Federal regulators earlier this week issued a notice of proposed rulemaking to raise the threshold for commercial real estate transactions requiring an appraisal from the current level of $250,000 to $400,000. The agencies including the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency believe raising the threshold level will greatly reduce the number of transactions that require an appraisal.

The agencies also believe raising the threshold will save costs and expenses in these transactions while not posing a threat to the safety and soundness of financial institutions.

Instead of an appraisal, the proposal would require that commercial real estate transactions at or below the threshold receive an evaluation. There are some key differences between the two processes. As defined by agency guidance, evaluations are less detailed than appraisals, do not require completion by a state licensed or certified appraiser, and provide a market value estimate of the real estate pledged as collateral.

Comments will be accepted for 60 days from publication in the Federal Register. Read the full notice.