New Appraisal Exemption Rule Takes Effect Today

October 9, 2019

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

This is the first time in 25 years that federal regulators have increased the property value limit of the 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 do 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; all will still require an appraisal.

The previous rule stated that appraisals were not 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 that any loan limit related to an appraisal exemption be tied to specific markets rather than a blanket number for the whole country. A $100,000 limit might be reasonable in some parts of the country, and a $500,000 limit might be reasonable in others, depending on average housing values, NAR says.

Read the final rule.