Appraisal감정 평가 (어프레이절)

What is it?

An appraisal is a qualified appraiser’s independent opinion of a home’s market value, written up in a report. When you buy, it is usually ordered by the lender (your bank) to confirm the value of the home that will secure the mortgage.

The key point is that the mortgage is based on the appraised value. The Appraisal Institute of Canada (AIC) explains that the approved mortgage amount is based on the appraised value, not the purchase price, and that if the price you paid is much higher than the appraisal you may not get the full loan you counted on.

Guideline B-20 from OSFI (the federal bank regulator) requires lenders to assess collateral properly, using a mix of on-site inspections, third-party appraisals and automated tools, and not to rely on a single method.

Who does it?

The AIC grants two designations. An AACI (Accredited Appraiser Canadian Institute) can appraise any property type; a CRA (Canadian Residential Appraiser) can appraise dwellings with up to four units and residential lots. OSFI B-20 says lenders using third-party appraisers should make sure they are designated, licensed or certified, and independent of the loan decision.

The appraiser’s client is usually the lender. The AIC explains that appraisers have a confidential relationship with their client, so even the person who paid may not receive the report without the lender’s written consent. Ask your lender whether you can get a copy.

An appraiser is not there to hit a target number. The AIC says appraisers are independent and do not advocate for a particular value.

How does it work?

1. After your offer is accepted, you apply for the mortgage. The lender decides whether an appraisal is needed and what scope it should have.
2. The lender assigns an appraiser. For a full appraisal, the appraiser visits the home for about 20 to 40 minutes and takes photos (AIC guidance). Sometimes a drive-by (exterior only) or desktop (data only) report is used instead.
3. The appraiser analyzes 3 to 10 or more recent sales of similar homes to estimate market value. The AIC notes that most of the work happens after the visit, so you will not get a number on the spot.
4. The report goes to the lender, which sets the loan amount using the lower of the appraised value and the price.
5. If the appraisal is below the price, the lender tells you, and you must decide how to cover the difference (see below).

How is it different from a CMA or the MPAC assessment?

MPAC warns not to confuse "sale price" with "current value". The sale price is what two parties agreed on; MPAC’s current value is an opinion based on all sales in the area. Do not use the property tax assessment as evidence of what a home is worth.

When the appraisal comes in low (the appraisal gap)

In a hot market, competing offers can push the price above recent sales. Because the appraiser works from homes that have already sold, the appraised value can come in below what you agreed to pay. The difference is often called the "appraisal gap".

Since the loan is based on the appraised value, the most you can borrow can get smaller, and you must pay everything above the loan from your own money. So you may need more cash than the down payment you planned (see the example below). For an insured mortgage (less than 20% down), the insurer also uses a "lending value", and CMHC insurance requires the purchase price or lending value to be below $1,500,000.

If your deal is already firm when the low appraisal arrives, you cannot cancel. You could lose your deposit and be sued for losses. That is why RECO says pre-qualifying for a mortgage does not safely remove the need for a financing condition. A pre-approval also assesses you, not the appraisal of this specific home.

What you can do after a low appraisal: pay the gap from your own money, ask the lender to reconsider with other comparable sales (only through the lender), get a new appraisal through a different lender, or, if your financing condition is still open, renegotiate the price with the seller or end the deal. Talk to your mortgage professional and lawyer first.

Who pays?

The AIC explains that an appraiser’s fee is not tied to the value of the home and is generally a flat fee based on the complexity and hours involved. It also notes that for mortgage lending the homeowner is often required to pay the fee, even though the lender is the appraiser’s client.

Some lenders cover or refund the appraisal fee. Ask your lender or mortgage broker in advance about the amount and who pays. This page does not state a dollar amount because it varies by provider and changes often.

How to prepare

• Share property details early. The AIC suggests giving the address, access details and known upgrades up front. If you are the seller, have the construction year, major renovations and repairs, and permit documents ready.
• The appraiser may ask about listings or offers in the past 12 months and any sales of the home in the past three years.
• If you want to submit comparable sales, get a list of recent similar sales (a CMA) from your agent and pass it through the lender. The AIC says to keep communication in the lender’s channel to preserve independence.
• Allow time. The AIC notes that timelines vary by market and complexity. The appraisal must be done inside your financing condition period, so keep that in mind when you set the deadline.
• Interior photos need the owner’s (or occupant’s) consent. If the home is tenanted, give notice in advance.

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