Understanding Appraisals

When it comes to mortgages, arguably, the most important number isn’t your credit score, and it isn’t even the price you agreed to pay. It’s the number on the appraisal. You can negotiate like a pro, line up your down payment, and put together a great application, but if the appraisal comes in short, the whole deal can fail. People get the big picture around appraisals but it is in the details that things happen, or not, such as who’s doing it, why a client is paying for a report they will never see or even know what it looks like or what it says or even how long the thing takes to do or how long it takes to order. Appraisals are complicated. Let me walk you through residential appraisals to appreciate their impact on you.

I’ll talk about:

• Commercial vs. Residential Appraisals: Know Which One You’re Dealing With
• What Is a Residential Appraisal
• The Different Kinds of Residential Appraisals
• When and How an Appraisal Gets Done
• What an Appraisal Costs
• Who Orders It and Who Owns It
• Mortgage Transactions That Need an Appraisal (and Why)
• How Long It Takes and How Timing Affects Your Mortgage
• A Real-World Story: The Toronto Townhouse That Came In Short
• Putting It Into Practice: Playbooks for Realtors and Clients
• Allen’s Final Thoughts
• How I’m Here to Help You

Commercial vs. Residential Appraisals: Know Which One You’re Dealing With

There are 2 kinds of appraisals: Commercial and Residential.

Commercial appraisals cover properties that earn their keep as businesses: plazas, office buildings, industrial units, mixed-use buildings, and residential rentals of five or more units. These are long, detailed reports that lean heavily on income, using things like net operating income and cap rates to figure out value. They can take weeks to complete and often cost several thousand dollars. I do a fair bit of commercial work, and trust me, it’s a whole other world.

Residential appraisals cover the homes most of us live in: detached houses, semis, townhouses, condos, and small rentals of one to four units. These rely mostly on what similar homes nearby have actually sold for. They’re faster, cheaper, and far more common.

For the rest of this article, we’re talking only about residential appraisals.

What Is a Residential Appraisal

An appraisal is an independent, professional opinion of what a property is worth on the open market on a specific date. Appraisers are valuation professionals designated through the Appraisal Institute of Canada, either as a Canadian Residential Appraiser (CRA) or an Accredited Appraiser Canadian Institute (AACI).

Mortgages are collateral based lending and your home is the security for the loan. If things ever went sideways and the lender had to sell it, they want to know the value is really there. So the appraisal protects the lender first, and it protects you second by making sure you’re not borrowing against a number that’s not true.

Most residential appraisers use the direct comparison approach. They look at recent sales of similar homes nearby, usually within the last three to six months, and then adjust for differences like an extra bathroom, a finished basement, a bigger lot, or a dated kitchen. On new builds or unusual properties, they might also use the cost approach, estimating what it would cost to rebuild. On small rentals, they may add an income approach to see what the rents support.

An appraisal is not a home inspection. The appraiser is figuring out value. They’ll note condition because it affects value, but they’re not testing your furnace or poking at your wiring. You still need your home inspection for that.

The Different Kinds of Residential Appraisals

Depending on the lender, the deal, and the property, you could get anything from a full walk-through to a value spat out by a computer in seconds. Here’s the lineup:

Type	What happens	When you’ll see it
Full appraisal	The appraiser inspects inside and out, measures, takes photos, and compares recent sales	Conventional purchases, refinances, private and B-lender deals, unique or rural homes
Drive-by (exterior-only)	The appraiser views the outside from the street and relies on records for the interior	Lower-risk files, HELOCs, some switches and refinances
Desktop appraisal	No site visit; the appraiser works from listing data, photos, and public records	Low loan-to-value refinances, switches, some HELOCs
Automated valuation (AVM)	A computer model estimates value from sales data in seconds	Many insured purchases and low-risk files in typical neighbourhoods
As-complete or as-improved	The appraiser values the home now and after planned work or construction	New builds, Purchase Plus Improvements, renovation and suite financing
Progress or completion inspection	A follow-up visit confirming work is done before money is released	Construction draws and improvement holdbacks
Private appraisal	Ordered by you for your own purposes, not by a lender	Estates, separations, tax matters, pricing a sale

A quick mention about AVMs, because they cause a lot of confusion. Mortgage insurers and lenders run automated models on many files, especially insured purchases of everyday homes in established areas. If the model is confident, you might never have a human appraiser at all, and you might not even pay a fee. If the home is unusual, the data is thin, or the numbers don’t line up, the system kicks it back and asks for a full appraisal. So don’t count on an AVM, but don’t be surprised if you get one either.

