An appraisal captures the value of a home for a moment in time. Although, technically, appraisals don’t expire, conditions change based on demand, market volatility, the economy, and other factors. Because of this—and the fact that mortgage lenders decide whether to accept an appraisal—shelf life can vary.
If you’re a homebuyer, you want to know that the appraisal you pay for is providing you with the best and most updated information, so the home you buy isn’t overvalued based on old data. If you’re a seller, you want the buyer’s appraisal to reflect every improvement you’ve made. Ultimately, both of you want accuracy, and the fresher the appraisal the better.
- Technically, appraisals don’t expire, but lenders may refuse to honor them if they think the appraisal is too old.
- Most appraisals will be accepted for 90 days and many for up to six months.
- Rapidly changing market conditions can reduce the time frame to as little as 30 days.
- Different loan types, i.e., FHA, VA, etc., have different validity periods.
- Appraisals can be updated or recertified, avoiding the need for a new appraisal.
90 Days Is Normal
Under typical circumstances, a home appraisal should be valid for two to six months. There are exceptions and variables, listed below, and special requirements based on the type of loan the buyer is getting.
One thing that affects the validity of an appraisal is comparable sales, often referred to as “comps,” which use the prices of recently sold homes of comparable size and condition to help determine what the market will bear. Six months is considered the outside time frame for comps, making 90 days a better all-around time frame.
State of the Market
If the local real estate market is volatile—that is, if prices are changing more rapidly than normal due to demand, the economy, or other factors—90 days may be too long to rely on an appraisal. In either a red-hot, rising market or one that is cooling, with prices lowering rapidly, 30 to 60 days may be as far as lenders want to go.
Conversely, if the market has been stable for a while, lenders may be quite comfortable with an appraisal that is six months old. Lenders do have remedies if things change unexpectedly, such as appraisal updates or value recertification, discussed later in this article.
On April 14, 2020, the Federal Reserve deferred certain appraisals and evaluations for real estate transactions for 120 days after closing due to the COVID-19 pandemic. The deferrals will expire on Dec. 31, 2020, unless extended by federal banking agencies. Additional guidance has been issued by various lenders and underwriters. These guidelines are available from the Appraisal Foundation.
Buyer’s Appraisal ‘Rules’
Sellers sometimes pay for an appraisal in advance in hopes it will speed up the closing process or even as a selling point to save the buyer money. Unfortunately, the only appraisal that matters is the one the buyer’s lender will accept. Though appraisers are impartial providers of home valuation, they work for the lender. As sellers typically don’t know in advance who the buyer will be, let alone who the buyer’s lender will be, it’s best to let the buyer take care of the appraisal.
Realtor Joe Wilen notes a couple of exceptions. “Homeowners may order an appraisal,” Willen says, “when they have a unique property that is difficult to get comparables on.” Other times that a homeowner might have an appraisal, he notes, could be for a refinance or for insurance purposes.
State of the Property Being Sold
Anything that happens to the property after the appraisal takes place can change or invalidate the appraisal. This could include major improvements that increase value as well as damage or even natural events such as a flood or fire. Any of these things can be cause for a new appraisal or either of the remedies mentioned earlier, appraisal update or value recertification.
Requirements by Loan Type
As noted above, the type of loan the buyer is seeking may influence the length of time an appraisal is valid.
- Conventional loans are the least restrictive, and in most cases an appraisal for an existing home is good for 120 days, while an appraisal for a new home is valid for one year.
- Federal Housing Administration loan appraisals are valid for 120 days or up to 240 days if updated. A new appraisal may be ordered if the case number assignment changes, even if the original appraisal is less than 120 days old.
- Fannie Mae (FNMA) loan appraisals are normally valid for 12 months but require an update at the four-month mark.
- USDA loan appraisals are valid for 120 days plus a 30-day grace period. If the appraisal will be more than 150 days old at closing, an update or a new appraisal is required.
- Veterans Affairs loan appraisals are valid for up to six months and automatically expire if the loan closes. VA borrowers cannot reuse the same appraisal once the loan has closed. If the appraisal expires before the loan closes, a new appraisal is required.
Depending on loan type and how old the original appraisal is, appraisal updates, extensions, and value recertifications can be very difficult to obtain.
If your appraisal expires, a new appraisal may not be necessary. Instead your lender may order an update (refresh). The main reason is to make sure the property value has not declined in value since the original appraisal was completed.
Recertification of Value
Also known as “completion certification,” a recertification of value may be required to certify the original appraiser’s valuation. This may be to make sure that repairs or updates conditioned by the original appraisal were completed.