What Are the Appraisal and Inspection Requirements?

Home-buying loans require properties to meet minimum safety and livability standards before a loan can be approved. Understanding what the loan requires, how appraisals work, and what inspections are needed helps you avoid surprises and keep your purchase on track. This article explains property standards, the appraisal process, inspection requirements, and what repairs must be completed before closing.

Understanding Property Standards

What Are Property Standards for a mortgage?

Loan property standards are minimum requirements that every property must meet to qualify for financing. These standards ensure the property is:

Safe and structurally sound
Free from hazardous materials
Livable and functional
Protected from environmental hazards
Adequate for the borrower's needs

Lenders require properties to be perfect—just safe, clean, and in good repair. A 50-year-old home can qualify if it meets these standards; a brand-new home won't qualify if it has safety issues.

Who Enforces Standards?

The appraiser is responsible for determining whether a property meets the loan standards. The appraiser inspects the property and notes any issues that must be corrected before closing.

The Appraisal Process

What Is an Appraisal?

An appraisal is a professional evaluation of a property's fair market value and condition. The lender requires it for two purposes:

Valuation - Confirming the property is worth at least the purchase price
Condition assessment - Confirming the property meets the loan guidelines

Who Conducts the Appraisal?

An independent, lender-approved appraiser conducts the appraisal. The lender neither employs the appraiser nor the borrower—they're neutral third parties certified to evaluate property value and condition.

When Is the Appraisal Ordered?

The lender typically orders the appraisal after your offer is accepted and you're under contract. This timing allows the appraiser to inspect the actual property you're purchasing.

Appraisal Cost

Appraisal fees typically range from $400-600 depending on:

Property location
Property type and size
Complexity of valuation

The borrower pays the appraisal fee, usually as part of closing costs or upfront during the loan process.

Appraisal Timeline

Order date: Day 1 after contract accepted
Inspection: Usually scheduled within 3-5 days
Report completion: 5-10 days from order
Total timeline: 5-10 business days from order to completed report

What the Appraiser Evaluates

Interior inspection:

Room count and sizes
Flooring condition
Wall and ceiling condition
Kitchen appliances and cabinets
Bathrooms (fixtures, condition)
Plumbing functionality
Electrical safety
HVAC system

Exterior inspection:

Roof condition and age
Siding or exterior finish
Foundation condition
Deck/porch condition
Driveway condition
Grading and drainage
Fences and gates

Systems:

Electrical system
Plumbing system
Heating and cooling systems
Water heater
Septic (if applicable)
Well water (if applicable)

Environmental:

Mold or moisture issues
Pest damage or infestation
Lead paint (homes built before 1978)
Asbestos
Underground storage tanks
Radon (if applicable)

Property features:

Square footage
Lot size
Comparable properties
Market conditions

Minimum Property Standards

Structural Requirements

Foundation:

Must be structurally sound
No major cracks or settling
Must protect the home from moisture intrusion
Basement or crawl space must be dry (no active water intrusion)
Sump pump required if drainage issues are present

Roof:

Must be structurally sound and weather-tight
Maximum age typically 20-30 years (varies by type)
Asphalt shingle roofs: Generally acceptable up to 20 years
Metal roofs: Can exceed 30 years if in good condition
Must have adequate drainage
No missing, cracked, or curled shingles
Must have proper flashing around chimneys and vents

Walls and Structure:

No significant cracks or structural damage
No major settlement or shifting
Walls must be plumb (straight) or reasonably close
No major wood rot or insect damage
Adequate wall bracing if needed

Safety Requirements

Electrical System:

Must be adequate and safely installed
All outlets must be properly grounded
No exposed wiring
The electrical panel must be properly labeled
Adequate capacity for the home's needs
GFI outlets are required in bathrooms and kitchens

Plumbing:

All plumbing must function properly
No leaks or water damage
Adequate water pressure and drainage
The water heater must function properly
No lead water lines (or must be replaced)
Septic systems must be functional (if applicable)