When and How an Appraisal Gets Done

Timing-wise, the appraisal usually happens after your mortgage application is submitted and the lender has said “yes, subject to.” On a purchase, that means during your financing condition. On a refinance or switch, it happens once the lender has reviewed your file and needs to confirm the value.

Here’s how a typical full appraisal plays out:

1. I submit your application, and the lender (or insurer) decides whether an appraisal is needed and what type.
2. The lender orders it, almost always through an appraisal management company that assigns an approved local appraiser.
3. The appraiser or their office calls to book a visit; on a purchase, that’s usually arranged through the listing agent, and on a refinance, with you.
4. The appraiser visits, typically for 20 to 45 minutes, measuring rooms, noting finishes and condition, and snapping photos inside and out.
5. Back at the office, they pull comparable sales, make adjustments, and write the report.
6. The report goes to the lender, who reviews it against the purchase price or the value you estimated.
7. If the value supports the deal, your file moves toward final approval; if it doesn’t, we talk options.

When preparing for an appraisal, have the place reasonably tidy, make sure every room and the basement are accessible, and have a short list of recent upgrades with dates and costs. A new roof, furnace, or kitchen won’t always move the number much, but it helps the appraiser see the full picture.

What an Appraisal Costs

Appraisals are affordable costing typical appraisal at around $400 to $800:

Type	Typical cost
Full appraisal, standard home or condo	$400 to $500
Full appraisal, rural, large, acreage, or 2 to 4 units	$500 to $800, sometimes more
Drive-by or desktop	$150 to $300
Automated valuation	Often free to you, or a small fee
Progress or completion inspection	$150 to $250 per visit

Who pays? It depends. On many insured purchases and a lot of switches, the lender covers it, or there’s no fee at all because an AVM was used. On conventional purchases, refinances, HELOCs, and almost all private or alternative lending, you’ll usually pay, either up front or out of your closing funds. Some lenders will reimburse it once the mortgage funds. Part of my job is telling you which bucket you’re in before anything gets ordered, so it never comes as a surprise.

Who Orders It and Who Owns It

You might pay for the appraisal, but it’s not really yours.

For mortgage purposes, the lender orders the appraisal, usually through an appraisal management company. That keeps things arm’s length, so nobody can lean on the appraiser to hit a certain number. Not you, not your realtor, and not me. Lenders generally won’t accept an appraisal that a borrower ordered on their own.

Because the lender is the appraiser’s client, the lender is the intended user of the report. That has a few real-world consequences:

• You may or may not get a copy. Many lenders will share it if you ask, and some send it automatically. Others keep it in-house. It never hurts to ask, and I’ll ask on your behalf.
• You usually can’t take it to another lender. If we switch lenders mid-deal, the new lender typically orders a fresh appraisal. Sometimes the appraiser can re-address the report to a new lender for a small fee, but plenty of lenders won’t accept that.
• It has a shelf life. Lenders usually treat an appraisal as current for about three to six months. If your closing drags on or you come back a year later to refinance, expect a new one.

The exception? A private appraisal you order yourself, say for an estate, a separation, or to help price your home for sale. That one’s yours to keep and share. It just won’t carry weight with a lender.

