How Long is an Appraisal Good for in Real Estate?

When you're involved in a real estate transaction, whether buying or refinancing, an appraisal is a crucial step in determining the property's value. However, it's essential to know that appraisals have a "shelf life" or a validity period, and understanding this timeframe is key to a smooth transaction. Let's delve into the factors influencing the duration of an appraisal's validity in real estate.

1. Lender Policies:

• The primary factor influencing the validity of an appraisal is often the policies set by the lender. Lenders typically specify a validity period, commonly ranging from 90 to 120 days. This period allows for the completion of the real estate transaction within a reasonable timeframe.

2. Market Conditions:

• Real estate markets can be dynamic, experiencing fluctuations in property values. If the time between the appraisal and the closing date is prolonged, significant market changes could occur. In such cases, lenders may require an updated appraisal to ensure the property's value aligns with current market trends.

3. Loan Type:

• The type of loan being used for the real estate transaction can impact the appraisal's validity. Government-backed loans, such as FHA or VA loans, may have specific requirements regarding the timeframe for which an appraisal remains valid.

4. Purpose of the Appraisal:

• The purpose for which the appraisal was conducted plays a role. Appraisals for mortgage financing purposes may adhere to standard validity periods. However, appraisals conducted for other purposes, such as legal matters or estate planning, may have different considerations.

5. Property Changes:

• Significant changes to the property between the appraisal date and the closing date could impact the appraisal's validity. If alterations, improvements, or damages occur, a lender may request a reassessment to ensure the property's value remains accurate.

What Happens if the Appraisal Expires?

If the validity period of the initial appraisal expires before the closing of the real estate transaction, several scenarios may unfold:

• Lender Request for Update: The lender may require an update or a new appraisal to reflect current market conditions.

• Appraiser's Assessment: The appraiser might assess whether market conditions have changed significantly and whether a full reappraisal is necessary.

• Reduced Fee Updates: In some cases, appraisers may offer to provide updates or new appraisals for a reduced fee, especially if there haven't been substantial changes in market conditions.

Conclusion

Understanding the validity period of a real estate appraisal is crucial for all parties involved in a transaction. Clear communication with the lender, staying informed about market conditions, and addressing any property changes promptly can help navigate the appraisal process smoothly. Whether you're a buyer, seller, or lender, being aware of the factors influencing appraisal validity ensures that property values remain accurate and transactions proceed seamlessly in the ever-changing landscape of real estate.