Home appraisals are used to determine the fair market value of a home. In terms of buying or selling a property, an appraisal ensures that the buyer and lender are getting a reasonable price. For those who already own a property, an appraisal can track appreciation and help determine rental or selling prices.
There are numerous reasons to get appraisals on your rental properties, whether or not you’re intending to sell. But no matter the reason behind your decision to have an assessment done, it’s crucial to know how long appraisals are good.
How Long Are Appraisals Good For in Real Estate?
The Federal National Mortgage Association (Fannie Mae) states that most appraisals are typically good for 90 days. However, this number can fluctuate based on factors such as the type of loan for the property and the current real estate market.
The most significant reason appraisals don’t typically last longer is because appraisers often use comparable sales to determine the value. Comparable sales (or “comps” for short) are similar homes in the area that sold within the last six months. Since comps are constantly in flux, the appraisal value of a property can easily change. This can be good if you get an appraisal while selling prices are on an upswing but can harm your property value when it’s a buyers’ market.
Because real estate is such a volatile market, updating your appraisal as needed allows you to adjust to the ebb and flow of the market.
How Long Are Appraisals Good For Based on Mortgage Loan?
The type of loan you get for a property will play a part in how long your appraisal is good.
Conventional loan appraisals are generally the least rigid and allow estimates on existing homes to last for up to 120 days and new homes to last for up to a year.
Federal Housing Administration (FHA) Loans
FHA appraisals are good for up to 120 days, and if they’re updated, they can last for up to 240 days. However, if the case number assignment changes, they may request a new appraisal no matter how many days have passed.
Fannie Mae appraisals usually last for an entire year as long as the appraisal is updated after the first 120 days. They’re able to offer incredible flexibility because Fannie Mae is a company that buys mortgages for banks and lenders and then sells them as mortgage-backed securities to investors. The mortgage market keeps housing affordable, and everybody wins.
Freddie Mac is similar to Fannie Mae in structure and allows appraisals to last for a whole year if an update is provided at 120 days. They require that the lender has a copy of the appraisal report, so it’s crucial to have the information readily available.
The US Department of Agriculture (USDA) loans are provided to people buying property in rural areas. These appraisals are good for 120 days and have a 30-day grace period.
Veteran Affairs (VA) provide qualified veterans and active service members with loans to purchase property. Their appraisals are valid for up to six months, but if the loan doesn’t close in six months, they’ll have to get a new assessment.
How Long Are Appraisals Good For in an Unstable Market?
Unfortunately, the more unstable the real estate market is, the fewer days an appraisal will be valid. Since appraisals are all about getting the best deal on a home, lenders will want the most up-to-date home value when prices are rising and falling rapidly.
However, the more stable the market is, the longer an appraisal will last because the lender will be more inclined to trust the initial assessment.
What Do I Do When My Appraisal Expires?
If you’re reading this and realize you have an expired appraisal or are dangerously close to one, there are a few things you can do.
Request an Appraisal Extension
As a borrower, you can ask your mortgage lender for an extension if you meet specific requirements.
Get an Appraisal Update
Instead of an extension, you can ask your appraiser to update their assessment. While this doesn’t provide a new opinion about the property, it gives your lender the confirmation that the value hasn’t decreased since the appraisal time.
Get a Recertification of Value (ROV)
An ROV is a reassessment of property value by confirming that the repairs requested by the original appraisal were completed. ROVs confirm the initial value of the home assessed rather than recalculating a new value.
Get Another Appraisal
Depending on the market and your intentions behind looking up how long appraisals are good for, it might be time to have another appraisal done.
Can Appraisals Be Revoked Before Their Expiration Date?
In extreme cases, yes. This only happens when significant home improvements are made, or severe property damage occurs. Changes in the market won’t cause your appraisal to be revoked before it expires.
What’s the Difference Between an Appraisal and a Comparative Market Analysis (CMA)?
When a seller works with a real estate agent to sell a property, the realtor will often create a CMA to help establish a reasonable asking price for a house. The information generated by a CMA is very similar to an appraisal, but the two serve different purposes.
Agent-provided CMAs are focused on the seller’s best interest; appraisals concentrate on the buyer’s best interest. So while a CMA works to determine how much money the seller can make, an appraisal makes sure the buyer doesn’t overpay, and the lender doesn’t lend more than the home is worth.
Another significant difference between the two is that a licensed or certified professional home appraiser must perform an appraisal to be valid.
In some cases, an appraisal can convince the seller to lower the price, or a CMA can provide data missed by an appraisal to persuade a lender to increase the mortgage value.
For more tips and advice related to your real estate investment business, be sure to check out our other Mashvisor blog posts.