New Appraisal Exemption Rule Now in Effect

WASHINGTON – Certain home sales of $400,000 and below will no longer require an appraisal, under a new rule that took effect this week. Homes that qualify for the appraisal exemption can receive an evaluation instead.

It’s the first time in 25 years that federal regulators have increased the property value limit for homes that require an appraisal as part of the selling process. Federal regulators cited price appreciation in residential real estate transactions for the change.

The new rules likely apply to about 40% of home sales, regulators estimate. For properties that qualify for the exemption, the agencies require institutions to obtain an evaluation that provides an estimate of the market value of the real estate property.

The new exemption does not apply to loans sold or guaranteed by the Federal Housing Administration, Department of Housing and Urban Development, Department of Veterans Affairs, Fannie Mae or Freddie Mac. These will all still require an appraisal.

Under the previous rule, appraisals weren’t required on home sales of $250,000 and below. The Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve approved the new threshold over the last two months, and the rule appeared in the Federal Register this week, making it official on Wednesday.

The National Association of Realtors® has advocated for a city-specific rule – that any loan limit related to an appraisal exemption be tied to specific markets rather than a blanket number for the whole country. Depending on average housing values, a $100,000 limit might be reasonable in some parts of the country, while a $500,000 limit might be reasonable in others, NAR says.

Read the final rule.

Source: “It’s Official: Appraisals Are No Longer Required on Some Home Sales of $400,00 and Under,” HousingWire (Oct. 8, 2019)

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