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Dollar threshold for appraisal requirement may increase

Banks in California may not be required to obtain a certified appraisal to approve loans for commercial properties valued at or under $400,000 if a new rule is approved. Currently, financial institutions that provide loans must have a certified appraisal for properties valued at more than $250,000. This increase could make it easier for commercial real estate buyers to be approved for loans. Federal banking agencies came together to propose the rule change since it would alleviate some of the regulatory burden placed on them under the current rule.

In 1989, banks became legally obligated to standardize their rules for appraisal internally. In 1992, an amendment to the law allowed federal banking agencies to set a dollar amount as the value at or above which properties must be evaluated by a professional appraiser in order to approve a loan. Two years later, federal banking agencies chose $250,000 as the minimum value. If the proposal goes through in 2017, the new minimum value for a property that would require a certified appraisal to be approved for a loan will be $400,000.

The rule change would only apply to commercial real estate loans. Loans for single or multi-family housing would still require certified appraisal for properties valued at more than $250,000. The rule change does not apply to consumers' loan applications because appraisals can be used to protect consumers from overpaying.

A commercial buyer who is interested in purchasing a property might find it useful to discuss the details of the transaction with a lawyer who focuses on commercial real estate. Counsel might help by drafting agreements, revising them and making sure they are enforceable.

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