Property appraisals may not have expiration dates, but, typically, lenders tend to reject appraisals that are more than 120 days old. In other cases, the expiration date may be within 60 to 90 days. Some lenders will allow up to 180 days to match the usual acceptance age of similar properties that were sold in the last six months. It’s also possible to extend an appraisal with the proper documents. Lenders call the time in which they accept appraisals the “term of validity.”
What Are Comparables?
Comparables are the comparable sales that are similar to the property itself. A comparable shows a snapshot of the housing market surrounding the appraised home.
Why Do Limits on Property Appraisals Exist?
People may wonder why lending institutions limit the age of a property appraisal. The answer is that property values change. The housing market rises and falls, depending on the economy and the area of the property.
Appraisals are always needed so the lender knows the house has enough value to act as the collateral for the loan. If the market is on the rise, it isn’t a big issue. However, if the market is declining, the lender may lose money by accepting an old appraisal that said the house is worth more than it is now.
The Obstacles in Receiving an Extension
Different institutions have different requirements. One example of this comes from 2010, after the housing crisis. In the past, FHA appraisals were valid for up to 180 days. After the crisis, the FHA wouldn’t accept appraisals older than 120 days and had the right to use even shorter terms of validity as the market declined. However, the FHA does give 30-day extensions. If the homeowner provides the proper documentation, shows special circumstances, and the FHA approves the loan, homeowners can receive a 240-day extension on their appraisal.
Other lenders give 90-day extensions, and most appraisers will perform a re-certification at a reduced price.
How Does the Appraisal Process Work?
For those who have never had their homes appraised, it may seem like a quick and easy process. One of the first steps is inspecting the home. It might take an hour to examine it, depending on the size of the house and if the property is complex, but this is only the beginning. Outside of the inspection, the appraiser needs to research the zoning records and public ownership and investigate the area. This includes learning about the demographics and lifestyles of the residents around the home. After that, the appraiser needs to compile comparable sales to create a snapshot of the market and look at replacement costs and rentals.
With all this information, the appraiser can analyze the home’s value and write a report based on the findings that will lead to the final product of appraising the home. With all this work and research, the appraisal process may take between several days and a few weeks.
How Appraisers Fact Check and Dig for Information
Appraisers will ask for several documents during the appraisal. When this occurs, it’s best to provide the available documents. The more information the appraiser has, the more accurate and detailed the appraisal can be. This will save time for the appraiser as well, because there will be no need to look for the information.
Speaking of information, homeowners shouldn’t hold back information from the appraiser. Almost all kinds of information is useful, so sharing what you can will help them out. Additionally, the information should be truthful. Appraisers are always skeptical, so they will always verify what homeowners say with other resources. Sometimes they even ask questions they know the answer to in order to test the homeowners' veracity. Appraisers are always preparing, in case they ever need to go to court over any issue, so any misinformation will reflect badly on the homeowner and create distrust in the appraiser.
Types of Appraisal Reports
There are three types of appraisal reports. The most inexpensive report is a restricted use report. This report is short, and the pricing will depend on the size of the home and the amount of research needed for the appraisal. Prices for a restricted use report can range from $2,000 to $2,500.
A summary report may cost over $3,000. This report creates a summary of the data and analysis from the appraisal process. It is also free for use by any user.
The last type of report is a self-contained report. This is usually not requested, but it contains all the details, data, and analysis. This is most likely the priciest report because of how much information it contains. If a homeowner needs help figuring out which appraisal report to use, the appraiser can usually tell them by knowing how they want to use the report.
The reason appraisal reports are pricey is because of the amount of work that must be done for every home. Each appraisal requires a large amount of information, but because the homeowner only sees a smaller portion of information in the final report, it seems expensive. However, the appraiser typically keeps the information in a separate work file and doesn’t include it in the appraisal report.
Tell the Appraiser the Reason for Interest
Everyone has different reasons for showing interest in a property. If someone only wants to know the value of the building or property, this is the “fee simple interest.” This usually happens when someone is looking for a place to move a business to.
If an individual wants to know the property’s worth based on a landlord’s perspective and when it’s occupied with tenants, this is a “leased fee interest.” Last, if someone wants to know the worth of a property from a tenant’s point of view, this would be a “leasehold interest.” People make this request when they want to buy a business, because they need to know the value of the lease. Getting the property interest appraised is another way to get a more accurate report on the value of a property.
To summarize, property appraisals have expiration dates because the housing market tends to fluctuate, and the lender doesn’t want to lose money. A good window of time in which the appraisal is valid is between 30 and 120 days. It’s difficult to get extensions, so re-certifications from the appraiser is sometimes necessary. Appraisers work hard to gather large amounts of information on homes and properties to write accurate appraisal reports. There are three types of reports and explaining the property interest to the appraiser will help with the report.