Purchasing or selling a home is a significant financial decision, and an integral part of this process is the home appraisal. Home appraisals play a crucial role in determining the fair market value of a property, ensuring that the price set by the buyer and lender is fair and accurate. However, in a real estate transaction, unforeseen delays can occur, and it’s essential to understand the validity period of a home appraisal. In this article, we will delve into how long home appraisals are good for, the factors influencing their duration, and what to do when the appraisal time frame expires.
What is the Role of Appraisals in Home Ownership?
A home appraisal is conducted by a certified appraiser to provide an impartial evaluation of a property’s market value. The appraiser considers multiple aspects, such as the property’s condition, location, recent sales of comparable properties, and prevailing market trends. This assessment is crucial for both buyers and sellers, as it guarantees that the property’s price is in line with the current dynamics of the real estate market.
An exact appraisal enables buyers to be confident that they are paying a reasonable and justifiable price for the property they plan to buy. Overvaluation can lead to difficulties in obtaining financing and potential affordability issues. On the other hand, undervaluation may prevent buyers from accessing the accumulated equity in the property when selling or seeking a home equity loan. Accurate appraisals also play a crucial role in the mortgage lending process, as lenders use them to determine the appropriate loan amount based on the property’s value.
For sellers, a precise appraisal ensures that they are setting a reasonable listing price for their property. Overpricing may lead to extended time on the market, resulting in potential financial losses and fewer interested buyers. On the other hand, underpricing may undervalue the property and cause the seller to miss out on maximizing their returns. Accurate appraisals also provide sellers with an opportunity to showcase any improvements made to the property, increasing its market appeal and value.
Overall, accurate appraisals are fundamental to maintaining the integrity of the mortgage lending process and supporting healthy homeownership. By preventing overvaluation or undervaluation, appraisals contribute to the stability and growth of both individual homeowners’ financial assets and the overall real estate market.
How Long Are Home Appraisals Good For?
The validity period of a home appraisal can vary based on different factors, such as the loan type, market conditions, and individual lender policies. While most home appraisals are generally valid for 90 days, this duration can be shorter or longer depending on the specific circumstances.
Let’s explore the validity periods for various loan types:
1. Conventional Loan
There are two considerations when looking at conventional loans:
- Existing Homes – Appraisals for conventional loans on existing homes are typically valid for 120 days. This allows buyers and sellers sufficient time to complete the purchase process without the need for frequent appraisals.
- New Homes – For newly constructed homes, the appraisal remains valid for up to one year. This longer validity period takes into account the time required for new construction projects to be completed and marketed.
2. Federal Housing Administration (FHA) Loan
FHA appraisals are valid for 180 days, which provides a considerable timeframe for borrowers to secure financing and complete the home purchase. In the event of an update to the appraisal, it can remain valid for up to a year. However, if the case number assignment changes during this period, a new appraisal may be necessary, regardless of the number of days that have passed.
3. Fannie Mae and Freddie Mac
Both Fannie Mae and Freddie Mac appraisals are typically valid for 12 months. However, these appraisals require an update after the initial 120 days to account for any market fluctuations or changes in the property’s condition.
4. USDA Loan
Appraisals for USDA loans, designed to assist homebuyers in rural areas, are valid for 120 days, with an additional 30-day grace period. This allows borrowers sufficient time to explore available properties in rural locations.
5. Veteran Affairs (VA) Loan
VA loan appraisals remain valid for up to six months. If the loan does not close during this period, a new appraisal is required for the transaction to proceed.
What to Do When the Appraisal Time Frame Expires?
When the appraisal time frame is approaching its expiration date, borrowers have several options to consider:
Appraisal Extension and Update
Borrowers can request an extension or an update to the appraisal before it expires. An extension allows the lender to prolong the validity period, providing more time to complete the home-buying or refinancing process.
An update involves a review of the property’s current market value and condition to confirm that the initial appraisal’s value remains accurate. This process is particularly useful in fluctuating real estate markets.
Recertification of Value (ROV)
An ROV is a reassessment and confirmation that repairs or improvements specified in the original appraisal have been completed. By recertifying the value, the lender can confirm that the property’s market worth remains consistent with the initial appraisal.
Can I Get A Reappraisal Even Before the Expiration Date?
In some cases, borrowers may wonder if they can request a reappraisal before the initial expiration date. This situation may arise if significant market changes or property improvements have occurred since the original appraisal.
While the possibility of an early reappraisal may vary among lenders, borrowers can communicate with their lenders to explore such options. An early reappraisal may be considered if there are substantial changes in the property’s condition or if the market experiences rapid fluctuations that could impact the property’s value significantly.
It is essential to work closely with the lender and provide clear, relevant information to support the request for an early reappraisal. Effective communication ensures that the most accurate valuation of the property is obtained, benefiting both the borrower and the lender in the home buying or refinancing process.
Home Appraisals can Expire
In conclusion, home appraisals are critical components of the home buying and selling process, providing valuable insights into the property’s market value. The validity period of a home appraisal typically ranges from 90 days to one year, depending on the loan type and the real estate market’s conditions. In cases where the appraisal time frame is nearing expiration, borrowers have the option of seeking an extension, an update, or a recertification of value. Maintaining effective communication with the lender is vital throughout the process to address any inquiries and guarantee a fair and transparent appraisal process.