When it comes to buying, selling, or refinancing a home in Canada, one step can unexpectedly shake up your plans: a low appraisal. Whether you’re a homeowner trying to refinance or a buyer trying to close on a new purchase, a low appraisal can feel like a major setback. But don’t panic—this guide will walk you through exactly what to do, what to avoid, and how to move forward with a clear mind and confidence.
Understanding the Role of an Appraisal
What is a Property Appraisal?
An appraisal is a professional evaluation of a home’s current market value. In most Canadian real estate transactions, the lender or mortgage broker will order the appraisal to confirm that the house is worth the amount being financed.
Unlike a home inspection, which checks the condition of the property, an appraisal is predominantly about the home value—what a buyer could reasonably pay for the property based on comparable sales in the area.
Who Orders the Appraisal and Why It Matters
Typically, the lender or mortgage broker orders the appraisal as part of the mortgage underwriting process. The appraiser looks at recent sales data, local market trends, and the condition of the home to provide an unbiased estimate.
Key takeaway: A low appraisal doesn’t mean your home is worthless—it simply means the lender believes the value is lower than expected at that moment in time.
Why Appraisals Come Back Low
Factors That Influence Appraisal Values
Appraisers base their estimates on factors such as:
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Recent comparable sales (comps) within the last 90 days
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Property condition and layout
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Neighbourhood desirability
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Square footage and usable space
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External factors (e.g., power lines, zoning changes)
In some cases, the property value may be affected by a cooling market or limited comps in the area.
Common Mistake: Assuming Asking Price = Appraised Value
Sellers and even realtors may overestimate a property’s value based on listing price or emotional attachment. A realtor sets out to get the maximum amount they can when listing and selling a home. Unfortunately, lenders go by data, not feelings.
Appraiser Limitations or Errors
Appraisers may:
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Use outdated or irrelevant comps
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Miss recent upgrades
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Misclassify the property type or location
Important to note: Appraisers work independently, but mistakes can still happen. You have the right to review and challenge the report if something seems off. Gathering factual data to support your concerns is extremely important.
Immediate Steps After a Low Appraisal
Step 1 – Request details of the Appraisal Report
If you’re refinancing or buying, request the details of the report right away.
Review it closely for:
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Incorrect square footage
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Missed upgrades
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Poor comparables (e.g., distressed sales, different locations)
Step 2 – Contact Your Mortgage Broker or Lender
Your broker can guide you through the next steps. In some cases, they may suggest:
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Asking for a reconsideration of value (ROV)
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Seeking a second opinion
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Pivoting to a private lender or alternative financing solutions
Step 3 – Prepare for a Reconsideration of Value
If there are valid concerns, your broker can submit a formal ROV request.
This must include:
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At least 3 more relevant comparable sales
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Proof of overlooked home upgrades
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Market trend data or local sales you believe were ignored
Checklist: Documents You’ll Need to Challenge a Low Appraisal
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Appraisal report copy
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List of recent home upgrades (with dates and costs)
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High-resolution photos of improvements
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Local MLS listings of comparable sales
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Property tax statement
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Recent market data reports
Common myth: You cannot question an appraisal once it’s done. In Canada, you absolutely can—through your broker or lender.
Financing Options After a Low Appraisal
Adjust Your Offer or Down Payment
If you’re a buyer and the appraisal comes in low, your mortgage lender may only finance up to 95% of the appraised value, not the offer price.
You can:
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Renegotiate the purchase price by speaking with your realtor
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Increase your down payment
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Seek guidance from your realtor or lawyer on your rights to walk away from the deal
Refinance with a Private Lender or B-Lender
Private lenders are typically more flexible with loan-to-value (LTV) ratios. If your bank won’t move forward, an experienced mortgage broker can match you with a private lender that focuses more on equity than income or appraisal figures.
Use a Second Mortgage or HELOC
Another workaround is to apply for a second mortgage or home equity line of credit (HELOC) to cover the shortfall. This is common in refinancing scenarios, particularly when home values are fluctuating.
Key takeaway: You’re not stuck. If a traditional lender won’t approve you due to a low appraisal, there are still viable options in the Canadian lending market.
How Sellers Can Prepare for Appraisals
Pre-Listing Appraisals or Evaluations
If you’re selling a property, especially in a soft market, consider getting your pre-listing appraisal or opinion of value. This allows you to set a more realistic price based on data, not emotion.
