Q: What types of transactions require an appraisal?
A: The agencies’ Title XI appraisal regulations require an appraisal performed by a state-certified or state-licensed appraiser for all FRTs.16 All real estate-related financial transactions engaged in by financial institutions are FRTs unless the transactions are exempt from the appraisal requirements of the appraisal regulations.17
The agencies’ Title XI appraisal regulations require an evaluation that is consistent with safe and sound banking practices for certain exempt transactions.18 The Title XI appraisal regulations apply to both commercial and residential transactions; however, for financial institutions the threshold above which an appraisal is required is different for residential transactions, commercial real estate transactions, and qualifying business loans.19
As discussed in the Valuation Guidelines, a financial institution’s appraisal policy and practices may differ by transaction type. The financial institution should consider the type and complexity of the transaction when ordering appraisals, selecting appraisers, and reviewing appraisals.20 Moreover, for all lending activity, a financial institution should ensure that independence is maintained when ordering appraisals, selecting appraisers, and reviewing appraisals.21
16 OCC: 12 CFR 34.43(a); Board: 12 CFR 225.63(a); and FDIC: 12 CFR 323.3(a).
17 OCC: 12 CFR 34.43(a); Board: 12 CFR 225.63(a); and FDIC: 12 CFR 323.3(a).
18 OCC: 12 CFR 34.43(b); Board: 12 CFR 225.63(b); and FDIC: 12 CFR 323.3(b).
19 OCC: 12 CFR 34.43(a)(1), (5) and (13); Board: 12 CFR 225.63(a)(1), (5), (14); and FDIC: 12 CFR 323.3(a)(1), (5), (13). Additionally, the HPML Appraisal Rule requires appraisals for higher priced mortgage loans, which must include an interior visit of the property, unless the
HPML is $25,000 or less (adjusted annually for inflation; $26,000 for 2018) or another exemption from the rule applies. OCC: 12 CFR 34.203(b)(2); Board: 12 CFR 226.43(b)(2); and BCFP: 12 CFR 1026.35(c)(2)(ii).
20 See Valuation Guidelines, sections VIII and XV.
21 See Valuation Guidelines, section V.