Under the Federal Reserve’s 12 CFR 225.63(d), which statement correctly describes when a federally related transaction requires a state-certified appraiser?
Correct Answer
D) All FRTs of $1 million or more, CRE FRTs over $500,000, complex residential FRTs over $400,000
Section 225.63(d) requires state-certified appraisers for all FRTs at $1 million or more, commercial-real-estate FRTs over $500,000, and complex residential FRTs over $400,000. Coverage and exemptions must first be determined; transaction value is not automatically the appraised value. These regulatory requirements are separate from state credential-scope rules and investor requirements.
Why This Is the Correct Answer
Option D is correct because 225.63(d) requires a state-certified appraiser for all federally related transactions with a transaction value of $1,000,000 or more, commercial real estate transactions of more than $500,000, and complex residential appraisals when the transaction value is more than $400,000. Option D states all three tiers.
Why the Other Options Are Wrong
Option A: Certification is not required below $1 million for any transaction type
Option A, saying certification is not required below $1 million for any transaction type, is wrong because commercial real estate transactions over $500,000 and complex residential transactions over $400,000 also require a state-certified appraiser.
Option B: Residential transactions require certification because their transaction value exceeds $100,000
Option B, saying residential transactions require certification because their transaction value exceeds $100,000, uses a figure that does not appear in 225.63(d); the residential trigger is a complex appraisal with a transaction value over $400,000.
Option C: A single $250,000 threshold applies to each property type and to each transaction
Option C, a single $250,000 threshold applying to each property type and to each transaction, does not match the rule, which sets separate tiers at $1,000,000, $500,000 and $400,000.
One million, five, four
Remember the tiers top down: $1 million for all FRTs, over $500,000 for commercial real estate, over $400,000 for complex residential.
How to use: Use 1 million, 5, 4 to check which answer states all three certification thresholds.
Exam Tip
Look for the answer that lists all three tiers; options with a single threshold or a different figure do not match 225.63(d).
Common Mistakes to Avoid
- -Applying a single dollar threshold to all transactions
- -Forgetting the separate commercial real estate tier
- -Treating transaction value as automatically equal to appraised value
Concept Deep Dive
Analysis
This question tests the Federal Reserve's thresholds in 12 CFR 225.63(d) for requiring a state-certified appraiser. There are three tiers: all federally related transactions of $1 million or more, commercial real estate transactions over $500,000, and complex residential appraisals over $400,000. Distractors use single thresholds or wrong figures.
Background Knowledge
Federal banking regulations specify when a federally related transaction needs an appraisal by a state-certified rather than a state-licensed appraiser. The appraiser and lender must first determine coverage and any exemptions, and transaction value is not automatically the same as appraised value. State credential-scope rules and investor requirements apply separately.
Real-World Application
A bank makes a $600,000 loan secured by a small office building in a federally related transaction. Because it is commercial real estate over $500,000, the bank engages a state-certified appraiser.
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