In the wild world of appraisals, the only constant is change. The appraisal industry is constantly adjusting to new regulation, changes in the market, and lender guidelines. All while trying to be thorough and transparent to the industry, their clients, and the borrower. So, when change is the constant, how long is the appraisal good for?
For mortgage purposes, it would be the lender’s decision to set the time frame in which they will accept a dated appraisal. However, to answer that question, one must understand what the appraisal report is.
An appraisal is essentially a snapshot in time that reports the value of the property based on a particular date. The information contained in the report is based on “past” or historic data that is only current to the effective date of the report.
As a rule of thumb, most lenders will accept a report within 90-180 days. As time progresses from that “past” effective date, the market continues to move. If the market is dynamic, new information introduced could produce new results if the property was re-appraised. Changes in the market can occur slowly or quickly in relatively short periods of time.
Here is a scenario that illustrates the point. House “A” is appraised in September for $100,000. The value was based on information available up until the time of report.
** Fast forward 90 days. A new appraisal is ordered. **
Since September, interest rates dropped a full point, 10 new homes in the neighborhood were listed for sale there has been 5 sales in November similar to house “A” that sold in the same neighborhood.
What do you think happened to the value?
Remember that the market is always moving, and that the appraisal report isn’t a living document, but a snapshot of a property’s value at a given time. Because the market is always changing an appraisal has a shelf life. That shelf life is determined by the lender, but as a rule of thumb an appraisal report is good for 3-6 months.
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