Much Ado About Appraisals!


10 minute read

February 21, 2023

Thanks to the readers for commenting on Friday’s blog and providing some suggestions for topics this week.

One reader asked what a question that felt like it was posted with a little nerviness.  One of those, “asking for a friend,” questions.

The truth is, if we’re going to talk about appraisals, I feel as though our good friend Appraiser should be guest blogging!

“Appraiser” is one of those names that we see most often on TRB, but when I close my eyes and squint, trying to picture the name from last year, the year before, or the one before that, I think I’ve been seeing this name on TRB for a decade or more.

Two years ago, I asked in a blog post, “How long have you been reading TRB?”

I was so excited to see the responses from the readers, both those we’re used to seeing comments from, and some who had been lurking in the shadows for some time.

A friend of mine once suggested, “You should throw a massive TRB party and invite everybody, then when they show up, they take a name-tag and write their blog-persona or nickname on there.  Everybody eats finger foods and drinks wine, walking around, looking at name tags and answering questions they’ve had for many years!”

Fun idea, in theory.  But many, if not most of the TRB readers prefer to be anonymous.

Nevertheless, a golf foursome with the likes of Appraiser, Condodweller, Ace Goodheart, and myself could make for some interesting conversations…

Here’s a comment from Friday’s blog:

As I said, it seems like Samantha is a bit nervous and might be “asking for a friend,” but I get a lot of questions about appraisals from my clients.  We just never really discuss them in dedicated posts here on TRB.

There are specific questions here, and then there are a lot of stories I’d like to tell in response.

Let’s start with this:

Are appraisers being conservative?

Actually, I think I can answer specific questions and tell stories at the same time!

So in the context of “problems” with appraisals, let me offer something which might not be popular, but which will jive with everything I say on a regular basis about people taking responsibility for their actions or inactions, especially in face of problems:

The buyer’s decisions during the mortgage process could have a negative effect on the appraisal process.


“The buyer?” you ask?

Yes, the buyer.  And let me open with a horror story just to illustrate why…

A friend of mine told me this tale last fall, but she actually told me at the onset when she exclaimed, “My clients are going to fuck themselves on this house purchase, I just know it.”

Truer words couldn’t have been spoken, but do you think the buyers blamed themselves in the end?

Her clients purchased a home for $3,450,000 in mid-April of 2022 with an extra-long closing date so they could take their time, renovate their existing home, and put it on the market looking better than it ever did when they lived there.

Now, you and I might think, “July likely isn’t the best time to sell,” but her clients theorized that there would be very little on the market at that time, and that the summer would offer them the opportunity to have zero competition.

So the first problem was: the market didn’t respond well to their listing.  In fact, they “under-listed” with an offer date but received zero offers, then they raised the price thereafter.

Although they bought in mid-April with a late-August closing date, their home was still unsold by early-August and they had to ask for an extension on their purchase.  The extension was granted, but only because they offered a further deposit of $100,000.

They finally sold their home in late-August and prepared for the extended closing date of their new home in mid-September.

Then, they did something crazy.  Absolutely bonkers.

What was it, you ask?

They ordered the appraisal on their new home.

Half of you now have a red mark on your forehead from facepalming and the other half are waiting to read the explanation.

In my mind, there is only one acceptable date to order an appraisal when you purchase a house.

What date is that, you ask?

The day after you purchase.

You always, always, always get the appraisal done immediately after your purchase because it takes market fluctuations out of the equation.

Appraiser can debate me on this if he wants, but I believe about 99% of appraisals are rubber-stamps in any ordinary market.  I can’t tell you how many times I receive a call from an appraiser who asks, “What was the sale price on that property?” and then the appraisal magically arrives at that number.

But what if you purchase a house in mid-April, the market declines, and then you order an appraisal in late-August?

Well, in this case, the appraisal came in at $3,000,000 even.

And the buyers of this house were completely screwed.

Having obtained $200,000 less for their house than they expected, the bank was now telling them to come up with an additional $450,000 to close on their new home.

But the best (worst?) part is yet to come.

When my colleague asked them, “Why the hell did you wait so long to order the appraisal?” do you know what they said?

