Some homebuyers are about to catch a break, courtesy of the Federal Reserve Board and other banking regulators. 

As long as the price tag on their new homes is below $400,000, these lucky purchasers will no longer have to pay for a mandatory appraisal. But the other side of the coin isnt as positive: How will buyers know if theyve overpaid? 

After all, if the appraisal comes in below the agreed-upon price, you can back out of the deal or ask the seller to lower the price. But without an appraisal, youll never know whether you paid too much  or, on the other hand, whether you nailed the deal of a lifetime. 

In raising the appraisal threshold, the Fed, acting in concert with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, notes that the ceiling hasnt risen since 1994, though the price of real estate certainly has. 

Given price appreciation in residential real estate transactions … the change will provide regulatory burden relief without posing a threat to the safety and soundness of financial institutions, the central bank said in the Federal Register. 

The Consumer Financial Protection Bureau has also signed off on the higher limit, which takes full effect on Jan. 1, citing the savings to the homebuyer of not having to pay for the appraisal. 

The federal watchdog agency also noted the tendency of financial institutions to order appraisals, even in cases when they are not obligated to. This, too, tends to decrease the risk to the nations financial system that the change in the limit may have. 

Few Lenders Changing Requirements 

Some appraisers agree with the CFPBs assessment.  

We dont even know what the impact will be. Most banks still want an appraisal, and I dont think thats going to change, said Thomas Hoff, vice president of marketing and communications at Pro Teck Valuation Services, a Waltham-based appraisal company. I dont know of any banks that have changed their policies. 

Hoffs colleague at Pro Teck, Chief Compliance Officer Jeff Dickstein, agreed 

In my conversations with our lender clients, most have not changed their rules, he saidAnd we see no movement to change, at least not anytime in the near future. 

Lenders have just as keen an interest in the value of the house as their borrowers do, Dickstein pointed out 

Is it a good investment to spend an extra $500 for some peace of mind on what may well be the most expensive purchase youll ever make?

Theres still risk associated with every single loan, and the house is the collateral for that loan, he saidSo, lenders still need to validate the collateral. 

Federal regulators werent thinking only about consumers when they proposed the change of rules. The industry has also been experiencing a shortage of appraisers, especially in rural areas, making a lighter load welcome. 

How much will an appraisal set you back? Figure around $400 to $600, though it varies based on location and other factors. Hoff said he recently saw a $1,500 charge for an appraisal on a $1.5 million house in Los Angeles. 

Lenders have a number of options they can use to estimate a propertys worth. Besides a hands-on, personal appraisal, they can opt for an automated valuation model, a desktop appraisal or an electronic valuation. But in some states, even if lenders use an AVM or e-valuation, they still have to engage an appraiser. 

In addition, the quoted price may not be what you wind up paying. Lenders quote a price to consumers, but the law allows them to raise it if circumstances change. Houses in rural areas can often present appraisal challenges, for instance. 

Thousands of Sales Exempted Nationwide 

The new exemption limit could have a big effect. The FDIC looked at 2017 real estate transactions, the latest for which data was available, and estimated 214,000 more would have been exempted under the higher limit. Thats about 16 percent of the more than 1.5 million deals that year. 

And since 56 percent of 2017 sales were under the $250,000 threshold, the total number of exemptions would have equaled 72 percent of the market, or nearly 1 million transactions.  

In New Hampshire, the year-to-date statewide median single-family home sale price was $285,000 for all 13,845 homes sold as of Oct. 31 according to The Warren Group, publisher of The Registry Review. For the state’s 4,592 condominium sales so far this year, the same figure was $207,867.  

However, many of these transactions would not be covered by the threshold as it does not apply to loans insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the U.S. Department of Agriculture or loans purchased by mortgage agencies Fannie Mae and Freddie Mac. It doesnt apply to credit union mortgages, either. 

One potential benefit that could stem from the new appraisal landscape is less fraud. 

Back in the bad old days (about a dozen years ago), many faulty  and perhaps fraudulent  appraisals inflated the value of many properties far above what they were actually worth. The result was disaster for real estate, mortgage lending and the general economy. Fewer appraisals might mean less of an opportunity for the industry to get in trouble. 

But if the lender does not require an appraisal and you still want an unbiased view of the houses value, theres nothing to prevent you from hiring your own appraiser  not your agent, who may or may not be working strictly on your behalf and is not necessarily a valuation expert, but a professional who looks beyond comparable properties and makes adjustments to bring the property youre buying in line with others. 

Ask yourself this: Is it a good investment to spend an extra $500 for some peace of mind on what may well be the most expensive purchase youll ever make? 

Freelance writer Mark Fogarty contributed to this report.

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at 

Fewer Appraisals Are Mandated, But They’re Still a Good Idea

by Lew Sichelman time to read: 4 min