How Long Are Conventional Appraisals Good For?

A conventional appraisal is a professional assessment that determines a property’s market value, which is a common requirement in real estate transactions, particularly for mortgage lending. This evaluation provides lenders with assurance that the property’s value supports the loan amount. For homebuyers and lenders alike, understanding how long an appraisal remains valid is a significant factor in navigating the financing process.

Typical Validity Period for Conventional Appraisals

Conventional loan appraisals generally adhere to guidelines set by major mortgage entities, such as Fannie Mae and Freddie Mac. For existing homes, a conventional appraisal is typically considered valid for 120 days from its effective date. Appraisals for new construction properties can sometimes retain validity for a longer period, extending up to one year. Fannie Mae guidelines specify that while an appraisal may be valid for up to 12 months, an appraisal update is usually required if the report is older than 120 days at the time of the loan’s closing. Similarly, Freddie Mac also allows appraisals to be valid for 12 months, with an update becoming necessary after 120 days. Some individual lender policies might impose slightly stricter requirements than these standard guidelines.

Situations Affecting Appraisal Durability

Various factors can impact the continued acceptability of a conventional appraisal, potentially shortening its useful life even within the typical validity period.

Market Conditions

Significant and rapid shifts in local market conditions can quickly render an existing appraisal less reliable. For instance, sudden changes in supply and demand, economic downturns, rising interest rates, or inflation can cause property values to fluctuate, necessitating a more recent valuation. Appraisers rely on recent comparable sales, and if the market changes drastically, those comparables may no longer accurately reflect current values.

Physical Changes

Physical changes or damage to the appraised property after the appraisal date can also compromise its durability. Major renovations, additions, or deterioration can materially affect the market value determined in the original report. Issues such as mold, an active roof leak, foundation problems, or unpermitted additions identified after the appraisal could require re-evaluation. Any substantial alteration to the property’s condition or characteristics can invalidate the initial assessment.

Lender Policies

Lender-specific internal policies, sometimes referred to as “overlays,” may also affect an appraisal’s longevity. These policies can be stricter than the general guidelines from Fannie Mae or Freddie Mac, requiring a new appraisal sooner than anticipated. Therefore, even if an appraisal falls within broader conventional validity periods, specific lender requirements could necessitate a fresh assessment.

Extending Appraisal Validity

When an existing conventional appraisal approaches its typical validity limit, specific mechanisms are available to extend its use without requiring a full new appraisal. The primary method is through a “Recertification of Value” or an “Appraisal Update.” This form has a dual purpose: to update an existing appraisal or to certify completion of required repairs.

To utilize an appraisal update, the original appraiser typically performs an exterior inspection of the property and reviews current market data. The appraiser’s objective is to confirm that the property’s value has not declined since the original appraisal date.

This process is permissible when market conditions have not changed significantly, the property’s condition remains similar, and the original appraiser is available to perform the update. An appraisal update can extend the validity of the original appraisal, often allowing it to be used for up to 12 months from its initial effective date.

When a New Appraisal Becomes Necessary

A completely new appraisal becomes mandatory in several scenarios where an existing appraisal cannot be extended or updated. This is often the case if the original appraisal exceeds the maximum acceptable timeframe for an update, such as being older than 12 months from the loan’s note date. Even if an update was performed, if the total time from the original effective date surpasses the maximum allowed period, a new appraisal will be required.

A new appraisal is also necessitated when significant changes have occurred to the property or market conditions that render the original appraisal fundamentally unreliable for an update. If, during an appraisal update, the appraiser determines that the property’s value has declined since the original appraisal date, a new appraisal is typically required to reflect the current market reality. Extensive renovations, major damage, or a substantial market shift indicating a decline in value would trigger this requirement.

Additionally, if a lender needs to utilize a higher appraised value for underwriting purposes due to an increase in market value, a new appraisal reflecting this higher value is generally required, as updates are typically designed to confirm no decline in value.