In the fast-paced world of mortgage sales, surprises are rarely welcome—especially when they involve last-minute lender changes due to appraisal issues. One of the most overlooked yet critical aspects of lender selection is understanding each lender’s appraisal guidelines. These guidelines can vary significantly and may impact whether a property qualifies for financing.

Why Appraisal Guidelines Matter

Appraisal guidelines dictate how lenders evaluate risks associated with a property. The deal can fall apart if a property doesn’t meet a lender’s criteria —often after considerable time and effort has already been invested. This not only jeopardizes the transaction, but also affects client satisfaction and the likelihood of future referrals.

Common Appraisal Red Flags That Vary by Lender

Here are some property characteristics that can trigger issues during appraisal—and how different lenders might treat them:

1. Heritage Designations

Some lenders are cautious about properties with heritage status due to potential restrictions on renovations and increased maintenance costs. While one lender may approve such a property, another might decline it outright.

2. Aluminum Wiring & Asbestos

Properties with aluminum wiring are often flagged due to fire risk. Some lenders require a full electrical inspection or proof of remediation, while others won’t lend on these properties at all. Asbestos has been associated with causing cancer, and many lenders avoid properties with asbestos insulation. 

3. Rural or Unique Locations

Properties in remote areas or with unconventional features (e.g., log homes, hobby farms) may be subject to stricter appraisal scrutiny. Lenders differ in their comfort levels with non-standard properties. Some remote properties rely on wood stove heating, which may also cause challenges.

4. Zoning Issues

Mixed-use or commercially zoned properties can be problematic. Some lenders only finance residentially zoned homes, while others may allow mixed-use under specific conditions.

5. Condominium Restrictions

Certain lenders have blacklists of condo buildings due to financial instability, litigation, or poor management. Brokers should verify whether a building is acceptable before proceeding.

6. Property Condition

A home in poor condition—missing flooring, unfinished renovations, or structural concerns—may be declined by some lenders. Others might approve with conditions or reduced loan-to-value ratios.

How Brokers Can Stay Ahead

To avoid last-minute surprises and ensure a smooth client experience:

• Know your lenders: Maintain a reference guide or matrix of lender-specific appraisal guidelines.
• Ask early: If a property has unique features, consult with the lender before submitting the deal.
• Build relationships: Strong connections with underwriters and BDMs can help clarify grey areas.
• Educate clients: Set expectations early, especially if the property may raise flags.

Summary

Understanding appraisal guidelines isn’t just about getting the deal done—it’s about doing it right. By proactively aligning property characteristics with lender criteria, brokers can eliminate surprises, improve customer satisfaction, and increase the likelihood of referrals. In today’s competitive market, that edge can make all the difference.