Nexus Analytix

FHA appraisals do expire.

New Policy: Mortgagee Letter 2009-30, dated September 01, 2009, states that effective for all FHA case numbers assigned on or after January 1, 2010, the validity period for all appraisals on existing and proposed and under construction properties will be 120 days.

This change aligns FHA’s requirements pertaining to the validity of an appraisal with current industry practices. This is a change from the current validity periods of six months for an appraisal of an existing property that is complete, and 12 months for proposed and under construction properties.

Old Policy: The appraisal has a term of six months for existing construction and 12 months for proposed construction and substantial rehabilitation. However, if the appropriate HOC determines that soft market conditions exist in certain areas or markets, it may shorten the term of appraisals for proposed construction and substantial rehabilitation to a period of less than 12 months upon advance notice to lenders. The term of the appraisal begins on the day the home is inspected by the FHA appraiser and this date appears on the URAR.

For existing dwellings, if a borrower signs a valid sales contract or is approved for a loan prior to the expiration date of the appraisal, the term of the appraisal may be extended, at the option of the lender, for 30 days to allow for the approval of the borrower and closing of the loan. Approval of the borrower occurs when the lender's DE underwriter signs the Mortgage Credit Analysis Worksheet, Form HUD-92900-WS/92900-PUR.

Appraisals on proposed construction or substantial rehabilitation may be extended up to 12 months provided that construction or rehabilitation started before the original appraisal expired. An FHA Roster appraiser must inspect the property and update the appraisal previously done. 

(Source: www.hud.gov)

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