Faulty reporting. Photo of FPE panel box. Followed by statement; Assumed acceptable. Please refer to home inspection report, for any technical details. Appraiser not an electrical inspector, etc, etc.
FPE is a possible danger, but not an absolute indication of one. If they pigtail those aluminium connections, resonating electrical frequency will not cause friction heat and possible fire hazards. It's all about tying in with proper metals. The danger comes from metal on metal contact under load, and ensuing heat up, and the danger is the aluminum wiring. A total original FPE with total original aluminum wiring can still be acceptable, if they've combed through connection points and swapped out some coupling metals.
An absolutely original FPE system with original tie ins, breaker pieces, and original line, that might be a danger.
Don't go there, and condition subject to passing of electrical inspection if anything is wrong. Otherwise, like the other appraiser said, I've seen many an FPE pass electrical inspection. I've called them subject to a handful of times and unless there is some other associated damage, they usually do pass professional electric inspection.
Don't recommend inspection I guess, unless you go subject to, but rather; use an ordinary or extra ordinary assumption.
Remember, the lender does review the home inspectors report, even though you do not. Underwriting security is about more than just the appraiser.