Mortgage Transactions That Need an Appraisal (and Why)

The more risk the lender carries, and the less they have to go on, the more likely they’ll want a full appraisal:

Transaction	Appraisal needed?	Why
Insured purchase (less than 20% down)	Sometimes; often an AVM	The mortgage insurer carries much of the risk and sets the valuation rules
Conventional purchase (20% or more down)	Usually a full appraisal	No insurer, so the lender carries all the risk and needs to confirm the price
Refinance or equity take-out	Almost always	There’s no purchase price, so value decides how much you can borrow
Home equity line of credit	Usually, often drive-by or desktop	Your credit limit is tied directly to value
Switch or transfer at renewal	Sometimes	The new lender may want to confirm value, especially on uninsured files
Purchase Plus Improvements or construction	Yes, as-is and as-improved, plus a completion check	Money is advanced against a value that doesn’t exist yet
Rental property (1 to 4 units)	Usually, with a rent assessment	Rental income helps you qualify, so the lender wants market rents confirmed
Private or alternative (B) lending	Always a full appraisal	These lenders lend mainly on the property, so value is everything
Reverse mortgage	Always	How much you can access depends directly on the home’s value
Rural, acreage, or unique homes	Almost always a full appraisal	Fewer comparable sales means more uncertainty

The common thread is loan-to-value. Your lender needs to know the loan is a safe percentage of what the home is truly worth. On a purchase, they lend on the lower of the price or the appraised value. On a refinance, the appraised value is the whole ballgame.

How Long It Takes and How Timing Affects Your Mortgage

The appraisal process takes time. They are often the slowest aspect of the whole approval. Rough timelines from the day it’s ordered:

Type	Typical turnaround
Automated valuation	Minutes
Desktop or drive-by	1 to 3 business days
Full appraisal, typical home	3 to 5 business days
Full appraisal, rural, unique, or busy season	5 to 10 business days, sometimes longer

Add a day or two for the lender to review the report, and you can see the squeeze. In Ontario, financing conditions are commonly five business days. If the appraisal isn’t ordered right away, or the appraiser can’t get in because the sellers are away, that clock ticks down fast.

Here’s how timing can ripple through your file:

• Condition deadlines. If the appraisal isn’t back in time, your realtor may need to ask the seller for an extension. Sellers don’t always say yes, especially in a hot market.
• A low value takes time to fix. If the number comes in short, you might cover the gap, renegotiate the price, request a reconsideration, or try a different lender. Each of those eats days.
• Switching lenders means starting over. A new lender usually orders its own appraisal, so you’re back at the start of the clock.
• Rate holds and closing dates. Pre-approval rate holds typically last 90 to 120 days. On a long closing or a slow refinance, a delayed appraisal can push you past that window.
• Refinances move at the appraisal’s pace. There’s no seller waiting, but if you need equity by a certain date to pay off debts or fund a renovation, the appraisal sets the tempo.

Consequently, get the paperwork in early, so the appraisal can be ordered the moment the deal is accepted, and build a little breathing room into your conditions.

A Real-World Story: The Whitby Townhouse That Came In Short

Introducing Sofia and Daniel (not their real names, but a very real file). They’d lost out on three homes in multiple offers before finally landing an end-unit townhouse in Whitby. It was listed at $849,900, and they won it at $905,000, conditional on financing. They had $181,000 saved for a 20% down payment, so they were looking at a conventional mortgage of $724,000.

Because we’d already gathered their documents before the offer date, I submitted the file the morning after acceptance, and the lender ordered a full appraisal that same day. The listing agent was fantastic about access, and the appraiser was in on day two.

Then, on day three, the phone rang. The appraisal came in at $875,000, a full $30,000 under the price. Since the lender lends on the lower of price or value, 80% of $875,000 meant a maximum mortgage of $700,000. Suddenly Sofia and Daniel needed $205,000 down, not $181,000. That’s a $24,000 hole with two business days left on the condition.

We didn’t panic. Their realtor pulled the recent sales in the complex and found two end units that had sold in the last six weeks for over $900,000; the appraiser had leaned on interior units instead. I sent those to the lender with a request for reconsideration of value. At the same time, we lined up a backup plan: an insured mortgage with the same down payment, which would have worked but added a premium of roughly $22,000.

The appraiser reviewed the new comparables and revised the value to $890,000. That brought the maximum conventional mortgage to $712,000, and the gap shrank to $12,000. Daniel’s parents gifted the difference, the condition was waived on time, and they closed six weeks later.

