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Name: What can derail a closing at the appraisal? | Brown – A Legacy of Home Lending
Uploaded: 2026-11-05
Duration: 1 min
Description: Blake Brown, VP and Senior Mortgage Advisor at Brown – A Legacy of Home Lending, explains how appraisal condition ratings can stop a loan days before closing, even when the buyer is approved, and why conventional and FHA appraisals now look at condition in similar ways.

Your buyer's loan is the part of the deal you can't control. We make it the part you don't have to worry about. You get verified pre-approvals, updates at every milestone, and a loan team you can reach seven days a week.

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The Brown Team, a family-run mortgage team serving real estate agents in Edwardsville, Oakbrook Terrace, and Lake Geneva

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Brown is a family-run mortgage team serving the Metro East, Chicago's western suburbs, and Lake Geneva. We verify your buyer's income, assets, and credit before the letter goes out. You and the listing agent get updates at each step from application to clear to close. And when you have questions, you get a direct answer.

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Blake · 0:58

Blake Brown, VP | Senior Mortgage Advisor, on the cost-of-waiting report he builds for agents with buyers on the fence.

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0:00I put this together this morning and I sent it over to a local realtor. You've got to check this out.
0:04In this case, I sent off the cost-of-waiting analysis for the realtors here in Edwardsville. It's going to help them sell more. It's going to help a lot of those clients that are on the fence make an educated decision, not just a decision on a guess.
0:16And I'll review it for you when y'all are pre-approved and ready to go.
0:19If someone were looking at a $350,000 home today, and they were to wait one whole year before buying that same $350,000 home, it could cost them almost $13,000 to wait 12 months.
0:30The way I come up with this stuff for local realtors is I try to put myself in their shoes and think: what are the biggest obstacles they face on a daily basis? Then I come up with a solution for that obstacle.
0:39I hear all the time, "Hey, I have a client. They're just not ready to buy yet." So that's where I come in with tools like this, to help them get to that next step.
0:47There's way too many transactions going on and not enough solid relationships. And I truly believe that if you have a solid relationship with your lender partner, you're going to be able to provide the best service to your buyers.

Example only, based on assumed changes in home prices and interest rates. Your buyer's numbers will vary. Ask us for a cost-of-waiting report on a real scenario.

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Pre-approvals that hold up. We review income, assets, and credit before the letter goes out.
Updates at every milestone. Application, appraisal, conditional approval, clear to close. You won't have to chase us.
We back your offer. With your buyer's permission, we'll call the listing agent and explain what we've verified.
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Blake · 1:00

Appraisals Watch · 1 min

What Can Derail a Closing at the Appraisal?

Short answer: The condition of the home. Appraisers rate condition from C1 to C6, and a home with serious problems, like a cracked foundation or water in the basement, can stop the loan days before closing, even when the buyer is fully approved. It's no longer just an FHA issue. Conventional loans look hard at condition too.

The buyer can be approved while the home isn't. The appraisal judges the collateral, not the borrower.
Watch for the big items: foundation cracks, active leaks or damp basements, roofs and mechanicals at the end of their life, and safety hazards.
Don't steer away from FHA offers by default. With conventional condition reviews this strict, the two often play out about the same.

Prevention tip: If you know about a condition issue, tell us before the offer goes in. We'll tell you what an appraiser is likely to flag and how to plan for repairs.

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0:00What's something you could see on an appraisal 10 days before closing that could potentially derail the whole transaction?
0:07Maybe a foundation that's cracked. Maybe there's some damp spots in the basement.
0:15And people think a lot of these are more of an FHA condition, right? And that right there is the misconception.
0:23So what changed? Conventional got a lot more strict with their appraisal guidelines. Fannie Mae and Freddie Mac are cracking down on the condition ratings, one through six, that an appraisal has to meet.
0:34If the condition rating is too high, you have to look at it with a fine-tooth comb and say, where's the risk here? And if the risk is too high, then Fannie Mae simply will not allow us to close the loan.
0:44It's not so much just approving the borrower. The borrower may be good and approved, but it's the actual collateral, the home itself, that's not approvable.
0:51It used to be that you would shy away from an FHA offer and say, "I'm always going to go with the conventional offer." But now they're pretty much the same ball game.

Offers

What Should a Listing Agent Look for in a Pre-Approval Letter?

Short answer: A letter only carries weight if the lender has actually reviewed the buyer's income, assets, and credit. Call the lender named on the letter and ask what was verified.

Any lender can print a letter. Before you counsel your seller, find out what's behind it:

Was credit pulled and were documents reviewed? That means pay stubs, W-2s or tax returns, and bank statements. A letter based only on what the buyer said about themselves is an estimate, not an approval.
Did the file go through automated underwriting? Ask whether it got an approval from Fannie Mae's or Freddie Mac's system (DU or LPA), or from the FHA, VA, or USDA equivalent.
Do the loan type and amount match the offer? An FHA letter attached to a conventional offer, or a letter capped below the offer price, is a red flag.
How old is the letter? Older letters may need updated pay stubs and statements before closing.

