If you are planning to purchase or sell a home in 2020, you should be aware that homes that are priced at $400,000 or below do not have to go through the appraisal process any longer.
Federal regulators approved the rule in late 2019, which was the first change to the appraisal threshold since 1994. The appraisal threshold used to sit at $250,000. The increase largely stems from appreciation in home prices that have taken place over the last two-and-a-half decades.
There are some distinctions to be aware of when it comes to the types of loans this new rule applies to, however. Any home loan that is backed by the Department of Housing and Urban Development, Fannie Mae, Federal Housing Administration, Freddie Mac or Department of Veteran Affairs still requires an appraisal, regardless of the price of the home.
This means that the rule applies to loans that are sold through the private-label securitization market to investors, or sit in a lender portfolio, and does not apply to loans that are insured through a government agency.
According to HousingWire, the new rule will apply to around 40 percent of home sales moving forward.
A home appraisal is a formal estimate on the market value of a home. During an appraisal a licensed professional will evaluate the cost of living and comparable properties in the area, the size and age of the property, any upgrades made to the home, the competition in the market, and previous transactions of the home, among other factors.
For an appraisal to have legal standing, it has to be performed by someone who is licensed. Appraisals are sometimes required in legal proceedings such as boundary disputes, short sales, property tax disputes and foreclosures.
Sometimes legal help is required during an appraisal if there are any legal disputes during the process and it needs to be determined if a violation occurred.
If you have any questions about the new appraisal threshold, or need advice on a dispute over an appraisal, our real estate attorneys are here to help. They have years of experience and specialize in assisting those who need any sort of real estate law advice.