Under FIRREA, what is the minimum transaction value threshold for requiring 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 with a transaction value of $250,000 or more. This threshold was established to ensure proper oversight of significant real estate transactions involving federal financial institutions.
Why This Is the Correct Answer
The $250,000 threshold was specifically established by FIRREA as the minimum transaction value requiring a state-licensed or certified appraiser for federally related transactions. This amount represents the regulatory balance point where federal oversight becomes mandatory due to the significant financial exposure involved. The threshold applies to the transaction value, not the property value, and has remained consistent since FIRREA's implementation. This requirement ensures that substantial real estate transactions involving federal financial institutions receive proper professional appraisal oversight.
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 warrant mandatory professional appraisal oversight under federal law.
Option C: $500,000
$500,000 is double the actual threshold and would leave too many significant transactions without required professional appraisal oversight.
Option D: $1,000,000
$1,000,000 is four times the actual threshold and would exclude the vast majority of transactions that Congress intended to have mandatory appraisal requirements.
Quarter Million FIRREA Rule
Remember 'Quarter Million' = $250,000. Think 'FIRREA needs a Quarter (25) to start the game' - where the quarter represents $250,000 and the game is mandatory professional appraisal oversight.
How to use: When you see FIRREA threshold questions, immediately think 'Quarter Million' and select $250,000. The word 'quarter' should trigger the $250,000 amount in your memory.
Exam Tip
FIRREA threshold questions are common on the exam. Always look for $250,000 when asked about minimum transaction values requiring licensed/certified appraisers for federally related transactions.
Common Mistakes to Avoid
- -Confusing the FIRREA threshold with other regulatory thresholds like de minimis amounts
- -Thinking the threshold applies to property value rather than transaction value
- -Mixing up FIRREA requirements with individual lender policies or other federal regulations
Concept Deep Dive
Analysis
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) established specific thresholds for when federally related transactions require professional appraisal services. The $250,000 threshold represents a critical regulatory boundary that determines the level of appraisal oversight required for real estate transactions involving federally regulated financial institutions. This threshold balances the need for professional oversight on significant transactions while avoiding unnecessary regulatory burden on smaller transactions. Understanding this threshold is essential for appraisers as it directly impacts when their services are mandatorily required versus optional.
Background Knowledge
FIRREA was enacted in 1989 following the savings and loan crisis to strengthen oversight of financial institutions and real estate appraisals. The Act established uniform standards for real estate appraisals in federally related transactions and created the framework for state licensing and certification of appraisers.
Real-World Application
When a borrower applies for a $300,000 mortgage from a federally insured bank, FIRREA mandates that a state-licensed or certified appraiser must perform the appraisal. However, for a $200,000 transaction, while an appraisal may still be required by the lender, it doesn't fall under FIRREA's mandatory professional appraiser requirement.
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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