When a Brown buyer writes an offer, the listing agent can call us. With the buyer's permission, we'll explain exactly what we've reviewed.

Offers

What Questions Should You Ask the Buyer's Lender Before Accepting an Offer?

Short answer: Ask five things: what's been verified, what underwriting returned, what conditions are still open, whether they can close on the contract date, and who your contact is during the loan.

What have you verified? Income, assets, credit, or just a conversation?
What did automated underwriting return? An approval with standard conditions is a stronger file than one waiting on manual review.
What's still open? A pending sale of the buyer's current home, gift funds that aren't documented yet, and a recent job change are the usual issues.
Can you close on our date? Ask about their current appraisal and underwriting turn times. Don't settle for a general "yes."
Who do I call? Get a name and a direct number, not just a general inbox.

A five-minute call before you accept can save a three-week delay later.

Appraisals

What Happens When an Appraisal Comes in Low?

Short answer: The buyer usually has four options: the seller lowers the price, the buyer covers the gap in cash, the two split the difference, or the buyer challenges the value with better comparable sales. Depending on the contract, the buyer may also be able to cancel.

The loan is based on the lower of the purchase price or the appraised value. If the home appraises under the contract price, the gap has to be covered or negotiated.

Reconsideration of value (ROV): We can ask the appraiser to review recent comparable sales they may have missed. It works best with strong, nearby, recent sales.
Price renegotiation: This is often the cleanest fix when the comps support the appraisal.
Split the gap: This is common in competitive markets where both sides want the deal.
Appraisal contingency: Check your contract language before advising either side.

Prevention tip: Listing agents can give the appraiser factual information at the appointment, such as recent comparable sales and a list of upgrades with dates. Facts help. Pressure doesn't, and it isn't allowed.

Closings

Why Do Closings Get Delayed, and How Do You Prevent It?

Short answer: Most delays come from missing buyer documents, new credit or job changes during the loan, appraisal repair conditions, title issues, or Closing Disclosure timing. Nearly all of them can be prevented if they're caught early.

Slow documents: Tell buyers to send requested items within 24 hours. The longest delays usually trace back to one missing bank statement.
New debt or a job change: No new cards, car loans, or furniture financing before closing, and no job changes without calling us first.
Appraisal conditions: FHA, VA, and USDA appraisals can require repairs. Plan who handles them as soon as the report comes back.
Title problems: Old liens and estate or probate issues take time. Order title early.
Closing Disclosure timing: Federal rules require the buyer to receive the Closing Disclosure at least three business days before closing. Certain changes, such as switching the loan product, restart that clock.

Our milestone updates exist so you see these problems coming instead of hearing about them the day before closing.

Loan Types

Should Your Seller Accept an FHA or VA Offer?

Short answer: Often, yes. FHA and VA appraisals check basic safety and soundness items that a conventional appraisal may not, but most well-maintained homes pass. The buyer's file strength and timeline matter more than the loan type.

FHA and VA appraisers look for things like:

Peeling paint on homes built before 1978
Missing handrails, broken windows, or exposed wiring
A roof, furnace, or water heater at the end of its life
Working utilities and safe access to the home

If the home is in good shape, these offers usually close like any other. VA buyers are often among the most qualified in the market. On USDA loans, check the property address on USDA's eligibility map first, because eligibility is based on location.

Unsure about a specific property? Send us the address and we'll tell you what an appraiser is likely to flag.

Negotiation

Seller Credit or Price Cut: Which Helps the Buyer More?

Short answer: For the monthly payment, a seller credit used to buy down the interest rate often helps more than a price cut of the same size. For cash-to-close or appraisal problems, a price cut or a closing-cost credit can be the better tool. Compare both before you counter.

Price reduction: Lowers the loan amount, the down payment, and property taxes over time. It also helps if the appraisal is tight.
Permanent rate buydown: Seller money pays points that lower the buyer's rate for the life of the loan.
Temporary buydown: This lowers the payment for the first year or two, then it steps up. The buyer still has to qualify at the full note rate.
Closing-cost credit: Reduces the cash the buyer needs at the table.

Every loan type caps how much the seller can contribute, and the caps differ by program and down payment. Confirm the limit for your buyer's loan before you write the counter.

Send us both scenarios. We'll show you the buyer's payment and cash-to-close side by side.

Getting a new buyer ready? Send them the Application Checklist and the First-Time Buyer Guide. Moving a seller up? Share the Move-Up Buyer Guide. For program details, see Loan Options.

How a Partnership Starts

1

Make an Intro Call

Fifteen minutes. We learn how you work and how you like to communicate. You learn how we run a file.

2

Send Us a Buyer

We call your buyer and tell you right away where they stand and what they need.

3

Close With Updates

You get a status update at every milestone through closing day.

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Have a Buyer Who Needs a Pre-Approval?

Send them our way. We'll tell you where they stand.

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General information for real estate professionals, not a commitment to lend. Loan approval is subject to credit, income, property, and program guidelines. Brown loan advisors originate through Preferred Rate, a Division of American Pacific Mortgage Corporation, NMLS #1850. Equal Housing Opportunity.