The home appraisal is a critical step in the mortgage process that many buyers don’t fully understand. The lender orders an appraisal to confirm the property is worth what you’re paying — and if the appraisal comes in low, it can derail your purchase. Here’s how the appraisal works, what to expect, and what to do if it doesn’t go in your favour.
Why lenders require appraisals
The lender is using the property as collateral for your mortgage. They need to confirm that if you default, they can sell the property and recover their money. The appraisal protects the lender, not you — but it indirectly protects you from overpaying.
| Purpose | Details |
|---|---|
| Confirm market value | Ensures the property is worth the purchase price |
| Calculate loan-to-value (LTV) | Determines how much the lender will finance |
| Identify major issues | Obvious structural defects, environmental problems |
| Satisfy insurance requirements | CMHC/insurer needs value confirmation for insured mortgages |
What happens during an appraisal
| Stage | Details | Duration |
|---|---|---|
| Lender orders appraisal | After your mortgage application and purchase agreement are submitted | 1–3 days |
| Appraiser visits property | Physical inspection of interior and exterior | 30–60 minutes |
| Comparable sales analysis | Appraiser researches recent sales of similar properties | Part of the report |
| Report completed | Written appraisal report submitted to the lender | 3–7 business days |
| Lender reviews | Underwriter reviews the report and confirms value | 1–3 business days |
What appraisers evaluate
Interior
| Factor | What They Look At |
|---|---|
| Square footage | Total living area (above-grade and below-grade) |
| Layout | Number of bedrooms, bathrooms, functional layout |
| Condition | Age and condition of finishes, flooring, paint |
| Kitchen and bathrooms | Updated vs original, quality of materials |
| Basement | Finished vs unfinished, height, walkout access |
| Systems | Age and condition of furnace, water heater, electrical panel |
| Renovations | Quality of work, whether permitted |
Exterior and property
| Factor | What They Look At |
|---|---|
| Lot size and shape | Regular lot vs irregular, usable space |
| Structure | Foundation, roof, siding condition |
| Garage/parking | Attached, detached, number of spaces |
| Landscaping | General condition and curb appeal |
| Outbuildings | Sheds, pools, decks, accessory structures |
| Access | Road access, private vs public road |
Location and market
| Factor | What They Look At |
|---|---|
| Neighbourhood | Quality, amenities, schools, transit |
| Comparable sales | Similar properties sold in the last 6 months within the area |
| Market conditions | Rising, stable, or declining market |
| Zoning | Confirmed legal use |
| Environmental | Proximity to highways, rail, industrial, flood zones |
Appraisal cost
| Property Type | Typical Cost |
|---|---|
| Standard residential (urban) | $300–$500 |
| Condo | $250–$400 |
| Rural property | $500–$800 |
| Waterfront property | $500–$1,000 |
| Luxury/high-value home | $750–$1,500 |
| Multi-unit residential | $500–$1,000+ |
Appraisal vs home inspection
| Factor | Appraisal | Home Inspection |
|---|---|---|
| Purpose | Determine market value (for the lender) | Evaluate physical condition (for the buyer) |
| Who orders it | Lender | Buyer |
| Cost | $300–$500 | $350–$600 |
| Duration | 30–60 minutes | 2–4 hours |
| How thorough | Surface-level observation | Detailed systems check |
| Checks behind walls | No | No (but can recommend specialists) |
| Tests HVAC, plumbing, electrical | Notes age/condition only | Tests function and identifies issues |
| Report focus | Dollar value and comparables | Property condition and defects |
| Required for mortgage | Yes (by most lenders) | No (but strongly recommended) |
You need both. The appraisal ensures the price is fair. The inspection ensures the property is sound.
→ See: Home Inspection Guide Canada
What to do if the appraisal comes in low
A low appraisal means the property was appraised for less than the purchase price. This is a problem because the lender will only mortgage the appraised value.
Example
| Detail | Value |
|---|---|
| Purchase price | $600,000 |
| Appraised value | $560,000 |
| Mortgage (80% LTV) | $448,000 (based on appraised value, not purchase price) |
| Your required down payment | $152,000 (instead of $120,000) |
| Gap you need to cover | $32,000 extra |
Your options
| Option | Pros | Cons |
|---|---|---|
| Renegotiate the price | Saves cash; price reflects true value | Seller may refuse |
| Cover the gap with cash | You keep the deal | Requires additional funds |
| Request a second appraisal | May get a higher value | Costs another $300–$500; not guaranteed |
| Submit a reconsideration of value | Free; provides new comparable data | Appraiser may not change their opinion |
| Walk away (with financing condition) | Protects you from overpaying | You lose the property |
| Push back through your broker | Broker may have relationships with lender underwriters | Results vary |
How to submit a reconsideration of value
- Review the appraisal report — Ask your broker for a copy (you have the right to see it)
- Identify errors — Wrong square footage, missing renovations, incorrect lot size
- Provide better comparables — Recent sales of truly similar properties that support a higher value
- Submit through your broker — They send the reconsideration package to the appraisal company
- Wait for review — Typically 3–5 business days
Success rate: Reconsiderations succeed roughly 20%–30% of the time when strong comparable sales data is provided.
How to prepare your home for an appraisal (sellers and refinancers)
| Action | Impact |
|---|---|
| Clean and declutter | Makes spaces feel larger and better maintained |
| Complete minor repairs | Fix leaky faucets, patch drywall, replace burned-out lightbulbs |
| Provide a list of upgrades | New roof, furnace, kitchen — with dates and approximate costs |
| Ensure access to all areas | Basement, attic, garage, crawl space |
| Provide recent comparable sales | The appraiser will research their own, but supporting data helps |
| Do not over-renovate | Cosmetic updates help; major renovations may not return full value |
When appraisals are not required
| Situation | Why |
|---|---|
| Insured mortgage (under 20% down) | CMHC or other insurer may use automated valuation models (AVM) |
| Mortgage renewal with same lender | Lender already knows the property |
| Some refinances | If LTV is low and the lender’s AVM confirms value |
| Low-ratio mortgage (under 65% LTV) | Lower risk to lender; some waive the in-person appraisal |
Even when a physical appraisal is waived, the lender still assesses property value — they just use automated data instead of an in-person visit.