The US Treasury's Office of the Comptroller of the Currency has issued a notice of proposed rulemaking with the aim of raising the threshold for residential real estate transactions that require an appraisal from $250,000 to $400,000 apiece.

This proposal is a response to banks complaining about the time and cost associated with the residential real-estate transactions that they handle and have to complete. The OCC teamed up with the Federal Reserve System and the Federal Deposit Insurance Corporation to issue the proposals. The present threshold of $250,000 was set in 1994. The OCC believes that it can raise the figure without threatening the safety and soundness of financial institutions.  

As is the case now, the proposal states that residential real estate transactions that go under the threshold should obtain "an evaluation of the real property collateral that is consistent with safe and sound banking practices." Evaluations provide estimates of the market value of real estate but are less burdensome than appraisals because the regulators’ appraisal regulations do not require evaluations to be prepared by state licensed or certified appraisers. In addition, evaluations are typically less detailed and costly than appraisals.

This year, the appraisal threshold for commercial real estate transactions has already risen from $250,000 to $500,000.

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