HVAC (Heating, Ventilation, Air Conditioning):

The heating system must be adequate for the climate
Must be safe and functional
No carbon monoxide hazards from furnaces
Ventilation must be adequate
Air conditioning is not required, but if present, it must function

Stairs and Railings:

Interior and exterior stairs must be safe
Handrails are required where applicable
No excessive gaps between balusters (for child safety)
Railings are required on decks over 30 inches
Stairs must not have excessive rise/run variations

Exterior Access:

Property must be accessible
The front entrance must be functional
Steps and walkways must be safe and in good repair
Handrails are required where needed

Health and Sanitation Requirements

Lead Paint Hazard (Pre-1978 homes):

FHA-financed properties must have an FHA Lead-Safe certification or
Lead paint hazard remediation must be completed or
Lead disclosure must be provided to the borrower
Properties built after 1978 have no lead paint concerns

Mold and Moisture:

No evidence of active mold growth
No signs of water damage or moisture intrusion
Basement/crawl space must be dry
Proper grading around the foundation to direct water away
No smell of mold or mildew (strong indicator of moisture issues)

Pest Infestation:

No evidence of active pest infestation (termites, carpenter ants, cockroaches, etc.)
No wood damage from pests
May require pest inspection and treatment

Sanitation:

Property must be clean and sanitary
No excessive dirt, garbage, or filth
Bathrooms and kitchens must be functional
No evidence of rodent infestation

Hazardous Materials:

No exposed asbestos
No tanks or hazardous materials storage on the property
No environmental contamination

Functionality Requirements

Kitchen:

Must have a functional kitchen with a sink
Stove/oven required or space for one
Refrigerator space available
Counter space for food preparation
Cabinets or storage space

Bathrooms:

At least one functioning bathroom is required
Toilet, sink, and bathtub/shower
Ventilation in the bathroom
Proper drainage

Utilities:

Electricity is available and functional
Water supply (municipal or well)
Sewer or septic system
All utilities must be adequate

Bedroom Requirements:

Each bedroom must have:
- Closet or storage space
- Window (with emergency egress for bedrooms)
- The door that closes
- Adequate ceiling height (minimum typically 7 feet)

What Fails Appraisal

The following issues are common reasons properties fail the appraisal and require repairs before closing:

Major Issues (Must Be Fixed)

Structural damage - Cracks in foundation, settling, and bowing walls
Roof issues - Leaking roof, missing shingles, age beyond limits
Electrical hazards - Exposed wiring, unsafe panels, inadequate service
Plumbing issues - Leaks, non-functioning toilets/sinks, water pressure problems
Pest damage - Active termite infestation, carpenter ant damage, rodent damage
Mold growth - Active mold, water damage, basement moisture
Safety hazards - Missing handrails, unsafe stairs, broken windows
Heating system failure - Furnace not working or inadequate for the climate
Lead paint hazard (pre-1978 homes) - Unless properly disclosed or remediated
Environmental hazards - Underground storage tanks, asbestos, contamination

Minor Issues (May Need Correction)

Cosmetic damage - Peeling paint, worn flooring (if safe)
Minor repairs - Cracked tiles, worn caulk, missing trim
Appliance condition - Old but functional appliances are usually okay
Landscaping - Overgrown bushes, broken fences, poor drainage (if safety/water issue)
Driveway/walkway - Minor cracks acceptable; major damage may need repair

Typically NOT Required

Interior renovations or upgrades
Carpet replacement (if flooring is safe)
Paint (unless required for lead remediation)
Landscaping improvements (unless drainage issue)
Appliance upgrades
Cosmetic improvements

Appraisal Results: What Happens Next

Appraisal Comes In at or Above Purchase Price

Best case scenario:

Property appraised at $300,000
Purchase price: $300,000
Appraisal value meets or exceeds purchase price
Process continues normally

What happens:

