The FDIC’s Appraisal Regulations do not specify exactly how long an existing appraisal or evaluation continues to be valid. Rather, an institution may use an existing appraisal or evaluation if it continues to reflect the market value of the property and you meet the other requirements in the federal banking agencies’ Interagency Appraisal and Evaluation Guidelines.

First, we note that the result of an automated valuation model, in and of itself, is not considered an “appraisal” or an “evaluation” under the FDIC Appraisal Regulations. But assuming that your bank has a valid appraisal or evaluation, we believe the appraisal or evaluation may be reused for subsequent loans in certain circumstances.  

The Interagency Appraisal and Evaluation Guidelines state that an institution may use an existing appraisal or evaluation for a renewal, refinancing, or other subsequent transaction, “as long as the institution verifies and documents that the appraisal or evaluation continues to be valid.” The Interagency Guidelines also state that “an institution should establish criteria for assessing whether an existing appraisal or evaluation continues to reflect the market value of the property (that is, remains valid)” and “[s]uch criteria will vary depending upon the condition of the property and the marketplace, and the nature of the transaction.”

Additionally, the Interagency Guidelines provide examples of factors that may change the originally reported market value of the property and necessitate a new appraisal or evaluation. One of the many factors listed is the “[p]assage of time.” Consequently, we recommend reviewing whether your appraisals and evaluations continue to reflect the market value of the property in accordance with the Interagency Guidelines and your own criteria before deciding to reuse them.

Note that loans insured by the FHA, sold to a government-sponsored enterprise (Fannie or Freddie), or considered higher-priced mortgage loans under Regulation Z may be subject to additional appraisal requirements that impose a time limit on re-using appraisals or evaluations.

For resources related to our guidance, please see:

• FDIC Appraisal Regulations, 12 CFR 323.3(a) (“An appraisal performed by a State certified or licensed appraiser is required for all real estate-related financial transactions except those in which: (1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less.”)

• FDIC Appraisal Regulations, 12 CFR 323.3(b) (“For a transaction that does not require the services of a State certified or licensed appraiser under paragraphs (a)(1), (5), (7), (13), or (14) of this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices.”)

• Interagency Appraisal and Evaluation Guidelines, Appendix A — Appraisal Exemptions, 7. Renewals, Refinancings, and Other Subsequent Transactions, 75 Fed. Reg. 77449, 77467 (December 10, 2010) (“If an evaluation is permitted under this exemption, an institution may use an existing appraisal or evaluation as long as the institution verifies and documents that the appraisal or evaluation continues to be valid.”)

• Interagency Appraisal and Evaluation Guidelines, IV. Appraisal and Evaluation Program, 75 Fed. Reg. 77449, 77457 (December 10, 2010) (“An institution’s board of directors or its designated committee is responsible for adopting and reviewing policies and procedures that establish an effective real estate appraisal and evaluation program. The program should: . . . Develop criteria to assess whether an existing appraisal or evaluation may be used to support a subsequent transaction.”)

• Interagency Appraisal and Evaluation Guidelines, XIV. Validity of Appraisals and Evaluations, 75 Fed. Reg. 77449, 77461 (December 10, 2010) (“The Agencies allow an institution to use an existing appraisal or evaluation to support a subsequent transaction in certain circumstances. Therefore, an institution should establish criteria for assessing whether an existing appraisal or evaluation continues to reflect the market value of the property (that is, remains valid). Such criteria will vary depending upon the condition of the property and the marketplace, and the nature of the transaction. The documentation in the credit file should provide the facts and analysis to support the institution’s conclusion that the existing appraisal or evaluation may be used in the subsequent transaction. A new appraisal or evaluation is necessary if the originally reported market value has changed due to factors such as:

• Passage of time.
• Volatility of the local market.
• Changes in terms and availability of financing.
• Natural disasters.
• Limited or over supply of competing properties
• Improvements to the subject property or competing properties.
• Lack of maintenance of the subject or competing properties.
• Changes in underlying economic and market assumptions, such as capitalization rates and lease terms.
• Changes in zoning, building materials, or technology.
• Environmental contamination.”)