Under FIRREA, what is the minimum transaction threshold that requires a state licensed or certified appraiser for federally related transactions?
Correct Answer
B) $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 professional appraisal standards for significant real estate transactions.
Why This Is the Correct Answer
The $250,000 threshold is explicitly established under FIRREA regulations for federally related transactions requiring state licensed or certified appraisers. This amount was set by federal regulators as the minimum transaction value that poses sufficient risk to warrant mandatory professional appraisal oversight. The threshold applies to most real estate-related financial transactions involving federally regulated institutions. This specific dollar amount is a key regulatory requirement that appraisers must know for compliance purposes.
Why the Other Options Are Wrong
Option A: $100,000
$100,000 is too low and would create excessive regulatory burden on routine transactions that don't pose significant risk to federal institutions.
Option C: $500,000
$500,000 is too high and would leave many significant transactions without required professional appraisal oversight, defeating FIRREA's protective purpose.
Option D: $1,000,000
$1,000,000 is far too high and would exclude the vast majority of transactions that FIRREA was designed to regulate and protect.
Quarter Million FIRREA Rule
Remember 'FIRREA needs a Quarter' - the quarter represents $250,000, and FIRREA needs this quarter-million threshold for mandatory licensed appraisals.
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 - memorize $250,000 as a hard fact, and remember it applies to federally related transactions requiring licensed/certified appraisers.
Common Mistakes to Avoid
- -Confusing FIRREA thresholds with other regulatory thresholds like de minimis levels
- -Thinking the threshold applies to all transactions rather than just federally related ones
- -Mixing up the $250,000 FIRREA threshold with other dollar amounts in appraisal regulations
Concept Deep Dive
Analysis
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) established federal oversight of real estate appraisals to prevent the appraisal fraud that contributed to the savings and loan crisis of the 1980s. The Act created minimum standards for appraisers and set transaction thresholds requiring professional appraisals for federally related transactions. These thresholds ensure that significant real estate transactions involving federal financial institutions receive proper professional valuation oversight. The $250,000 threshold represents a balance between protecting federal interests and avoiding unnecessary regulatory burden on smaller transactions.
Background Knowledge
FIRREA was enacted in 1989 in response to the savings and loan crisis, establishing the framework for modern appraisal regulation and licensing. The Act created state licensing requirements and federal oversight to ensure appraisal quality and prevent fraud in federally related transactions.
Real-World Application
When a borrower applies for a $300,000 mortgage from a federally insured bank, FIRREA requires the lender to obtain an appraisal from a state licensed or certified appraiser rather than using an automated valuation model or unlicensed individual.
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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