I’ll be honest: reconsiderations don’t always work. But this one did because we moved fast, the evidence was strong, and we had a Plan B ready. Without that early start, those two extra days of breathing room simply wouldn’t have existed.

Putting It Into Practice: Playbooks for Realtors and Clients

If you’re a realtor:

• Prep your comps before the appraiser arrives. On the listing side, have a short package ready with recent sales, upgrades, and anything that makes the home stand out. Hand it over politely; appraisers appreciate good information.
• Make access easy. Respond quickly when the appraiser calls to book, and make sure the whole house, including the basement and garage, is open.
• Watch the bidding-war gap. When your buyer is going well over asking, especially with 20% or more down, talk with them about having a cash cushion in case the appraisal lands below the price.
• Ask for enough condition time. On rural, unique, or high-value properties, seven to ten business days for financing is a lot safer than five.
• Pull comps fast if value comes in short. Strong, recent, truly comparable sales are the best ammunition for a reconsideration request.

If you’re a buyer or homeowner:

• Get your documents in before you write the offer, so your file can be submitted, and the appraisal ordered, the day your offer is accepted.
• Know your appraisal cushion. If you’re stretching to win, ask me how much a short appraisal would cost you in extra cash, and decide in advance whether you can cover it.
• Keep a list of upgrades with dates and costs, especially for a refinance. It helps the appraiser give your home credit where it’s due.
• Ask for a copy of the report. If the lender will share it, it’s a handy record of your home’s value and features.
• Don’t order your own appraisal for mortgage purposes. The lender won’t use it. Let me coordinate it.

And here’s the workflow I recommend for a realtor and buyer heading into a competitive offer:

1. Get the buyer fully pre-approved, with income and down payment documents already reviewed.
2. Before the offer, check recent comparable sales so everyone knows where a lender’s value is likely to land.
3. Agree on how much over that value the buyer can cover in cash if needed.
4. Write the offer with a financing condition long enough for the property type.
5. Send me the accepted offer and MLS listing the same day so I can submit and the lender can order the appraisal.
6. Have the listing agent confirm access as soon as the appraiser calls.
7. If the value comes in short, gather comparables right away and decide together between a reconsideration, extra cash, renegotiation, or a different program.

Allen’s Final Thoughts

An appraisal is the lender’s reality check, and it can make or break your mortgage.

For homes, it’s a residential appraisal, which might mean a full walk-through, a quick drive-by, a desktop review, or a computer-generated value. It usually costs a few hundred dollars and is ordered by your lender. Because the lender is its intended user, you may pay for it without ever owning it. Purchases, refinances, HELOCs, private loans, reverse mortgages, and renovation financing all lean on it, because loan-to-value is what keeps lenders comfortable.

And since it’s often the slowest step in your approval, getting organized early is the best protection you’ve got. Know the process, plan for a short value, and you’ll walk into appraisal day with confidence instead of crossed fingers.

How I’m Here to Help You

Appraisals can feel like a black box because so much is hidden from you.

Here’s what I can do for you:

• Get your file appraisal-ready before you even write an offer, so the lender can order it the minute your deal is accepted.
• Tell you up front whether you’re likely to get an AVM, a desktop review, or a full appraisal, and whether you’ll be paying for it.
• Pick lenders whose valuation approach fits your property, whether it’s a downtown condo, a rural acreage, a duplex, or a fixer-upper.
• Coordinate with the lender, the appraisal management company, and your realtor so the appraiser gets in quickly and has the information they need.
• Stress-test your offer by showing you exactly what a short appraisal would mean for your down payment and your options.
• Lead the response if the value comes in low, from preparing a reconsideration request to restructuring your mortgage or finding a different program.
• Handle the follow-ups, like as-improved appraisals and completion inspections on Purchase Plus Improvements, renovation, construction, and secondary suite financing.
• Support you long after closing, with refinances, HELOCs, rental property financing, and reverse mortgages for older homeowners who want to unlock equity.

Whether you’re a first-time buyer, a homeowner thinking about a refinance, or a realtor who wants a mortgage partner who keeps deals on track, let’s talk. Let’s make sure the value is there, and that you’re ready either way.