A home appraisal technically does not have a “pass” or “fail” grade. Instead, an appraisal can come in lower than expected or reveal issues that prevent a mortgage from being approved, which is often referred to as a “failed” appraisal in real estate transactions. Here are the main factors that can cause serious problems or lower the appraised value, potentially stopping a sale or mortgage approval:
Low Appraised Value Compared to Sale PriceIf value differs from sale price, ask the lender and relevant advisers how it affects the particular transaction.Major Structural or Safety IssuesFoundation cracks, roof damage or water intrusion raise condition questions and may require further information or specialist inspection.Deferred Maintenance and Poor ConditionPeeling paint, broken fixtures, leaky roofs and worn systems can affect condition and comparison with other properties.Outdated or Failing Major SystemsOld or malfunctioning HVAC, electrical, or plumbing systems can hurt an appraisal. These are costly to repair and may signal broader neglect.Pest Infestation or DamageEvidence of pest damage can be relevant. Supply available treatment and repair records.Location IssuesNearby land uses, access, noise and documented site issues can matter. Use relevant market evidence rather than broad neighborhood labels.Unique or Hard-to-Value PropertiesUnusual properties with few comparable sales can require broader research and explanation.Over-Personalization or Unusual RenovationsHighly personalized decor, unconventional room conversions, or unique finishes that don’t appeal to a broad market can negatively affect value.Fewer Bedrooms and Bathrooms Than Comparable HomesIf your home has fewer bedrooms or bathrooms than similar properties nearby, it may appraise for less.Legal or Zoning IssuesProvide available permits, plans and records for additions or changes in use. Ask the responsible parties what additional information is needed.Questions to resolve
| Issue | Useful next information |
|---|
| Value differs from price | Report facts, effective date and lender instructions |
| Condition concerns | Repair history and relevant specialist records |
| Unusual property | Plans, features and available comparisons |
| Addition or change of use | Available permits and property records |
Key Takeaway
A lower-than-expected value and a condition concern are different issues. Review the report’s facts and ask the responsible lender or adviser about the actual next steps.