When selling your home, two key steps in the process are the buyer’s inspection and the lender’s appraisal. While these steps are part of the buyer’s due diligence, they also affect your closing timeline, potential repair requests, and final negotiation.
Understanding how these work ahead of time can help prevent surprises, reduce stress, and keep your sale moving smoothly.
Inspection vs. Appraisal
These two steps often happen close together, but they are very different:
• The home inspection is optional for the buyer and is done for their benefit. It identifies the overall condition of the home and any needed repairs.
• The appraisal is required by the buyer’s lender. It confirms the home’s market value based on recent comparable sales and also checks for certain safety and structural standards depending on loan type.
If the home doesn’t meet the lender’s standards, repairs may need to be made before closing. Preparing in advance helps you stay in control.
How the Appraisal Works
The lender hires a licensed appraiser who will:
• Review recent comparable sales
• Evaluate the home’s size, layout, condition, and updates
• Confirm whether the agreed-upon purchase price is appropriate
If the appraisal comes in low, the buyer may ask for a price reduction, you may renegotiate, or the buyer could bring the difference in cash.
Loan Type Matters
Each type of loan has different property condition standards. Here’s what sellers should know:
- Conventional Loan
This is the most flexible loan type. The appraiser is mainly looking for major issues affecting safety or structure.
Common items that may need attention:
• Roof leaks or major water damage
• Non-working furnace, AC, or plumbing
• Electrical hazards (exposed wiring, missing cover plates)
• Significant foundation cracks
Cosmetic issues usually don’t matter. Homes needing light updates often sell easily under conventional financing.
- FHA Loan
FHA loans require the home to meet minimum safety, security, and soundness standards.
Common FHA-required repairs:
• Peeling or chipping paint (especially on older homes)
• Missing or broken handrails
• Damaged windows, doors, or locks
• Non-operational heating systems
• Standing water near foundation or poor drainage
If flagged, these items often must be repaired before closing. Sellers should be prepared for minor safety-related repair requests.
- VA Loan
VA loans require the home to meet Minimum Property Requirements. There is typically also a required pest inspection.
Common items that may need correction:
• Roof or structural issues
• Exposed wiring or electrical hazards
• Non-working heating systems
• Evidence of termites or moisture damage
• Unsafe entry or trip hazards
If any of these issues are present, repairs must generally be completed before closing.
USDA Loan
Similar to FHA standards, but with added emphasis on water and septic systems for rural properties.
Common items reviewed:
• Well and septic must meet health standards
• Mechanical and plumbing systems must be operational
• No major roof, drainage, or foundation issues
Repairs may be required for the loan to be approved.
Cash Purchase
When a buyer pays cash, neither an appraisal nor lender-required safety standards are required.
However:
• The buyer may still complete an inspection and request repairs or credits
• You have more flexibility to negotiate “as-is” terms
This is often the fastest and simplest closing scenario.
How Sellers Can Prepare
Small improvements can prevent delays and repair negotiations later. Consider:
• Replacing missing outlet covers and smoke detectors
• Repairing loose handrails and steps
• Ensuring furnace, AC, and water heater are working properly
• Removing peeling paint, especially on older homes
• Fixing obvious leaks or drainage issues
A pre-listing walkthrough with your agent can help identify easy fixes that make a big difference.
Final Thoughts
Understanding inspections and appraisals from the start helps you stay ahead of repairs, avoid surprises, and move confidently toward closing.
At Bay Realty Michigan, we guide our sellers through preparing the home, negotiating inspection results, and navigating the appraisal process to protect your sale and your bottom line.
If you’re thinking about selling or want help preparing your home, we’re here to help every step of the way.