…Appraisals Uncovered: What You Need to Know About Property Valuation Methods
Whether you’re a realtor helping clients close deals faster, or you’re a homeowner trying to wrap your head around why some appraisals cost nothing and others come with a $700 bill attached, understanding how lenders assess property value is crucial. It’s not just about the number they land on—it’s about how they get there, and how that process affects everything from closing timelines to cash out of pocket.
In this article, I’m pulling back the curtain on the different appraisal methods lenders use. No jargon, no corporate speak—just clear, honest insight from someone who deals with this stuff every single day.
Here’s What We’ll Cover:
Automated Valuation Models (AVMs)
Automated Valuation Models (AVMs)
If there’s a ‘set-it-and-forget-it’ option in the appraisal world, this is it. AVMs are essentially fancy algorithms that pull recent comparable sales, local market data, and a whole bunch of behind-the-scenes metrics to spit out a property value.
In fancy speak, an AVM is an instant valuation of a property, typically based on property address only. Information included in the RPS AVM reports include multiple confidence scores, homogeneity scores and market price trend charts. These reports can be provided by batch, real time through a browser or via an XML integration. Lenders have an account with an AVM provider, log in, create an order, enter the property details, and immediately receive a report.
The good news is there are no humans traipsing through the house, and no appraiser is scratching their head wondering if the new backsplash adds value. It’s all digital.
Best used when:
- Your client has solid equity.
- The property is in a cookie-cutter subdivision where recent sales are easy to find.
- The lender is feeling confident about the deal’s risk profile.
Example:
I had a client recently refinancing their detached home in Whitby. Because it was a textbook suburban property with 20% down and a clean history, the lender pulled an AVM and we had the value confirmed within minutes—no cost to the client, no hassle.
Desktop Appraisals
Think of this as the middle ground between fully automated and fully hands-on. A licensed appraiser still does the work, but from behind their desk. They review MLS data, tax records, historical listings, and Google Street View to make an educated call on the property’s value. No site visit involved.
Best used when:
- The lender wants a human to confirm the numbers but doesn’t need anyone physically on-site.
- The property isn’t unusual but isn’t perfectly standard either.
- Time is of the essence, but accuracy matters.
Example:
One realtor I work with often has clients refinancing older condos in Toronto. When lenders can’t quite trust the AVM, they’ll request a desktop appraisal. It saves time, keeps the client from paying a full appraisal fee, and usually gets the green light in 48 hours.
Drive-By Appraisals
Yes, it’s exactly what it sounds like. An appraiser drives by the property to verify its existence and make sure it’s still standing tall with a roof intact. They’ll take exterior photos and combine that visual with market data to determine value.
Best used when:
- There are questions about the property’s upkeep.
- The lender wants physical eyes on the home but doesn’t require a full inspection.
- Rural or investment properties where interior condition might not affect the value significantly.
Example:
One of my clients was refinancing a rental property up in cottage country. The lender wanted confirmation the place wasn’t falling into the lake. A drive-by did the trick. Cost the client a few hundred bucks, but it kept the file moving.
Full Appraisals
This is the gold standard. An appraiser physically visits the home, walks through every room, takes measurements, notes upgrades, identifies potential issues, and compares it to similar properties that have recently sold. It’s thorough, it’s detailed, and it’s the most widely accepted by lenders.
Best used when:
- The property is unique, rural, or heavily renovated.
- The loan-to-value is pushing boundaries.
- The lender needs hard proof of value to protect their investment.
Example:
I had a self-employed client buying a fixer-upper in Oshawa. The lender needed reassurance about value because of the property’s condition and the client’s non-traditional income. A full appraisal was ordered. It wasn’t cheap, but it gave everyone peace of mind—and it got the deal done.
NOTE: Different lenders have different policies around when a full appraisal is mandatory such as for rentals, spousal buy-outs, various financial conditions, and so forth.
How Realtors and Clients Can Use This Knowledge
For Realtors:
Use this intel to manage client expectations. If you’re representing a buyer in a rural area or dealing with a unique home, prepare them for the likelihood of a full appraisal. On vanilla subdivision sales with strong buyers? You can confidently tell them an AVM or desktop might be all that’s needed.
For Homeowners:
Understanding the method helps reduce stress. If your mortgage agent tells you the lender’s using an AVM, relax—you’re not writing a cheque for it. If they mention a full appraisal, you’ll know to budget accordingly and prepare your home to show well.
Storytime: The Case of the Bungalow Battle
Last year, I had a couple looking to refinance their 1960s bungalow in Pickering. They assumed—because they’d paid for an appraisal five years earlier—that another one would be needed. But the lender’s AVM nailed the value with ease. Zero cost, zero delay.
NOTE: Different lenders have different policies in regard to AVM cost; sometimes the lender covers it, sometimes there’s a small fee ($100), and sometimes, as with all things in the mortgage world, ‘it depends’.
Contrast that with another client, same town, same style of home—but theirs had a custom addition. The lender couldn’t trust the AVM, and a desktop wouldn’t cut it. Full appraisal ordered. $550 later, value confirmed, refinance approved.
Both clients walked away happy—but only because we set the right expectations upfront.
Allen’s Final Thoughts
The type of appraisal a lender requires isn’t random—it’s tied to risk, property type, location, and loan details. As a homeowner or realtor, knowing how these methods work gives you a huge advantage in navigating timelines, costs, and potential surprises.
The key takeaway? Not every deal needs a full appraisal. But when it does, being prepared means fewer headaches.
How I Can Help
As your mortgage agent, my job isn’t just about securing great rates—it’s about guiding you through the maze of lender requirements, appraisals included. I’ll advise you early in the process on what to expect, help you manage timelines, and ensure you’re not paying for services you don’t need.
Whether it’s negotiating with lenders to accept an AVM or helping you prep for a full appraisal, I’m in your corner. If you’ve got questions, concerns, or a tricky file on your desk right now, just give me a call. This is what I do, and I’m here to help you every step of the way.
