Traditionally, an appraisal is an important part of the real estate process, whether selling or buying a home. Home appraisals consider local property values and comparable sales to determine a fair list and offer price.
How long is an appraisal good for? Most appraisals are good for between three to six months, but this varies depending on many factors. Learn what factors affect appraisal timelines, including when an updated assessment may be needed.
What is a Real Estate Appraisal?
A real estate appraisal is an assessment of a property designed to determine its value. An appraisal uses various data points to establish the property’s fair market value. A licensed appraiser completes the appraisal, which includes property details, market value, photographs, public land records, and a written report.
The buyer is usually responsible for hiring an appraiser, and the home assessment is valid for as long as the contract’s effective date. However, the buyer’s lender may have their own requirements, which could shorten or lengthen the expiration timeline.
Why Appraisals Are Important in a Real Estate Market
Home appraisals are important in the real estate market. They protect buyers, sellers, and lenders and ensure a fairly priced transaction.
Mortgage lenders use home appraisals to calculate a property’s fair market value, which is used to determine the borrower’s loan amount. A mortgage lender won’t typically provide financing over the property’s market value.
Appraisals also benefit buyers and sellers, as they assist each other in negotiations. The seller uses the appraisal to set the listing price, and the buyer uses it to decide how much to offer.
The Validity Period of a Home Appraisal
Rapidly changing market conditions mean home appraisals are only valid for a certain period. Here are a few key things to know about home appraisal timelines.
General Guidelines
A home appraisal may be good for 90 days to six months, with 120 days (four months) being the most common. The actual valid period varies depending on the lender and the loan type.
Appraisals for Federal Housing Administration loans (FHA) are eligible for 180 days. However, with an updated report, FHA loans offer an appraisal extension of up to one year.
The appraisal time frame for a conventional loan may vary among lenders, with four months being the most common. However, the United States Department of Veterans Affairs (VA) loans usually require a new appraisal every six months. With a VA loan, if the home sale doesn’t close within six months, a new assessment is required.
Other federal loans may also have varying appraisal expiration dates. United States Department of Housing and Urban Development (HUD) loans are good for 180 days, and USDA loans are typically valid for up to 150 days.
Additionally, most lenders don’t allow buyers or sellers to reuse the same appraisal after purchasing the home. However, many federal lenders may enable buyers to obtain a recertification of value to extend the expiration date.
Factors Affecting Validity
Various factors, including market fluctuations, property changes, and lender requirements, can influence a home appraisal and its validity period.
For example, significant changes in the market can impact local market values, which may require a new appraisal. Certain events, such as natural disasters, could also void the original appraisal report.
Significant property condition changes after the initial appraisal may also require an updated appraisal, even if the original one is still within the validity period.
Home appraisal requirements also vary between lenders. Some may accept appraisals for up to six months, whereas others may have much shorter timelines of 90 days.
When a New Appraisal May Be Required
An up-to-date appraisal is important during the home-buying process to ensure an accurate property value. A new appraisal may be required in the following situations.
Expired Appraisal
Lenders typically require a new appraisal if an appraisal expires mid-transaction. FHA, VA, and conventional loans all require a new appraisal after the expiration date. Most lenders, including USDA and conventional loans, allow the borrower to hire or choose their own appraisers.
Significant Changes to the Property
Major changes to the property impact the appraised value, making a new report important. A seller who makes significant renovations or repairs should order a new appraisal to update the home’s value. Certain home changes, such as additions or complete renovations, can add substantial value, making a new appraisal well worth the cost.
Significant damage to the property, such as from a natural disaster or defective home appliances, could decrease its value and require a new appraisal.
Changes in Market Conditions
Market conditions change quickly, similar to the stock market, and some home sales may require an appraisal update. Sellers in cities or neighborhoods with rapidly rising or falling home values may need a new assessment before the closing. Other factors, such as the local job market or commercial demand, can also affect appraisal requirements.
Lender Requirements for a Loan
It’s also important to note that specific lenders may have their own requirements as to when an appraisal update is needed. Specific lender policies may require an updated appraisal before the loan closes, even if the existing one hasn’t yet expired.
Some lenders may only require a partially new appraisal. They may request that an appraiser complete a value recertification, confirming that the initial report’s information is still accurate, especially when numerous closing delays occur.
The Impact of Appraisal Validity on Home Sales
The appraisal process is an important real estate resource used to determine the fair price of a home sale. Appraisals can impact both buyers and sellers in the following ways.
Delays in Closing
Failure to update an appraisal before its expiration date can lead to closing delays. The potential buyer may need to push back the closing date to obtain a valid appraisal.
Financing Challenges
Appraisals can also affect financing options. Potential buyers who rely on a mortgage to pay for the home can only borrow up to a specific percentage of the home value. If the home does not appraise for the list price or their offer, the deal may fall through due to a lack of funding.
Additionally, many buyers include an appraisal contingency in the purchase agreement. This contingency allows the buyer to withdraw from the deal if the appraised value does not meet the offer price.
Avoiding Appraisal Concerns
An appraisal can be a useful real estate tool, especially for buyers who rely on a mortgage loan to pay for the home. However, appraisals are typically valid for up to six months; some expire before that.
Home appraisals can slow down the selling process, especially if numerous appraisal updates are required. Sellers who want to offload their properties faster without the inconveniences of an appraisal might consider a cash buyer. For a cash home buyer, appraisals are typically not required, as the buyer is not relying on financing.
Benefits of a Faster and More Certain Closing
With a cash buyer, sellers don’t have to deal with appraisers or frequent negotiations based on current market conditions. The seller also gets to choose their closing date with a cash sale.
A cash sale also avoids many fees associated with a traditional sale, such as real estate agent commissions, closing costs, and appraisal and inspection costs.
Cash sales are less likely to fall through since they’re not contingent on financing or home sales, allowing sellers to prepare better. With the ease and convenience of a cash sale, you can speed up the sale of your existing home and move on to buying your dream home.
Contact A-List Properties today at (972) 526-7042 to learn more about cash sales. You can also fill out our online form to receive a fast cash offer.
Zach Shelley
Zach Shelley is a seasoned real estate investor with a diverse network spanning across the nation. As the founder of his own real estate venture, Zach is committed to offering innovative solutions to homeowners facing various real estate challenges.. Through his dedication and strategic approach, Zach continues to make a significant impact in the real estate industry, providing homeowners with alternative pathways to navigate their property transactions.
