It’s clear that an appraisal will be good for the week that you get it, but what about a month or two later? What about a year later? Eventually, there will be a point where the appraisal will expire and no longer hold up in the market. When exactly that happens tends to depend on the type of home loan a buyer is after.
How long Is An Appraisal Good For?
How long an appraisal is good for depends on the type of loan being used. For FHA loans, the appraisal is good for 120 days, while VA appraisals are good for six months. After the 120 days or six months are up, the appraisal is no longer be considered valid and will expire.
For example, if a buyer uses an FHA loan and gets a home appraised, they will need to close within 120 days to avoid getting a second appraisal. This puts a quasi-deadline on a home sale, since you may end up having to pay more or get approved for the new amount if they close post-expiration.
What Happens If An Appraisal Expires?
If the sale of the home hasn’t closed before the appraisal expires, you’ll need to either get a new appraisal done or see if your lender will accept an update. An appraisal update would be the ideal option as it will cost less. Even though you may be past the date the original appraisal was good for, a lot of the work that went into it has already been done. The unique qualities of the home have already been assessed, and an appraisal update will focus more on market conditions and ensuring the value of the home hasn’t declined.
Can An Appraisal Be Deferred?
If you’re worried about not being able to close before an appraisal expires, you’re in luck. As of 2020, banks and credit unions can defer an appraisal until after the property’s sale. This movement is a (currently) temporary order created to help jog the ailing housing market and push forward loan deals.
There are several caveats here. Not all mortgage loans are allowed to have a delayed appraisal. Those who do have to have specialized approval through lenders, and most residential homes that all under this rule will have to be valued under $400,000 to qualify.
According to current legislation, this temporary deferral rule will be lifted at the end of the year. However, there’s always a chance that politicians may choose to extend it.
Do You Have To Accept An Appraiser’s Estimate?
Imagine the following scenario. You are trying to sell (or buy) your home, and you hire an appraiser. The appraiser gives you a value that is way below (or above) what you believe your house is worth. It happens more often than you think.
A bad appraisal can happen for a variety of reasons, including hiring an inexperienced appraiser, using outdated comps, or just having expectations that aren’t reasonable. These things can happen to anyone.
If you have a bad appraisal, you have two options. The first one is to reconsider the sale and stay home. If you don’t believe that the appraisal was done legitimately, then you can try for a do-over.
Should You File An Appraisal Appeal?
If you and your real estate agent both agree that it’s the right move to do, then yes, you should. To file an appeal, you will have to fill out a form stating the reasons for your objection to the appraisal price. From there, you might be able to change the appraisal as long as everyone is on the same page.
If you noticed that your appraiser used outdated comps, or used comps that didn’t really match your home, then you should notify the lender involved in the transaction. They may be able to come up with a solution that’s better.
When Can You Ask For A Second Appraisal?
Once in a while, you might end up with an appraiser that just isn’t doing their job well—and the appeal doesn’t go in your favor. Though it may start to feel like it’s hopeless, the truth is that you still have another way to get the appraisal to be fair.
Another option that you can consider doing is getting a second appraisal. To do this, the buying party will have to agree to work with another lender. That lender will refer them to a new appraiser. The selling party will be in charge of paying for the appraisal.
It’s worth noting that you will have to buy a second appraisal if your timeframe on the initial appraisal expired. So, this might be part of your real estate transaction regardless of the appraisal outcome if you drag your feet at closing.
Appraisals are only good for a finite amount of time, but it should be more than enough time to close the sale. For the vast majority of real estate transactions, the appraisal lasts either 120 days or six months.