“We were shopping for rates.”

My colleague explained the whole story to me over lunch one day, and it underscored multiple other problems…

“These fuckers were working with my mortgage broker for eighteen months,” she told me.  “My broker is the best of the best and she worked her ass off for them, took their calls on weekends, answered their emails at night, and continued to lock in rates for them every 3-4 months.  So they go out and buy a house, and then what do they do?  They decide to look elsewhere for a better rate.”

It’s not uncommon in our industry.

In fact, I’ve had clients of my own that have used my mortgage broker for a week, a month, or a year, only to turn around days before closing and go with a different lender for the same rate!  So many of our clients start with a broker because their own bank won’t give them the time of day, allow the broker to do all the work, then before closing when the bank says, “Oh, we can match that rate,” the clients reward the bank’s poor behaviour with an easy mortgage.

“So these guys never called my broker and told her that they bought, so she never ordered an appraisal,” my colleague explained.  “Then three months later, after the market dropped, they’re still shopping for interest rates and they finally decide to go with HSBC…”

And what happens next, you ask?

“HSBC orders an appraisal and the appraisal comes in at $3,000,000, so they freak out, then they call my mortgage broker and as if there’s anything she can do.”

Of course.

“My mortgage broker told them, ‘I was in touch with you guys for a year-and-a-half and then you went dark on me.  I emailed you several times but never heard back.  I wish you’d have kept me in the loop and I could have helped you, but there’s nothing I can do now, I’m sorry.'”

What a gong-show.

In the end, the buyers did what so many Torontonians do, much to the chagrin of BlogTO readers and the like: they had their parents bail them out.  Just your standard interest-free loan for a half-million, repayable never…

But the point is made here, folks.  Several points, in fact.

One is about the intersection of loyalty, greed, and common sense.  If you’ve got a mortgage broker working for you, then work with them.  If you find a better posted rate somewhere, ask your mortgage broker.  Don’t ghost them for three months and look around trying to “do better” while putting yourself at risk in the meantime.

But the larger issue is obviously that you need to get an appraisal done as soon as you purchase and this is in any market.

Even if you’re in a market that is going up, the appraiser might choose to use sales from the period when you purchased, and ignore newer, higher ones.

And when the market declines, you can’t rely on your “book value” when the “market value” is lower.  Not a lot of buyers saw last year’s market decline coming, and many were caught off guard.  But there’s zero downside to commissioning an appraisal after you’ve purchased.  In the case of the buyers in our story, they could have locked in that $3,450,000 value, but they chose to mess around, looking for a better interest rate, taking their time, and all the while, “knowing best” when they knew nothing.

So let me move on to another issue and it’s a question I get asked a lot by my buyers:

What happens when the appraisal comes in lower than the purchase price?

The answer, in my mind, is: it depends.

It depends, first of all, on where you’re getting your mortgage.

Let’s say that you’re working with ye ole’ neighbourhood bank.  It’s your local branch where you’ve been baking since you were 14-years-old.  They approved you and your partner for a $1,400,000 purchase and you’ve been meeting with them, in person, like it’s 2001.

You buy a home for $1,370,000 just to ensure you’re not at your maximum purchase price but the appraisal comes in at $1,320,000.

What do you do?

Well, what is your loyal, looking-after-you bank going to suggest?

There’s only one thing that they can suggest, and that’s you making up the difference out of pocket.

They’ll advance you funds based on a purchase price of $1,320,000 provided you can come up with $50,000 to fill in the gap.

Now, what would I tell you to do?

Go to another lender.  Right now.

In fact, get in a time machine and go back to when you started this search and work with a broker instead of a bank.

I alluded above to the fact that the worst possible service you will receive is always from your own bank because they expect your business and you’re not a new client so there’s no real upside to them working their tails off to satisfy you. I could write about this for days.

So at the risk of making this sound like an advertorial for working with a mortgage broker, let me suggest that having a broker who can shop dozens of different lenders, in addition to having knowledge and experience that will trump any front-line, over-the-counter, street-level mortgage specialist at your corner bank, should be automatic for everybody out there.

