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.
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.
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.“
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.
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 inspection, and 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.
“…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.”
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.
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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