Presenting the Home Professionally
The condition of your home absolutely matters—even to an appraiser.
Improve your odds by:
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Tidying up both inside and outside
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Making sure all lights and systems work
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Showing the home in its best light (literally and figuratively)
Provide a List of Recent Upgrades
Don’t assume the appraiser knows your furnace was replaced or your basement was waterproofed.
Provide a typed list of:
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Dates and descriptions of work
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Invoices or receipts
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Before and after photos, if possible
Important to note: Even small details—like energy-efficient windows or upgraded flooring—can boost the home value in the appraiser’s eyes.
What Buyers and Owners Should Know About Appealing
The Reconsideration of Value Process
If you find errors or have better comps, you can submit a Reconsideration of Value request. This is done through your lender, not directly to the appraiser.
Be respectful and professional. Only submit valid corrections or overlooked data.
Hiring an Independent Appraiser
In rare cases, it may be worth hiring a third-party appraiser to confirm value, but your lender may not accept this unless they specifically request it.
If multiple appraisals show consistently low values, consider adjusting your strategy. It may reflect true market conditions.
Common mistake: Waiting too long to act. The earlier you respond to a low appraisal, the more financing options you can preserve.
Final Thoughts on Low Appraisals
Low appraisals can feel like a financial roadblock, but they don’t have to derail your goals entirely. Whether you’re buying, refinancing, or selling, it’s essential to act quickly, ask questions, and explore your options.
Always review your appraisal thoroughly. Look for discrepancies, ask for support from your broker, and consider flexible alternative financing methods to help to you accomplish your financing goals.
Key takeaway: A low appraisal is a challenge, not a total dead end. With the right guidance and preparation, you can still explore alternatives to achieve your goals.
FAQ Section
Q1: Does a realtor’s opinion of value count as an appraisal?
A: No. A realtor’s opinion of value—commonly called a Comparative Market Analysis (CMA)—is not the same as a formal appraisal. While realtors base their estimate on local sales and market trends, an appraisal must be completed by a certified appraiser and is required by lenders during mortgage financing. Only an appraisal carries legal weight for financing or refinancing decisions.
Q2: What designations do Canadian appraisers carry?
A: Professional appraisers in Canada are typically designated by the Appraisal Institute of Canada (AIC). The two most recognized designations are:
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CRA (Canadian Residential Appraiser) – qualified to appraise residential properties up to four units.
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AACI (Accredited Appraiser Canadian Institute) – qualified to appraise both residential and commercial properties.
Appraisers must follow the Uniform Standards of Professional Appraisal Practice (USPAP) or CUSPAP (Canadian version).
Q3: What should I do first if my appraisal comes back low?
A: Start by reviewing the report for errors or omissions. Look at the comparable sales, property condition notes, and square footage. Then speak with your mortgage broker or lender to explore appeal options or alternate financing routes.
Q4: Can I appeal or dispute a low appraisal in Canada?
A: Yes. You can request a Reconsideration of Value (ROV) through your lender. This usually involves providing more recent or more accurate comparable sales, documentation of property upgrades, or market conditions that the appraiser may have missed.
Q5: Will a low appraisal stop my mortgage from being approved?
A: Not necessarily. A low appraisal may reduce the amount a lender is willing to finance, which can affect your loan-to-value ratio (LTV). You might need to increase your down payment, renegotiate the purchase price, or reduce your mortgage refinance amount.
Q6: Can I get a second appraisal if I don’t agree with the first one?
A: You can hire an independent appraiser, but lenders and brokers typically only accept the one they ordered. If you strongly disagree with the valuation, work with your broker to submit additional evidence or ask the lender to consider a new appraisal request.
Q7: Is an appraisal required for refinancing in Canada?
A: Yes. Most lenders require a new appraisal when refinancing to determine the current home value and ensure that there is enough equity to support the new mortgage loan. This helps lenders assess risk and calculate the updated loan-to-value (LTV) ratio.
Disclaimer: While homeowners often request a copy of the full appraisal report, it’s important to note that most mortgage brokers and lenders are not authorized by appraisal firms to release the report directly due to licensing and anti-fraud protocols. However, it is common practice for brokers or lenders to share the appraised value and key details—such as the comparables used or the valuation summary—to help clients understand the results and next steps.
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