Record Level CRE Loan Extensions and Valuation Evolution
In this issue:
- Remote Work Shifts Housing Demand: Suburbs and "Zoom towns" thrive, while urban and commercial values drop.
- KC Housing Crisis: Investors drive up prices, making homes unaffordable for locals.
- Florida Eyes Tax Reform: Lawmakers consider relief as property taxes soar.
Insights
Regulators, Politics, and the Role of Appraisals in Loan Extensions
A recent report from Colliers highlights a growing trend in commercial real estate loan extensions, with lenders rolling over $384 billion in loans into 2025, surpassing 2024 levels. Loan extensions now account for 40% of 2025’s maturities, raising questions about the long-term stability of commercial real estate financing.
At some point, federal financial institution regulators may intervene to address this issue, pushing for resolution rather than indefinite extensions. However, the political landscape plays a crucial role here. Regulatory agencies must answer to the administration, which will have its own views on financial stability and economic impact. If forced asset sales or stricter capital requirements are imposed, they could significantly affect property values and loan performance. Conversely, continued extensions might delay an inevitable reckoning and slow the pace of recovery in property markets.
For appraisers, this situation underscores the critical role of accurate valuations in financial decision-making. Banks are likely employing a range of valuation methods—including full appraisals and evaluations—to justify extensions. The choice of method depends on the asset’s risk profile, loan size, and regulatory scrutiny. Historically, agency policies have allowed evaluations for subsequent transactions as long as no new money is advanced, even in cases of devaluation. This approach has provided flexibility in valuation requirements. However, if regulators determine that valuations are being used to delay recognizing losses, new guidance could emerge, potentially requiring more full appraisals for extended loans.
Additionally, the range of valuation services in commercial real estate is evolving. Beyond appraisals and evaluations, validations are becoming increasingly important. Validations serve as a review process to ensure the credibility and reasonableness of valuation reports, adding another layer of oversight in financial decision-making. As lenders and regulators seek greater transparency, the role of validations may expand, influencing how collateral risk is assessed in loan extensions.
As the commercial real estate market navigates this uncertain environment, appraisers should stay attuned to regulatory developments and lender practices. The demand for reliable, market-based valuations will only grow as stakeholders seek clarity on asset performance and risk. Whether regulators act soon or allow extensions to continue, the appraisal profession remains at the center of this evolving landscape.
Your Benefits
This Week’s Featured AI Benefit: Appraisal Institute Insurance Trust
As the exclusive insurance home for Appraisal Institute members, Appraisal Institute Insurance Trust (AIIT) provides protection for what you value most through comprehensive insurance solutions designed to help keep your finances safe throughout every stage of your personal and professional life.
Thanks to the power of group purchasing, we're able to offer our AIIT policies at specially negotiated, member-only rates. From life and health insurance to business protection and more, we’re here to help you stay secure at every stage of your journey.
Trending Topics Thursdays:
Sign up for our next free webinar
Opportunities in IRS Appraisals: What the Sunsetting of TCJA Could Mean for Appraisers
Apr. 3, 12 PM ET
It is very likely that demand for valuations for estate planning will soar if Congress does not take action to extend or make permanent the Tax Cuts and Jobs Act (TCJA) of 2017. The TCJA will expire, or “sunset,” on December 31, 2025, if no action is taken, and the federal estate and gift tax lifetime exemption will revert from $13.61 million per individual or $27.22 million per married couple (in 2024) to its pre-TCJA level of $5.6 million per individual, adjusted for inflation from 2017.
This webinar aims to provide a high-level overview of changes in the IRS code involving estate tax and planning and how that can define an appraiser's scope of work. Our expert panelists will discuss common errors and insufficiencies in appraisals and how reports are reviewed upon audit. Gain tips about how to solidify your appraisals to minimize any issues upon review.
Panelists:
Eric Garfield, MAI, Cushman & Wakefield
Priya Royal, Esq., Royal Law Firm, PLLC
Justin Sok, Rich Feuer Anderson
Advocacy Updates
Appraisal Institute Urges FHFA to Reconsider Appraisal Waiver Policies
The Appraisal Institute urged newly confirmed FHFA Director Bill Pulte to reassess recent policy changes expanding appraisal waivers and hybrid appraisals for high loan-to-value (LTV) purchase loans.
In a Mar. 25 letter to Pulte, Appraisal Institute President Paula Konikoff, JD, MAI, AI-GRS, warned that allowing waivers on 97% LTV loans increases financial risk and weakens consumer protections. “High LTV ratios are well-known predictors of foreclosure,” she stated, calling for greater transparency and risk-based oversight.
The Institute urged FHFA to reconsider these policies to ensure the stability of the housing finance system.
Virginia Governor Vetoes Appraisal Education and Task Force Bills
Virginia Governor Glenn Youngkin has vetoed two bills—SB 995/HB 1693 and HB 1932—that sought to impose additional requirements related to real estate appraisals. The first set of bills would have mandated two hours of fair housing and appraisal bias education for new appraisers, while the second would have created a permanent Task Force on Property Appraisal and Valuation Equity.
Governor Youngkin justified his veto by citing existing state measures to ensure fairness in real estate appraisals, including continuing education requirements that already address fair housing. His decision aligns with the reality that, beginning January 1, 2026, the Appraiser Qualifications Board (AQB) will enforce similar national requirements, making Virginia’s proposed mandate largely unnecessary.
Real Estate Horizons
Stay updated and check out links to the latest major real estate industry stories!
More Opportunities to Learn
Search the latest educational offerings! Find National and Chapter-sponsored classroom, synchronous, and online opportunities.
Your Community
Legislative Day – Your Voice, Your Impact
Attend the Appraisal Institute’s first annual Legislative Day to express your voice before your elected representatives in Congress. Legislative Day is your opportunity to help shape the future of the appraisal profession by engaging in grassroots advocacy on Capitol Hill. Legislative Day will culminate in a dynamic day and a half of policy education, grassroots advocacy and unparalleled networking opportunities with appraisal policy officials and industry stakeholders.Conference begins May 14 at 3:30 PM ET and concludes May 15 with a reception at 5 PM ET.
LDAC Registration Slots Available
A few spots remain available for the 2025 Leadership Development and Advisory Council meeting on May 14-16 in Washington, DC. LDAC fosters creative thought from talented real estate appraisal professionals, generating future leaders of the Appraisal Institute. LDAC has served as a source of leadership and as an inspiration for new programming ideas for the Appraisal Institute since 1969. Through a series of roundtable discussions, LDAC provides a forum where ideas and opinions on targeted topics of concern to the appraisal profession are exchanged.
Until next week,
Team Appraisal Institute
