Under FIRREA, what is the minimum transaction value threshold that typically requires a state-licensed or certified appraiser for federally related transactions?
Correct Answer
B) $250,000
FIRREA establishes that federally related transactions of $250,000 or more generally require an appraisal by a state-licensed or certified appraiser. This threshold was established to ensure professional oversight for significant real estate transactions involving federal agencies.
Why This Is the Correct Answer
The $250,000 threshold is specifically established under FIRREA regulations and represents the point at which federally related transactions must involve a state-licensed or certified appraiser. This amount was set to ensure that significant real estate transactions involving federal agencies receive proper professional oversight while allowing more flexibility for smaller transactions. The threshold applies broadly across federally related transactions and is a fundamental regulatory requirement that appraisers must understand. This specific dollar amount is codified in federal regulations and represents a key compliance requirement for financial institutions.
Why the Other Options Are Wrong
Option A: $100,000
$100,000 is too low and would create an unnecessarily burdensome requirement for many routine transactions that don't warrant the full regulatory oversight intended by FIRREA.
Option C: $500,000
$500,000 is too high and would leave many significant transactions without the professional appraisal oversight that FIRREA was designed to ensure.
Option D: $1,000,000
$1,000,000 is far too high and would exclude the vast majority of transactions that Congress intended to cover under FIRREA's professional appraisal requirements.
Quarter Million FIRREA Rule
Remember 'Quarter Million' = $250,000. Think 'FIRREA needs a Quarter (25) to start the professional game' - just like you need a quarter to start some arcade games, you need $250,000 to trigger FIRREA's professional appraiser requirement.
How to use: When you see any question about FIRREA thresholds, immediately think 'Quarter Million' and look for $250,000 among the answer choices.
Exam Tip
FIRREA threshold questions are common on appraiser exams - always look for $250,000 when asked about minimum transaction values requiring licensed/certified appraisers in federally related transactions.
Common Mistakes to Avoid
- -Confusing FIRREA thresholds with other regulatory thresholds like HMDA reporting requirements
- -Thinking the threshold applies to property value rather than transaction value
- -Assuming the threshold varies by property type when it's generally uniform across federally related transactions
Concept Deep Dive
Analysis
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) established mandatory appraisal requirements for federally related transactions to protect federal financial regulatory agencies and taxpayers from losses due to inadequate or fraudulent real estate appraisals. The $250,000 threshold represents a critical regulatory benchmark that determines when professional appraisal oversight becomes mandatory versus when alternative valuation methods may be acceptable. This threshold balances the need for professional appraisal standards against the cost and time burden of requiring full appraisals for smaller transactions. Understanding this threshold is essential for appraisers as it defines a significant portion of their potential work and helps lenders determine their appraisal requirements.
Background Knowledge
FIRREA was enacted in 1989 following the savings and loan crisis to establish uniform standards for real estate appraisals in federally related transactions. The Act created the framework for state licensing and certification of appraisers and established minimum requirements for when professional appraisals are mandatory versus when alternative valuation methods may be used.
Real-World Application
A bank is making a commercial loan secured by real estate worth $275,000. Because this exceeds the $250,000 FIRREA threshold, the bank must obtain an appraisal from a state-licensed or certified appraiser rather than using an alternative valuation method like a broker price opinion or automated valuation model.
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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