Is Your Real Estate Appraisal Still Valid? Find Out Now!
Want to know how long is a real estate appraisal good for? Real estate appraisals play a critical role in the process of buying, selling, and refinancing properties. They provide an objective valuation of a property, which is essential for securing financing, setting sale prices, and making informed investment decisions.
However, the value assigned by an appraisal doesn't last indefinitely. The concept of appraisal validity is important because lenders often have specific requirements about how recent an appraisal must be to consider it valid. That’s why today we’re answering the question: how long are real estate appraisals good for?
How Long Are Real Estate Appraisals Good For?
Appraisals themselves don’t have an expiration date. However, their acceptance for real estate transactions is subject to lenders' assessment of their current relevance and accuracy.
This can vary greatly depending on market dynamics and the specific policies of the lender. Essentially, an appraisal's "shelf life" is determined by how long a lender believes it accurately reflects the property's value in the current market.
In practice, the majority of lenders have established a standard validity period for appraisals, typically around 90 days. This timeframe is often deemed sufficient under stable market conditions to reflect an accurate valuation of a property.
Some lenders may extend the acceptance of appraisals up to six months, especially in markets that are not experiencing rapid price fluctuations or other conditions that could significantly alter property values. This standard period ensures that the appraisal remains a reliable indicator of value for the purpose of loan origination, selling, or refinancing a property.
Factors Affecting Appraisal Validity
Market Conditions
The real estate market is dynamic, and significant fluctuations can occur within short periods. Rapid increases or decreases in property values can significantly impact the validity of an appraisal.
For example, in a seller's market where demand exceeds supply, property prices can escalate quickly, making an appraisal conducted just a few months ago obsolete. On the flip side, in a market downturn, values can drop, rendering recent appraisals overly optimistic.
These shifts can lead lenders to shorten the effective validity period of an appraisal to as little as 30 days in highly volatile markets to ensure the loan amount reflects the current market value of the property.
Loan Types
Different types of loans are governed by specific rules regarding appraisal validity, set forth by their overseeing agencies. For instance:
FHA Loans: The Federal Housing Administration (FHA) typically requires that appraisals are valid for 180 days for most of its mortgage insurance programs. This reflects the FHA's assessment of market stability and its impact on property valuations.
VA Loans: Loans guaranteed by the Department of Veterans Affairs (VA) have their own set of requirements, with appraisals generally considered valid for up to six months. This extended period accommodates the unique aspects of VA loans, including the benefits and safeguards provided to veterans and active military personnel.
The Impact of Time on Appraisals
The validity of an appraisal is directly influenced by real estate market trends. Factors such as changes in interest rates, economic conditions, and local developments can cause property values to rise or fall.
For example, a decrease in interest rates can lead to increased demand for homes, pushing property values up. Similarly, an economic downturn can result in decreased demand, lowering property values. Local factors, such as the opening of new amenities or changes in zoning laws, can also significantly impact property values.
These shifts can happen rapidly, meaning an appraisal conducted even a few months ago might not reflect the current value of a property. Lenders monitor these trends closely to determine the appropriate validity period for appraisals, adjusting their requirements as necessary to align with current market conditions.
If the market value of a property has decreased since the appraisal was conducted, and the lender has issued a loan based on the higher appraisal value, they may face losses if the borrower defaults and the property has to be sold.
On the flip side, if the market value has increased significantly, the borrower might not be getting the full benefit of their property's worth. That’s why lenders prefer recent appraisals to mitigate risk and ensure the loan-to-value ratio remains at an acceptable level.
If you want more tips from a property appraiser on how to unlock your home’s market potential, read this article.
Extending Appraisal Validity
To maintain the relevance of an appraisal in a dynamic real estate market, it's possible to have an appraisal updated or recertified. This process involves the original appraiser revisiting the appraisal to ensure it reflects current market conditions.
An update or recertification might include analyzing recent comparable sales that have occurred since the original appraisal date or revising the valuation based on changes in the local real estate market. The appraiser then confirms their findings that the original valuation is still valid, or providing a new valuation if necessary.
The primary benefit of updating or recertifying an appraisal is that it can extend the document's acceptance by lenders, allowing borrowers to proceed with their financing or refinancing without the need for a completely new appraisal. This can save time and money for all parties involved, and help streamline real estate transactions in fast-moving markets.
Criteria for Appraisal Updates
Not all appraisals are eligible for updates or recertification, and certain criteria must be met for an appraisal to be considered. These criteria can vary by lender but generally include:
Timeframe: There is often a limited window in which an appraisal can be updated or recertified, typically within a few months of the original appraisal date.
Market Stability: In highly volatile markets, lenders may be less inclined to accept updated or recertified appraisals due to the rapid changes in property values.
Significant Changes: If there have been significant changes to the property itself or its immediate surroundings since the original appraisal, a new appraisal may be required. This could include major renovations or developments in the area that could affect the property's value.
Original Appraiser Availability: Typically, the same appraiser who conducted the original appraisal must perform the update or recertification. If this appraiser is not available, a new appraisal might be necessary.
For more information, check out our guide on property appraiser hacks to boost your home’s value instantly, as well as our article on real estate valuation mistakes you're making that cost big bucks!
Best Practices for Homebuyers and Sellers
For Homebuyers
Stay Informed About Market Conditions: Understanding current market trends is crucial for anticipating changes that might affect your appraisal's validity. This knowledge can help you act swiftly if an update or new appraisal is needed.
Communicate With Your Lender: Regularly check in with your lender about the appraisal validity period and any potential concerns they might have as your closing date approaches. Being proactive can prevent unexpected delays.
Prepare for Possible Updates: Be aware that in rapidly changing markets, you may need to request an appraisal update. Discuss this possibility with your lender upfront to understand the process and associated costs.
Review the Appraisal Report: Carefully review your appraisal report for accuracy and completeness. If you notice discrepancies or outdated comparables, bring these to your lender's attention.
For Sellers
Keep Documentation of Improvements: Maintain detailed records of any upgrades or improvements made to your property. This information can be vital for an appraiser to accurately assess your home's value.
Understand Your Local Market: Stay updated on local real estate trends and how they might affect your home's appraisal. This understanding can help you set realistic expectations for your selling price.
Be Ready to Provide Market Insights: If you're aware of recent comparable sales or market dynamics not reflected in your initial appraisal, be prepared to share this information with the appraiser during a recertification or update process.
Consult With a Real Estate Professional: A knowledgeable real estate agent can provide valuable advice on making your home more appealing to appraisers and potentially avoiding appraisal issues.
Whether you're buying, selling, or refinancing, consulting with real estate professionals and lenders will provide you with the insights needed to ensure a smooth process. And if you need to get a home appraisal, don't hesitate to reach out to us and we’ll guide you through the specifics of appraisal validity and help secure the best outcome for your real estate endeavors.