Lender funds based on appraised value
No renegotiation needed
Closing proceeds as planned

Appraisal Comes In Below Purchase Price

Low appraisal scenario:

Property appraised at $295,000
Purchase price: $300,000
Appraisal is $5,000 below the purchase price
The lender will only lend based on the appraised value

Your options:

Renegotiate with seller - Ask seller to reduce price to match appraisal ($295,000)
Increase down payment - Make up the difference with a larger down payment
Split the difference - Seller reduces price; you increase the down payment
Walk away - Use appraisal contingency to cancel contract (if included)

Example of impact:

Original down payment: 3.5% of $300,000 = $10,500
New down payment needed: 3.5% of $295,000 = $10,325
BUT if you bring only $10,500, you'd be putting down 3.56% instead of 3.5%
The difference may require additional funds or lender approval

Timeline impact:

Renegotiation can delay closing 2-5 days
Most contracts include an appraisal contingency, allowing time to resolve

Appraisal Shows Required Repairs

Repairs required scenario:

Appraisal identifies roof needs replacement (estimated cost: $8,000)
Roof replacement is required before some lenders will approve the loan.

Resolution options:

Seller completes repairs - Seller pays for and completes repairs before closing
Repair credit from the seller - The seller credits funds to you at closing; you complete repairs after
Escrow holdback - Funds held at closing until repairs are completed and verified
Buyer completes repairs - You pay for repairs after closing (not recommended—may affect finances)

Most common resolution: Seller completes repairs or provides credit before closing.

Timeline impact:

Repair completion can add 5-15 days to closing
Verification of repairs may be required before Clear to Close
Use a repair contingency in the contract to protect yourself

Home Inspections vs. Appraisals

Important Distinction

Many borrowers confuse home inspections with appraisals. They're different and serve different purposes:

	Appraisal	Home Inspection
Purpose	Determine value & loan compliance	Detailed condition assessment
Who orders	Lender (required)	Borrower (optional but recommended)
Who performs	Lender-approved appraiser	Licensed home inspector
Cost	$400-600 (borrower pays)	$300-500 (borrower pays)
Timeline	5-10 days	3-7 days
Report detail	Summary of value & major issues	Extensive detail on all systems
Binding	Yes—lender requires compliance	No—informational only
Pass/fail	Yes—must meet the loan standards	No—just documentation of condition

Why Get Both?

Appraisal:

Required by the lender
Determines lending value
Identifies major violations
Summary-level condition assessment

Home Inspection:

Optional but highly recommended
Detailed examination of all systems
Identifies smaller problems and maintenance issues
Gives you a full picture of the property condition
Helps with negotiation and future maintenance planning

Best practice: Get both an appraisal (required) and a home inspection (recommended).

Home Inspection Process

What Is a Home Inspection?

A home inspection is a comprehensive, non-invasive examination of the property's physical systems and components by a licensed professional home inspector. It's more detailed than an appraisal.

Should You Get One?

Highly recommended - While not required by all loans, a home inspection is smart for:

Understanding the full condition of the property
Identifying maintenance issues before purchase
Negotiating repairs with the seller
Planning future repairs and budgeting
Protecting your interests

Inspection Timeline

Order: After the contract is accepted
Schedule: Within 3-7 days
Duration: 2-4 hours
Report: Within 1-3 days
Walk-through: You can attend (recommended)

What Inspector Evaluates

Exterior:

Roof condition and age
Siding/exterior finish condition
Foundation cracks
Grading and drainage
Decks, porches, walkways
Gutters and downspouts
Doors and windows

Interior Systems:

Electrical system and panels
Plumbing and water pressure
HVAC systems
Water heater
Flooring condition
Walls, ceilings, insulation
Kitchen and bathroom fixtures
Appliances (if included in sale)

Structural:

Foundation integrity
Framing and structure
Attic condition
Crawl space (if applicable)
Basement/foundation walls

