What Fails a Conventional Loan Appraisal? 5 Common Issues

What fails a conventional loan appraisal? The most common reasons are structural defects, building code violations, needed repairs, property condition issues, and outdated comparable sales. Understanding these factors helps buyers and sellers prepare for a successful appraisal and avoid delays at closing.

Conventional loan appraisals protect both buyers and lenders by confirming a property's market value. When issues arise, they can delay closing or kill the deal entirely. This guide covers the top reasons appraisals fail, how appraisers evaluate properties, and the steps you can take to fix problems before they derail your mortgage approval.

1. Structural Defects and Safety Hazards

Appraisers must identify any structural problems that affect property value or safety. These issues often trigger repair requirements or lower valuations. Even if a defect is cosmetic on the surface, it can signal deeper problems that make a home ineligible for conventional financing.

• Foundation cracks – Major cracks, settling, or bowing walls
• Roof damage – Missing shingles, active leaks, or sagging rooflines
• Electrical problems – Outdated wiring, insufficient panels, or exposed connections
• Plumbing failures – Leaks, corrosion, or poor water pressure
• Mold or water damage – Visible growth or moisture stains in basements, attics, or crawl spaces

If you are preparing to buy, use our affordability calculator to understand your budget before you make an offer on a home that may need repairs.

2. Building Code Violations

Appraisers note any code violations that could affect safety or livability. These issues are especially common in older homes or properties with DIY renovations. Common violations include:

• Missing smoke detectors or carbon monoxide alarms
• Inadequate handrails on stairs
• Improper electrical grounding
• Window egress issues in bedrooms
• Unpermitted additions or renovations

Unpermitted work is a frequent deal-breaker because lenders cannot finance a property with unapproved additions. Sellers should disclose any unpermitted work early so buyers can decide whether to proceed.

3. Property Condition and Deferred Maintenance

Poor property condition consistently ranks among the top reasons for low appraisals. Appraisers consider the overall condition of the home, including:

• Peeling paint or damaged walls
• Broken windows or doors
• Non-functioning appliances
• Overgrown landscaping
• General neglect and uncleanliness

For a complete overview of what appraisers inspect, see our conventional loan appraisal requirements guide. If you are still comparing loan programs, our conventional vs FHA comparison explains how appraisal standards differ.

4. Outdated or Inaccurate Comparable Sales

Appraisers use recent sales of similar homes to determine value. Problems arise when the comparable sales are not truly comparable. Common issues include:

• Comparables are more than 90 days old
• Properties are in different neighborhoods
• Homes differ significantly in size or features
• Sales were distressed or non-arm's length
• Insufficient comparable data exists

A low appraisal often stems from weak comparables rather than a problem with the home itself. In these cases, a value reconsideration request can help if you have better data to support a higher value.

5. Neighborhood and Location Issues

Location factors that can fail an appraisal include:

• Declining neighborhood values
• Proximity to undesirable features
• High crime rates
• Poor school ratings
• Lack of amenities or services

Location issues are the hardest to fix because they are outside the seller's control. Buyers should weigh these factors carefully before making an offer, especially if the home is in an area with declining values.

Do Conventional Loans Require an Appraisal?

Do conventional loans require an appraisal? Yes, most conventional loans require an appraisal to confirm the property value supports the loan amount. The appraisal protects both borrower and lender by ensuring a fair market value assessment.

The appraisal typically occurs after the purchase agreement is signed. Most appraisals take 7-10 business days to complete. For a detailed look at the process, see our appraisal requirements guide.

Can You Waive an Appraisal on a Conventional Loan?

Can you waive an appraisal on a conventional loan? In some cases, yes. Appraisal waivers may be available when:

• You have excellent credit
• You make a substantial down payment
• Automated valuation models support the value
• Market conditions are stable

Even when waivers are available, many borrowers choose to get an appraisal for peace of mind. Use our down payment calculator to see how a larger down payment could affect your loan terms.

How to Address Low Appraisal Issues

If your appraisal comes in low, take these steps:

• Challenge the appraisal – Present new comparable sales or documentation of errors
• Request reconsideration – Your lender can submit an appeal
• Negotiate with the seller – Ask for a price reduction
• Increase your down payment – Cover the appraisal gap
• Order a second appraisal – If the first seems inaccurate

Before making an offer, use our affordability calculator to determine your buying power and avoid overpaying. If you need to understand how PMI works with a low down payment, see our conventional loan PMI guide.

Difference Between FHA and Conventional Appraisal

The difference between FHA and conventional appraisal standards reflects different underwriting requirements:

• FHA appraisals – Focus heavily on property condition and safety, with strict health and safety standards
• Conventional appraisals – Emphasize market value and comparable sales analysis

FHA appraisers check for lead paint, adequate egress, and minimum property standards. Conventional appraisals allow more flexibility as long as value supports the loan. For a detailed comparison, see our guide on conventional vs FHA loans.

Tips to Prepare for a Successful Conventional Loan Appraisal

Proper preparation helps ensure a smooth appraisal process. Sellers and buyers can both take steps to improve the outcome:

• Clean and declutter all rooms
• Make minor repairs before the appraisal
• Trim landscaping and improve curb appeal
• Fix broken windows, doors, or visible damage
• Provide documentation of recent upgrades
• Have comparable sales information ready

These steps not only help the appraisal but also make the home more attractive to buyers. If you are still in the planning stage, our prequalification guide can help you understand what lenders look for.

Frequently Asked Questions About Conventional Loan Appraisals

What happens if the appraisal comes in low on a conventional loan?

If the appraisal comes in lower than the purchase price, you have several options: renegotiate with the seller, increase your down payment, request an appraisal appeal, or walk away. Many buyers use a low appraisal as leverage to negotiate a lower price. For more financing options, see our down payment calculator.

How long does a conventional loan appraisal take?

A conventional loan appraisal typically takes 7 to 10 business days from order to completion. Rush appraisals may be available for an additional fee.

Can an appraiser refuse to appraise a property?

Yes, an appraiser can refuse if the property falls outside their expertise, access is denied, or fraud is suspected. The lender will order a new appraisal from a different appraiser.

Who pays for the appraisal in a conventional loan?

The borrower typically pays, with costs ranging from $400 to $600 depending on location and complexity.

Can you challenge a conventional loan appraisal if you disagree with the value?

Yes, you can challenge through a value reconsideration request. Present evidence like recent comparable sales, documentation of improvements, or errors in the appraisal report.

Conclusion

Understanding what fails a conventional loan appraisal helps you prepare and avoid costly surprises. Structural defects, code violations, poor condition, outdated comparables, and location issues are the most common culprits.

By addressing these issues proactively, you can improve your chances of a successful appraisal and smooth closing. For more guidance, review our conventional loan PMI requirements and use our down payment calculator to plan your purchase.