How long is an appraisal good for? |Appraisals for different loans |State of the market | State of the property | Buyer’s appraisal rules
A home appraisal is much like a jewelry appraisal or a car appraisal: it’s a procedure to determine the fair market value of a house. This provides invaluable information whether you’re selling or buying.
That said, home values change over time, and it stands to reason that an appraisal won’t remain accurate forever. Eventually, it becomes “old news,” and you’ll have to get a new appraisal. So, how long is an appraisal good for? Here are some things you need to consider.
How Long Is A Home Appraisal In Real Estate Good For?
How long a home appraisal is good for depends on the circumstances. Normally, though, you’re looking at a time frame of around two to six months. Exactly how long will mostly depend on the loan type, although other factors are at play.
So, why do appraisals become outdated so quickly? The main reason is that appraisers rely heavily on “comps,” or comparable sales. These are sales of similarly-sized, similarly-equipped homes in the same area. At the very longest, comps are considered valid for around six months. After that, the sales are no longer considered recent. That said, six months is the outside number and isn’t always useful. A more normal timeframe is 90 days, after which you’ll want to get a re-appraisal.
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How Long Do Appraisals Last For Different Types Of Loans?
As we already discussed, the most important factor that impacts your appraisal’s “life span” is the type of mortgage loan you’re getting. Here’s a quick overview of the guidelines for the most common types of mortgage.
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Conventional loans. Appraisals for conventional loans offer the most flexibility of all. On existing homes, an appraisal is good for 90 days. And on new construction, the appraisal will be good for an entire year.
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Fannie Mae loans. Fannie Mae is a government-funded corporation that was founded in 1938 as part of the New Deal program. They provide mortgage funding in the background by buying mortgages from banks and other lenders, ensuring liquidity. Most Fannie Mae appraisals are good for a full year, but there’s a catch. After the first 120 days, you’ll need to have a second appraisal.
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Federal Housing Administration (FHA) loans. If you’re getting an FHA loan, the appraisal will be valid for 120 days. That said, you can extend this to 240 days by having it updated. On the downside, if your case number changes, you’ll have to have a re-appraisal no matter how recent your appraisal was.
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Freddie Mac loans. Freddie Mac is similar to Freddie Mae in that it ensures liquidity by purchasing mortgages from first-party lenders. Their policies are also similar since appraisals are good for a year, but require a re-appraisal after 120 days. But Freddie Mac also requires the lender to provide a copy of the appraisal, which Fannie Mae doesn’t.
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USDA loans. USDA loans are specialized government loans that are structured for people in rural areas. Appraisals for USDA loans are good for 120 days. However, there’s a 30-day grace period before you have to obtain a re-appraisal.
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VA loans. VA loans are offered by the Department of Veterans Affairs and are only available to active service members, veterans with an honorable discharge, and their spouses. These appraisals are fairly generous and are valid for six months. After that, a re-appraisal will be required.
How The State Of The Market Affects Appraisals
As you might imagine, the state of the market can impact the price of just about any home. Normally, the market changes slowly, so appraisals are good for a few months. But under conditions of extreme change, they could become unreliable much faster. If the market is rocketing upwards – or spiraling downwards – appraisals might only be good for 60, or even 30 days.
On the flip side, the market sometimes stagnates. If the market is exceptionally stable, lenders will sometimes accept appraisals that are as old as six months. If conditions do suddenly change, the lender can still have recourse to an appraisal update or recertification of value.
How the State Of The Property Affects Appraisals
Another factor that could impact your appraisal is if there are major changes to the property. For example, suppose the homeowner builds a three-season porch or constructs an attached garage. Those kinds of improvements could significantly increase the property’s value. On the other hand, the property may also lose value due to damage from a fire, accident, or natural disaster.
Can You Pay For An Appraisal In Advance?
If you want to get your own appraisal in advance, you can. An appraiser is an impartial adviser, and they’ll give you their best judgment on how much the house is worth. If you’re a seller, this can help you decide how much to list your home for, which is certainly helpful information. You might also want to get an appraisal for insurance purposes, or for refinancing.
That said, lenders employ their own appraisers, and will not accept appraisals from third parties. This means that no matter what your appraiser says, they’re not going to have the final word. Ultimately, the buyer’s lender will perform their own appraisal. If they determine your house isn’t worth as much as the agreed-upon price, the lender won’t approve the loan.
What Do You Do When An Appraisal Expires?
So, what happens when an appraisal expires? In that case, you’ll have a couple of different options. Here’s a short overview.
Appraisal Extension & Update
When the appraisal expires, you can request an extension. The lender will then look at market conditions and other factors, and decide whether a new appraisal is warranted. If you’re lucky, they can extend the appraisal for another 30, 60, 90 days, or even more.
Another option is to get an appraisal update. An update is similar to an extension, but it’s performed by the appraiser themselves. If they determine that the home value hasn’t been decreased, your appraisal will be updated to note that.
Recertification Of Value
A recertification of value is a little bit different. Sometimes, an appraiser makes a conditional valuation. For example, they may value a house at $300,000, provided the seller installs a new roof. In a recertification of value, the appraiser is simply following up to ensure that their conditions have been met.
Can A Home Appraisal Be Revoked?
Yes, but it’s uncommon, and it only happens if there’s been a sudden change in the home’s value. This can be due to a major improvement or significant property damage. In those unusual scenarios, the lender may revoke their appraisal and insist on a re-appraisal.
Appraisal Vs. Comparative Market Analysis
An appraisal and a comparative market analysis (CMA) have a lot in common. Both of them are designed to determine the fair market value of a property. That said, both of them have significant differences.
An appraisal is conducted by an appraiser who works for the lender. Their job is to ensure that the lender doesn’t loan out more money than the home is worth. A CMA, on the other hand, is performed by a real estate agent, and their job is to determine the price a seller can reasonably expect.
A good CMA, though, can work in your favor. If your agent considered comps that the lender missed, the lender can potentially be convinced to increase their appraised value.
Summary
So, taking all of these factors into consideration, how long is an appraisal good for? In general, a home appraisal is good for about 90 days. After that, you’ll need to obtain a new appraisal. That said, there are a number of factors at play, including the type of loan you’re applying for. Sudden property damage or a major improvement could also change the value. But by following these general guidelines, you can ensure that your appraisal is as accurate as possible.
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