Feds hike threshold for appraisals tied to commercial real estate loans

New federal regulations mean fewer commercial real estate-related loans will require an independent, certified appraiser to weigh in on a property’s value before a bank can lend against it.

An inter-agency group of regulators decided on Monday to raise the threshold for commercial real estate deals that need approval from a state-certified appraiser from $250,000 to $500,000, Reuters reported.

Now, financial institutions can utilize the less stringent evaluation process instead of a certified appraisal for deals below the threshold. Evaluations also provide a market value estimate but do not have to comply with federal standards.

Raising the threshold “will materially reduce regulatory burden,” according to a joint press release from the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, adding that upping the limit “will not pose a threat to the safety and soundness of financial institutions.”

The $250,000 limit was established in 1994. Regulators originally proposed raising the limit to $400,000 to keep it in line with inflation, but decided to raise the limit higher after considering comments from appraisers, financial institutions, and trade organizations received during a comment period last year. [Reuters] – Dennis Lynch