Environmental:

Signs of mold or moisture
Pest damage
Lead paint concerns (pre-1978 homes)
Radon (if radon testing ordered)
Asbestos concerns

Inspection Cost and Responsibility

Cost: $300-500 typically
Who pays: Borrower (you)
Required: No (optional)
Binding: No (informational only)

Using Inspection Results

Negotiation:

Use inspection findings to negotiate repairs with the seller
Request that the seller make repairs or provide credit
Most common: Seller credits funds for minor repairs

Knowledge:

Understand maintenance issues needing attention
Budget for future repairs
Identify systems reaching the end of life

Protection:

An inspection contingency in the contract allows a walkaway if major issues arise
Helps you make an informed decision

Repairs Required Before Closing

Required Repairs

These repairs MUST be completed before the lender will approve the loan:

Structural:

Foundation repair/stabilization
Roof replacement (if leaking or too old)
Major wood rot
Significant water damage

Safety:

Electrical hazards (exposed wiring, unsafe panels)
Plumbing hazards (no water, non-functioning)
HVAC system replacement (if not functional)
Stair/railing safety issues
Broken windows (security/weather concern)

Health:

Mold remediation
Pest infestation treatment
Lead paint remediation (pre-1978)
Sanitation issues

Environmental:

Removal of hazardous materials
Underground storage tank removal

Repairs That Can Wait

These can be completed after closing (though the seller usually completes):

Minor cosmetic repairs
Non-structural ceiling/wall damage
Broken trim or molding
Non-safety electrical outlet issues
Minor plumbing repairs (if not affecting safety/function)
Landscaping improvements
Paint touch-ups

Who Pays for Required Repairs?

Typical scenarios:

Scenario 1 - Seller pays:

Seller funds for repair work
Repairs completed before closing
Verification provided at final walk-through
Most common arrangement

Scenario 2 - Repair credit:

Seller provides credit at closing
You complete repairs after purchase
Funds held in escrow until completion
Less common; creates post-closing risk

Scenario 3 - Escrow holdback:

Portion of closing proceeds held in escrow
Released when repairs are verified complete
Less common; requires specialized closing arrangement

Best practice: Include in the purchase agreement a requirement that the seller complete the required repairs before closing.

Repair Timeline

Identified in appraisal: Typically, day 7-10 after appraisal is ordered
Resolution negotiation: 2-5 days
Repair completion: 5-15 days, depending on the repair scope
Verification: 1-2 days
Clear to Close: Can proceed once repairs are verified complete

Repair Verification

The lender typically requires:

Receipt/invoice for repairs completed
Photo evidence of completed work
Sometimes: Final inspection by appraiser or contractor
Proof that work meets the lender standards

Common Appraisal Issues and Solutions

Issue: Roof Age Exceeds Limits

Problem:

The roof is 25+ years old
Most loan guidelines typically limit to 20-25 years, depending on the type
Appraisal notes that the roof must be replaced

Solutions:

Seller replaces roof (most common)
Seller provides roof replacement credit
You make a larger down payment to compensate (rare)

Timeline: Roof replacement typically takes 5-10 days

Issue: Foundation Cracks or Settlement

Problem:

Appraisal notes foundation cracks
Appraiser notes settling or movement
Lenders will require a structural assessment

Solutions:

Structural engineer inspection (determines if repair is needed)
Minor cracks: Often acceptable if stable
Major cracks: Foundation repair required
Settlement: May require foundation stabilization

Timeline: Structural engineer report takes 3-5 days; repair timeline varies

Issue: Mold or Moisture

Problem:

Appraiser notes mold growth or moisture stains
Some lenders and loan programs require mold remediation or source correction
Common in basements or older homes

Solutions:

Mold remediation (professional cleaning/treatment)
Moisture source correction (grading, drainage, repairs)
Verification that moisture is now controlled

Timeline: Mold treatment: 2-5 days; moisture solutions: 5-15 days

Issue: Electrical Hazards

Problem:

