Reply by GOLDGIRL/CA on 10/12/12 4:16am
Msg #438260
Yes
I actually hear this occasionally. The appraisal is good for only 2 - 3 months and if the loan isn't ready by the time the appraisal "expires," then the borrowers have to get another appraisal and start over. They were all plenty ticked. However, I've never had a redraw because of this. That sounds like some major underwriting hysteria.
Mostly it happens when borrowers decide to switch lenders after getting an appraisal and the new lender can't get docs out in time ....
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Reply by Marazz/AZ on 10/12/12 9:11am
Msg #438284
Re: Yes
An appraisal reflects the (supported) opinion of value of an appraiser for the effective date only.
FHA links an appraisal to an address and it stays with the home for 6 months, even if borrowers change (say a sale falls through and a new buyer is in the picture). It's up to the DEU whether to say an appraisal a few months old might still be "good" or if a new one should be ordered, but, they are both part of the file and will both be considered in the underwriting. In the case of rapidly changing markets this can cause a lot of distress in a sale, but is done to prevent lenders shopping for the highest appraisal.
Other lenders and investors have specific criteria and tolerance for dated appraisals. I've never heard any big national lender with a hard and fast rule of 60 days or whatever, and I was an appraiser for 10 years. Fannie and Freddie do not place arbitrary expiration dates on appraisals.
One of the most interesting things (I always thought) about how lenders view appraisals is that there are federal rules saying a lending institution can use an appraisal prepared for another lender at any time (say a borrower is charge for an appraisal but then switches lenders). However most lenders will not do this because unless they are named as the client on the appraisal they have not established a client relationship (privity) and would be out of luck (probably, although anyone can sue anyone for anything...) in trying to make a claim on the appraisers E&O or sue the appraiser.
I had several requests over the years to "add a comp" to an appraisal that was several months old. This even happens post funding, when an investor down the road has stricter criteria than the initial lender. These requests are always amusing, but as long as the fee for extra work was paid, I was always willing to add comps. However most lenders didn't want a comp from 3 months ago, they want a current comp, and most fail to understand that this creates a new effective date with a completely new value. Possibly a value they might not like (particularly in markets that suffer seasonal swings or the rapidly depreciating markets of a few years ago).
If a loan is delayed in underwriting the lender has several options, to get an updated value. They can get an AVM (often done when buyers have lots of equity or exceptional credit) or a exterior only (driveby) which is less expensive. Most appraisers would discount a second appraisal to give a current value since they can clone the first report and they don't have to measure the house again. Just walk through it and make sure it didn't burn down or suffer some other horrible fate.
There is also an appraisal "update" form, the 1004D, from Fannie, that lenders like to use to request a recent value. This is a terribly flawed form and any appraiser with a clue does not use it. Any time you give a value you have done an appraisal and your reporting and record keeping requirements are substantial, and turning in a one page form does not fulfill these requirements. But lenders think since it's one page it should be really cheap and there are plenty of idiotic appraisers who provide those, I am sure.
At any rate, sorry, I'm rambling. I think the original question was: how long is an appraisal good for? The answer is: it depends.
"It depends" applies to most things in appraising. When I was first training as an apprentice I used to wonder why my boss (with 25 years experience) would never give me a straight answer on anything LOL. I eventually found out that the answer to almost everything is "it depends."
Oh I can tell you one thing I learned after appraising that is a hard and fast rule: Stay away from Chase.
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Reply by Pro Mobile Notary on 10/12/12 1:51pm
Msg #438316
It happens. We do not get to see it because it is rare for that to happen after the docs are drawn. Good lenders look at all expiration dates (appraisal, credit report, VODs etc) before drawing docs to prevent this from happening.
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