Under FIRREA, what is the minimum transaction threshold for requiring a state licensed or certified appraiser for federally related transactions?
Correct Answer
A) $250,000
FIRREA requires a state licensed or certified appraiser for federally related transactions of $250,000 or more. This threshold was established to ensure qualified appraisers handle significant real estate transactions.
Why This Is the Correct Answer
The $250,000 threshold is specifically mandated by FIRREA regulations for federally related transactions requiring state licensed or certified appraisers. This amount was established through federal rulemaking and represents the point at which the regulatory agencies determined that professional appraisal oversight becomes critical for protecting federally insured institutions. The threshold applies to most real estate-related financial transactions involving federal agencies, federally insured institutions, or government-sponsored enterprises. This specific dollar amount is a key regulatory requirement that appraisers must know for compliance purposes.
Why the Other Options Are Wrong
Option B: $500,000
$500,000 is too high and would exclude many significant transactions that require professional appraisal oversight under current FIRREA regulations.
Option C: $1,000,000
$1,000,000 is far too high and would eliminate the majority of residential and many commercial transactions from requiring licensed appraisers, contrary to FIRREA's protective intent.
Option D: $100,000
$100,000 is too low and would create excessive regulatory burden on smaller transactions that don't warrant the same level of oversight as larger deals.
Quarter Million FIRREA Rule
Remember 'Quarter Million' = $250,000. Think 'FIRREA needs a Quarter (25) to start the game' - where 25 represents $250,000 and 'the game' is requiring licensed appraisers.
How to use: When you see FIRREA threshold questions, immediately think 'Quarter Million' and look for $250,000 among the answer choices.
Exam Tip
FIRREA threshold questions are common on appraisal exams - always memorize the exact $250,000 figure as it's frequently tested and there are no exceptions to remember.
Common Mistakes to Avoid
- -Confusing FIRREA thresholds with other regulatory thresholds like HMDA reporting requirements
- -Thinking the threshold applies only to commercial properties when it applies to all federally related transactions
- -Assuming the threshold has been updated recently when it has remained at $250,000 for many years
Concept Deep Dive
Analysis
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) established federal standards for real estate appraisals to protect federally insured financial institutions from losses due to poor appraisal practices. The Act mandates that federally related transactions above certain dollar thresholds must be appraised by state licensed or certified appraisers. This requirement ensures that significant real estate transactions receive professional appraisal services from qualified individuals who meet state licensing standards. The $250,000 threshold represents a balance between protecting lenders and avoiding unnecessary regulatory burden on smaller transactions.
Background Knowledge
FIRREA was enacted in 1989 following the savings and loan crisis to strengthen oversight of financial institutions and establish uniform appraisal standards. The Act created the framework for state licensing and certification of appraisers and established minimum requirements for federally related transactions.
Real-World Application
When an appraiser receives an assignment from a bank for a residential property purchase loan of $275,000, they know this exceeds the FIRREA threshold and must be completed by a state licensed or certified appraiser, not a trainee working independently.
More Report Writing Questions
Under FIRREA, which federal agency has the authority to set minimum standards for real estate appraisals in federally related transactions?
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?
The Dodd-Frank Act established which requirement specifically related to appraisal independence?
Which of the following is NOT a responsibility of the Appraisal Subcommittee (ASC)?
State appraiser regulatory agencies are primarily responsible for which of the following functions?
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