A new bank rule could give more flexibility to borrowers and buyers in commercial real estate.
On April 2, the Federal Deposit Insurance Corp., along with the Board of Governors for the Federal Reserve System and the Office of the Comptroller of the Currency, issued a new threshold for commercial appraisals for real estate. Previously, property values of $250,000 required an appraisal. The new rule bumps that threshold up to properties valued at $500,000.
Alan Shettlesworth, president of Main Bank in Albuquerque, which chooses to only lend within New Mexico, said local banks stand to benefit from the FDIC’s new rule as the process to close a loan will be sped up. The regulatory requirements on appraisals take more documentation and more time to prepare compared to a valuation, which drives up the cost of a loan.
Shettlesworth said his bank typically outsources its valuations, which he said cost $500. For Main Bank, an appraisal can cost anywhere from $1,800 to $6,000 depending on the complexity, Shettlesworth said.
“Since we prefer to lend on commercial real estate — a lot of community banks prefer to lend on commercial real estate — this will lower the regulatory burden on the banks and speed up our time to close,” Shettlesworth wrote in a statement to Business First. “This makes the smaller-dollar loans more feasible. Valuations cost less and are typically generated quicker.”
Jim Chynoweth, managing director of operations at CBRE New Mexico, called the new rule “very reasonable.”
“It should be beneficial to the commercial real estate industry,” Chynoweth said. “I would caution any buyers who are unsure about their value to go ahead and get appraisals. Having those appraisals be a requirement of the lender is not always necessary on properties with that kind of valuation.
“All in and all, this should be good for Albuquerque properties.”
Ranked by 2017 commercial transaction value, CBRE New Mexico topped Albuquerque Business First’s List of Largest New Mexico Commercial Real Estate Firms at $447.24 million through 228 total transactions.
Largest New Mexico Commercial Real Estate Firms
Ranked by 2017 commercial transactions value
Rank Business name 2017 commercial transactions value 1 CBRE New Mexico $447.24 million 2 NAI Maestas & Ward Commercial Real Estate $193.7 million 3 Colliers International | Albuquerque-Santa Fe $179.65 million View This List