Last year, I sold a house where the appraisal came in low.  It was on a $611,500 condo purchase where the appraisal came in at $600,000.

“That appraiser must have had a bad day,” my mortgage broker told me with a laugh.

It’s rare to see these cases, and I have no idea how any appraiser could be that specific, but such is life.

So what did my mortgage broker do?  Did he tell the client to make up the difference out of pocket?


He went to another lender and they sent out a different appraiser, and voila – the appraisal magically came in at $611,500.

My clients basically went from Scotiabank to TD Bank overnight but got the exact same mortgage rate, term, and options.

Here’s another story with the same issue but a different solution…

A few years ago, I sold a house in Bloor West Village for $1,950,000.

I knew the listing agent and when all was said and done, she told me there were three other offers over $1,900,000, so I was feeling really good about our purchase!

But one week later, the appraisal came in shockingly-low at $1,800,000.

It made no sense.

Especially when you consider the three other offers over $1,900,000, it just made so little sense.

In this case, however, my client couldn’t go to another lender.  This particular lender was making multiple exceptions for him; one on the down payment requirement for the portion over $1,000,000, one on the amortization period, and another on using his commission income in addition to his salary.

My mortgage broker said, “No other lender is going to give those three exceptions.”

I asked, “Can we get a different appraiser?” and my mortgage broker said that he would try.  This is also not uncommon.

Unfortunately, the bank drew a hard line and said “no.”

I asked my broker, “What can we do?”

He said, “Well Dave, you gotta beat this guy at his own game!”

Huh?  I have to what?

“You’re a smart guy,” he said.  “Put together an appraisal.”

So I did.

I wrote it like a whitepaper.  I had no real clue what format this was supposed to be in, or to whom I was addressing this.  I just acted like it was part-blog and part evaluation.

My first section was about the comparable sales I would use as an agent, why they were appropriate, and what value they would produce for the subject property.

But my second section was about the comparable sales that the appraiser used, and why a house on Leland Road in Norseman Heights, or a house on Mariposa Avenue on the north side of St. Clair Avenue West had no business being mentioned in the same sentence as a house on a quiet, sought-after street in prime Bloor West Village.

Lo and behold, it worked!

I don’t know how it worked, in practice.  I don’t know if the appraiser was forced to re-write the appraisal or if the bank decided to use mine?

Nevertheless, they advanced funds based on a purchase price of $1,950,000 and not the $1,800,000 price from the appraisal.

Another question that was asked on Friday and which my clients sometimes ask:

Can I make an offer conditional on an appraisal?

Yes, you can.  You can make any offer you’d like, and that hasn’t changed.

But will you be successful if you have a condition on an appraisal?  That’s the question that’s really being asked.

If you’re making a conditional offer in competition and there are four, five, or six other offers, I think it’s fair to assume that one or more could be unconditional and that your condition might mean your offer won’t be considered by the seller.

So what is the point of a condition on appraisal then, say, in relation to a condition on financing?

A typical condition on financing is for five business days, but often seven or even ten in this market.  A condition on financing says, “We need go to through the entire process with our lender in order to proceed with this transaction.”

A condition on appraisal could be one, two, or three business days, depending on how much control the buyer, via their mortgage broker, has over the timing of the appraisal.  If the mortgage broker knows, with certainty, that there’s an appraiser from the lender who can get into the property tomorrow and have a report issued by end-of-day, then a 48-hour condition on appraisal might suffice.

To the seller, this is saying, “We have already obtained our pre-approval, the lender has all our documents, and we just need to know that if we buy this property for $1,000,000, then the appraised value will, in fact, be $1,000,000.”

I used this clause once already this year, not in competition, but for a property that had been sitting for a while.  We offered on a Wednesday and a five-day condition on financing would leave the seller waiting until the following Wednesday, but a 48-hour condition on appraisal would allow the seller to obtain an answer by Friday night.  The sellers were quite delighted, we had the offer accepted, and after the appraisal came in at full purchase price on Friday morning, we waived our condition and had a firm deal.

This brings me to a final point I’d like to make about appraisals:

Nobody wants the property to appraise at full purchase-price more than the lender.

