If a new Federal rule is approved it will have a sizeable impact on the real estate market. Federal regulators are close to approving a proposal to increase the appraisal threshold on residential home sales. What’s that mean for you? It means that certain home sales, of $400,000 and under, may not require an appraisal. Since 1994 the appraisal requirement has been set at $250,000.
The proposal is currently awaiting Fed approval to move forward. It has been approved by both the FDIC (Federal Deposit Insurance Corp.) and the OCC (Office of the Comptroller of the Currency), so experts believe it’s only a matter of time before the Fed approves the rule, it’s entered into the Federal Register and enacted as the law of the land.
Now, it’s important to mention this does not apply to ALL loans. New rules do NOT apply to loans that are wholly or partially insured or guaranteed by, or eligible for sale to, a government agency or government sponsored agency. That means loans sold to or guaranteed by the FHA, HUD, the VA or Fannie and Freddie Mac would still require an appraisal, per agency rules. However, the new rule would apply to approximately 40% of home sales.
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Aimee, there are times when an appraisal is waived by the lender now. If a home is priced reasonably as determined by the Automatic Valuation Model (AVM) the lender may issue a Property Inspection Waiver (PIW). In this case, it would be up to the buyer if they would like to forego the appraisal.
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Aimee, sometimes a lender is able to waive the appraisal requirement on a property no matter the purchase price. If a home is priced within the Automated Valuation Model (AVM) findings, the lender will be able to do a Property Inspection Waiver (PIW) for that property. At that time is would be the buyers choice to forego the appraisal if they choose to do so.
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