Outdated electrical panel
Unsafe wiring
Inadequate capacity
Missing grounding

Solutions:

Licensed electrician repairs/upgrades
Electrical panel replacement if needed
Rewiring sections (if outdated/unsafe)
Grounding improvements

Timeline: Simple repairs: 1-3 days; panel replacement: 5-10 days

Issue: Plumbing Problems

Problem:

Non-functioning fixtures
Leaks or water damage
Lead pipes (pre-1980s homes)
Low water pressure

Solutions:

Licensed plumber repairs/replaces
Lead pipe replacement (if required by state)
Water pressure/flow testing
Leak repairs and water damage mitigation

Timeline: Simple repairs: 1-2 days; pipe replacement: 5-10 days

Issue: HVAC System Not Functional

Problem:

The furnace is broken or very old
Air conditioning is not working
The system is inadequate for the climate

Solutions:

HVAC contractor repairs the system
System replacement if beyond repair
Verification system meets needs

Timeline: Repair: 1-3 days; replacement: 5-10 days

Issue: Low Appraisal

Problem:

Appraised value below purchase price
The lender will only finance based on the lower value
The buyer must make up the difference

Solutions:

Renegotiate the purchase price with the seller
Increase the down payment to compensate
Challenge appraisal (if you believe the value is higher)
Walk away using appraisal contingency

Timeline: Renegotiation: 2-5 days; appraisal challenge: 5-10 days

Tips for a Smooth Appraisal and Inspection Process

Before Appraisal

Clean the property - Cleanliness matters to appraisers
Maintain lawns - Cut grass, trim bushes (shows property is maintained)
Minor repairs - Fix obvious issues before appraisal (saves time)
Gather documentation - Have records of major repairs/replacements
Disclose issues - Tell lender about known problems (better to know upfront)

During Appraisal

Provide access - Appraiser needs access to all areas, including the attic and crawl space.
Be available - Answer appraiser's questions honestly
Don't interfere - Don't try to influence the appraiser's findings
Document condition - Take photos if you disagree with the findings

After Appraisal Results

Review carefully - Understand all noted deficiencies
Get quotes - If repairs are needed, get contractor estimates
Negotiate promptly - Address repairs/credits quickly
Verify completion - Ensure repairs are completed to the loan's standards
Request documentation - Get receipts and proof of work

Home Inspection Recommendations

Attend inspection - Be present to ask questions and learn about the property.
Take notes - Write down the inspector's findings and concerns
Ask questions - Understand what items are concerns vs. cosmetic
Don't over-negotiate - Focus on major issues, not cosmetic items
Plan future maintenance - Use inspection to understand upcoming repairs

Key Takeaways for Appraisal & Inspection Requirements

Appraisals serve two purposes: Determining value AND confirming the property standards compliance
Property must be safe and functional: Not perfect, just safe, clean, and livable
Roof age matters: Most roofs must be less than 20-25 years old
Foundation must be sound: Cracks are concerning; settlement requires engineering assessment
Electrical and plumbing must be safe: Hazards must be corrected before closing
Mold and moisture are deal-breakers: Source must be corrected, not just cleaned
Lead paint requires disclosure or remediation: Pre-1978 homes need proper handling
Appraisals can delay closing: Low appraisals require renegotiation or additional funds
Home inspections are optional but recommended: More detailed than an appraisal; helps you understand the full condition
Repairs must be verified before closing: Get documentation that lender-required repairs are completed to standard

Conclusion

Understanding the loan appraisal and inspection requirements helps you prepare for the process and avoid surprises. Lenders do not require perfection—just safety, functionality, and basic livability. Having realistic expectations about what might fail appraisal, being prepared to negotiate repairs with the seller, and completing a thorough home inspection help ensure a smooth closing. Work with your lender and appraiser to understand any identified issues and resolve them promptly to keep your purchase on track.