Do Real Estate Appraisals Expire? What You Need To Know About Appraisal Shelf Life

Do Real Estate Appraisals Expire?  What You Need To Know About Appraisal Shelf Life

To check the expiration date on food, all you (usually) have to do is read the box.  But what about when it comes to real estate?

 

Let’s get the important stuff out of the way- following most loan guidelines, there is no concrete “expiration period” for real estate appraisals.  However, the word “most” is very important here- without it we wouldn’t have an article.

There is no date, but no lender who plans to stay in business would give you a loan based on an appraisal performed 30 years ago- or even 1 year ago.  As a standard, most solid home appraisals are good for between 60-90 days.  This is a good rule of thumb, but it’s not an exact science- there are a few exceptions.

 

Comparables

Lenders want comparable sales that aren’t just similar to the subject property, but also represent a snapshot of the current market.  To keep things up to date, most lenders are reluctant to consider a loan when the comparables sales (comps) are more than six months old.

 

Appraisal Timeline

Based on the fact that comps shouldn’t be more than 6 months old, neither should the appraisal.  Depending on the lender and current state of the market, 90-180 days is usually the oldest appraisal you’ll find lenders willing to accept.  This is known as the “term of validity.

 

"89 Days."  I guess it's still good.

“89 Days.” I guess it’s still good.

A Common Exception

When the local market isn’t exactly stable, loan underwriters sometimes require appraisals performed within 3 months.  This requirement comes into play more often in a declining market, but lenders sometimes require it for rapidly increasing markets as well.

…most of the time though, as long as the lender is confident they can recoup any potential losses they don’t really care.

 

 

FHA Rules and Exceptions

 

Before January of 2010, FHA appraisals were good for up to 6 months (180 days).  Because there were so many foreclosures in the late 2000s, FHA loans after January 2010 are subject to a term of validity not to exceed 4 months (120 days).  The FHA also reserves the right to reduce that time period in declining markets.

 They’re not heartless though- FHA guidelines do allow 30 day extensions to give a borrower additional time to get approval and close.

[Update]

 When an appraisal exceeds the 120 day period, FHA guidelines don’t necessarily require a brand new appraisal.  This time period can change depending on where you are in the country, but typically as long as there wasn’t any recent remodeling or renovating, all you’d need is an appraisal update (or a “re-certification of value.”)

This is more of a market analysis than a second head-and-shoulders home inspectionand most of the time a second inspection isn’t even required- just new comparables.  Guidelines on this vary depending on where you are in the country.

An appraisal update by definition:

“…for the lender/client to evaluate the property that is the subject of this report to determine if the property has declined in value since the date of the original appraisal for a mortgage finance transaction.”

[Update]

  Although very very, VERY rare- the FHA (if they’re feeling generous) can extend the term of validity up to 240 days with the proper paperwork and approval.  This would obviously happen under special circumstances- as appraisers, we recommend you stick to the 90 day rule.

Washington Appraiser Jonathan Montgomery is the founder and president of the The Real Estate Appraisal Group, and has been a real estate professional since 1998. He has been a broker, an investor, and currently works full-time  as an appraiser.  He enjoys handling real estate appraisals in Washington D.C., Southern Maryland, and Northern Virginia.

 

 

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2 Comments

  1. Nice article Jonathan. Just sharing, I know in California new comps are required in an appraisal update after only 60 days.

    Reply
  2. Great topic Jonathan. When people ask me how long an appraisal is good for, I say it is good for just one moment in time or one instant. However, my value opinion will always be good for that moment. The house could burn down an hour after I viewed it and my appraisal would still be valid as an opinion of value for the time that I stated in the appraisal report. I could get called to testify on that appraisal five years later and my appraisal is still valid. Actually, the state makes me keep records for five years, but there is no statute of limitations on getting sued over an appraisal… lol,… 🙂 I know, people only care is how long they can use my appraisal for a loan. If someone wants a pre listing appraisal, I tell them to wait until they are almost ready to list. Maybe within a couple weeks. Values can change fast if new competition comes on the market in the subject’s neighborhood. If there are not many sales, I am happy to use sales much older than six months. A time adjustment might be easier to support and quantify than an adjustment for location on a more recent sale.

    Reply

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