The last time the appraisal threshold was changed was in 1994. Because of this, many felt it was time for an adjustment. In November of 2018, a group including the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve released a proposal. This proposal was to increase the appraisal requirement from $250,000 to $400,000. Once the plan is approved and recorded, homes sales of $400,000 or less will no longer require an appraisal. For nearly a year, the agencies received over 560 comments regarding the rule change. They considered all these as they deliberated. In August of 2019, the FDIC and OCC signed off on the rule. All that was left to approve the plan was the FED. Last month, the Fed gave the rule change their approval. With all three agencies on board, the appraisal rule change will soon go into effect. The three agencies believed the change was justified to match market growth. In a joint statement, they shared, “Given price appreciation in residential real estate transactions since that time, the change will provide burden relieve without postin a threat to the safety and soundness of financial institutions.” You can read the final rule here. The rule, submitted to the Federal Register, will go into effect once it is recorded and published. This process should only take a matter of days. Homes That will Qualify: Not every home listed at $400,000 and below will qualify for this rule. The rule will not apply to loans wholly or partially insured or guaranteed by (or eligible for sale to) a government agency or government-sponsored agency. In other words, loans sold to or guaranteed by any of the following would still require an appraisal:
- Federal Housing Administration
- Department of Housing and Urban Development
- Department of Veterans Affairs
- Fannie Mae
- Freddie Mac
- Financial institutions
- Financial institution trade associations
- State banking regulators.