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President signs legislation increasing commercial appraisal thereshold.

President Trump on Dec. 21 signed two pieces of legislation that link the Small Business Administration's appraisal threshold to the threshold for commercial real estate as established by the federal bank regulatory agencies. The legislation is FIR 6347, the 7(a) Real Estate Appraisal Harmonization Act, and HR 6348, the Small Business Access to Capital and Efficiency Act.

The SBA appraisal threshold has long been set by statute at $250,000. Now, SBA 7(a) and 504 loans involving commercial real estate below $500,000 no longer require an appraisal.

An Appraisal Institute analysis revealed that approximately 65 percent of SBA 7(a) loans already were exempt under the $250,000 threshold level.

For loans under the $500,000 threshold, the percentage increased to roughly 77 percent.

Additionally, the National Credit Union Administration is considering a proposal to raise its commercial real estate threshold level to $1 million for credit unions. If the federal bank regulatory agencies follow suit and increase to that level, approximately 90 percent of 7(a) loans would be exempt from appraisal requirements.

It's worth noting that appraisals are conducted on loans below the required level for a variety of reasons, including the creditworthiness of the borrower, the complexity of the loan application and general good business sense.

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Publication:Valuation Magazine
Date:Jan 1, 2019
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