Appraisal Extensions & Appraisal Updates
How Long Is A Home Appraisal Good For?
Did you know the home appraisal that was done for the home you are buying, selling or refinancing has an expiration date? The expiration date of a home appraisal is between 90 - 120 days depending on the type of loan. An appraisal conducted for an FHA loan will have an expiration date of 120 days, while a Fannie Mae backed loan will have an appraisal expiration of 90 days.
Why Does An Appraisal Have An Expiration Date?
Home values can go up or down depending on the market, the age of the home and other conditions. The value opinion in an appraisal if for an set date, typically the day of inspection but can be a date in the past or a date in the future. Unless the market is rapidly increasing or decreasing lenders will typically except the normal time frames. However, in times of rapid market changes values can change by 1-2% per month or more which in a $250,000 house can be over $5,000 per month. That’s why appraisals have an expiration date.
What Is An Appraisal Extension?
When a home appraisal reaches its expiration date, the appraisal can be extended if it meets certain requirements, including but not limited to the requirement that the appraisal not be updated prior and the maximum effective date of the loan type is not reached.
What Is An Appraisal Update?
An appraisal update does not provide a new opinion of value but does require the appraiser to review the market conditions and certify that values have not declined since the effective date of the original appraisal.
When Is An Appraisal Update or Extension Needed?
Home sale transactions involve a buyer and seller who agree on a price, then enter an escrow period when the home inspection and home appraisal happen, as well as an underwriting process for the loan to be funded. All these things don’t happen on the same day, thus the home appraisal expiration date becomes important. Most homes close within 50 days - and the 90 or 120 day home appraisal expiration date is not an issue.
Home refinances work differently, but they also involve a home appraisal and and underwriting process for the loan to be funded. Refinancing can take 30 - 45 days, and once again the home appraisal expiration date is not an issue.
When the market experiences low mortgage loan interest rates and income growth like recently in the second half of 2019 and beginning of 2020, more home purchases and refinances happen.
This can cause lenders to become backlogged with process and paperwork. Add to that the COVID-19 pandemic currently happening in the US where working at home has become the norm and causes processes to run slower - and underwriting loans, funding and home closings are taking longer. Currently this process takes more than 90 or 120 days, and appraisals are reaching their expiration dates.
An appraisal update allows additional time for the loan to close provided home values have not declined.
How Do You Get An Appraisal Update or Extension?
A homeowner cannot ask for an appraisal update. Appraisal updates are requested by the lender, asking the appraiser to complete paperwork and analyze the market conditions to verify that values have not declined.
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