Banks are in the business of lending money.

When they’re looking at a $2,000,000 purchase with a $1,600,000 mortgage at 4.99% for five-years, for a fully-qualified buyer, they’re salivating.  This is how banks make money.

The last thing in the world that the bank wants is for the appraisal to come in at $1,900,000 so that either the deal doesn’t close or the buyer goes to a different lender.

But banks are publicly-owned companies and there has to be accountability.

Banks can’t just take the buyer at their word when the buyer shows up and says, “I paid $2,000,000 for this house, so trust me when I say it’s worth it, now can you give me $1,600,000 please?”

So banks bring in a third-party, aka the appraiser.

For those of you who work in appraisal, lending, or for the major banks, tell me you disagree, but if you do, are speaking from a point of principal or practice?

Well folks, in the words of Forest Gump, “That’s all I’ve got to say about that.”

I’m happy to read and respond to any comments to contrary today.

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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  1. Marina

    at 10:02 am

    Long time bank worker here, and I was actually working on foreclosures in 2008-2009 for a bank with a large us presence. There is one thing banks hate more than losing business. And that’s foreclosing on your property.
    Getting foreclosed properties on your balance sheet is a huge problem – they carry a ton of costs, and usually foreclosures happen in a downward market, so you don’t even know when you will get them off your balance sheet.
    And do you know what people do to foreclosed properties? I’ve seen houses with every piece of hardware ripped off the wall and cabinets, wires torn out of the walls, bed bugs, broken windows, unspeakable things painted on the walls. People flush bags of rice down the toilet to crack piping and foundation. They salt the front and back yard. They put bodily output in vents. It’s insane.
    So in a regular, stable market, banks know people will prioritize paying their mortgage. So often times they will overlook things, fudge things a bit, to get the business. But once the stability goes, their risk tolerance goes way down. They no longer make exceptions. And the appraiser’s rubber stamp starts to actually make a difference.
    Anyway, just my experience.

    1. Jenn

      at 10:11 am

      Flushing bags of rice down the toilet? How do people come up with this? What’s wrong with people yeesh

      1. hoob

        at 8:50 am

        People don’t fit down the pipes well.

    2. GinaTO

      at 12:29 pm

      You need to do a guest blog one day – I would love to hear your stories!

  2. Derek

    at 12:39 pm

    Questions about process: Do the buyer and / or mortgage broker get to dictate when an appraisal occurs, relative to the closing date? Or does the lender decide the timing of any appraisal it wants to rely on? The last time I bought something, using a mortgage broker, with a long closing requested by seller, I did not have any input at all into any appraisal or any timing for same. I can’t even remember what happened, i.e., whether there was an appraisal or the appraised amount, if any. Presumably, if there was a problem I would know, but my point is I wasn’t involved in getting one done either quickly after the APS was signed, or even later as closing approached….

    1. Victor

      at 2:44 pm

      There’s definitely some strategy with ordering appraisals.

      Mortgage brokers have full control of when to order an appraisal. It’s not ordered by the lender, unless it’s an Automated Valuation Model (AVM). AVM is a tool to value properties quickly without having to conduct a full appraisal. The mortgage underwriter would plug in the purchase price/estimated value and the system will either support the value or not. If not, the lender will request for a full appraisal.

      Brokers must order appraisals through an Appraisal Management Company (AMC) like Solidifi and Nationwide Appraisal Service (NAS).

      The broker can choose any appraisal company on the lender’s approved list of appraisers for the majority of lenders that partner with brokers, except for TD and HSBC.

      TD will auto-assign the appraiser and the broker will not know who the appraisal company is until the report is delivered. The broker will get a copy of the report.

      HSBC requires appraisals to be ordered through FNF. Brokers don’t get to choose the appraisal company and also don’t receive a copy of the report. It goes direct to HSBC.

      Tip – to avoid killing the chances of getting the deal done with a particular lender (due to potential lower value), the broker can list his/her email on the appraisal order form instead of the underwriter’s. If value comes in lower, either dispute it (low success rate) or order another appraisal. If value is fine, send the report directly to the underwriter from Solidifi or NAS. Also important to review the report in its entirety before sending. There could be other issues besides value.

      Hope this helps.

  3. Appraiser

    at 2:15 pm

    @ Derek: You are correct, it is the lender that orders the appraisal and the buyer is not usually in the loop. But the appraisal is most often ordered after a mortgage application has been submitted. So the buyer who shops around and waits to submit an application is in appraisal limbo.

    @ David Fleming: You are also correct. The appraisal is often a rubber stamp and that stamp signifies that the subject property’s sale price can be supported by the market comparables contained in the report.

    Also @ David Fleming: The bank would never actually utilize your appraisal report. What occurred in your case was a successful appraisal appeal that was supported by better comps. (yours) as provided to the appraiser. The report was amended. Successful appeals are rare, most are laughable.

    Also correct: no appraiser should kill a deal for $11,000. on a $600,000 sale. Nobody is that good.

    It may surprise some folks to know that MLS sales make up a tiny fraction of overall residential appraisals. Most of the work comes from lines of credit applications, mortgage renewals, switches to a new lender and various refinancing purposes.

    Disclosure: Probably should have mentioned this sooner but as of October 1st, 2022, I am retired.

    1. Derek

      at 2:55 pm

      Congrats on your retirement!! I expect to die in my office chair. Interesting info about the proportion of appraisal work amongst different lines.

      1. David Fleming

        at 4:03 pm

        @ Appraiser

        This is both bad and good.

        Bad, because you might have to change your name to “The Artist Formerly Known As Appraiser.”

        Good, because now you have even more time to post comments here! 🙂

    2. JF007

      at 12:39 pm

      Can say that i was able to successfully appeal an appraisal back in fall’21..did the same thing got details on comparable sales around the area, per sq ft rate, details on basement legal or not bumped from 1.2 mill to 1.25 mil as had requested in the application was able to close everything on time and this was with one of the banks not through a broker. Do have a very good exp to share with a broker as well when was renewing back in Fall’20 and this time the broker after settling on a rate with me n all did an audit a month before renewal as per their std. practice and found me a rate that was .15% lower in the mkt and matched it so both cases worked out for me but feel mortgage brokers are motivated to get you the best offer end of day and to close something successfully

    3. Crofty

      at 4:22 pm

      @ Appraiser

      Congratulations on your retirement (my brother retired a couple of weeks later than you, on his 67th birthday). I know you’ll enjoy it.

  4. Condodweller

    at 3:13 pm

    I find it incredible how people sign a contract for such a large amount and don’t have contingency plans. Perhaps a house purchase should be treated like a franchise. Franchisors ask for an operating fund on top of the purchase price because they don’t want you to go out of business at the first sign of trouble. This is usually a few hundred thousand dollars.

    I realize there is a significant recency bias to overcome when prices have only gone up for 25 years and with high prices, one has to dig for pennies in the couch to finance the deal but perhaps it’s a bad idea to max everything out to put the deal together.

    Regarding brokers, I guess any service-oriented business has to deal with prospective clients walking away for a “better” deal. I think a lot of people are still more comfortable with dealing with their bank. Here’s a trick for them: you can always tell a broker that you prefer to deal with a bank and they will still likely negotiate a better rate with a bank than taking what the bank offers you with a smile.

    Regarding appraisals, I guess the old days are over when banks provided second mortgages if you couldn’t quite come up with the downpayment. Though it’s possible in those days the minimum downpayment was 25%.

  5. Ace Goodheart

    at 9:34 pm

    This is what people were doing back when I was house shopping and it was driving me bonkers.

    Some dreamer with 400K of their own money and 200K borrowed from relatives, was beating me on offer night for a $2 million dollar house, and I actually had two mil, but I wouldn’t go firm because I wanted to finance it at 1.2% and not sell all my investment holdings. So I would just indicate “conditional on financing” and I would get completely refused. They wouldn’t even talk to me. My Agent hated me.

    And these cream puffs didn’t even have the money. And they couldn’t come up with an extra $150,000 to close a 1,950,000 house, if an appraisal came up short? These are literally the people who were beating me on offer night.

    Canada is full of cream puffs.

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