Appraisals for Mortgage Financing

Lenders require more than an estimated property value to advance financing. They need an independent, well-supported valuation that can withstand scrutiny from their credit committee. A professional appraisal provides this assurance, establishing a credible basis for lending decisions.

As a critical component of the financing process, the appraisal can also be a significant factor in determining how quickly a transaction proceeds.

What a Lender Needs From an Appraisal

Three things, and a file stalls when any one of them is missing.

Independence. The appraiser cannot have an interest in the transaction. That is why a value supplied by the party who wants the loan is rarely accepted on its own.

A defined basis of value. Market value, as of a stated effective date, with the approach used set out in full. A number with no reasoning behind it cannot be reviewed.

A recognised standard. Reports written to CUSPAP, the Canadian Uniform Standards of Professional Appraisal Practice, by an appraiser holding a designation from the Appraisal Institute of Canada. Our appraisers hold AACI and CRA designations.

One thing worth understanding before you start. Lenders size the loan against the appraised value, not against the price you agreed. If the appraisal comes in below the purchase price, the shortfall comes out of your down payment, not the lender’s advance.

What Changes With the Type of Financing

The word appraisal covers several different pieces of work. What the lender actually needs depends on what is being financed.

Purchase or refinanceConstruction and draw financingMulti-unit residentialFarm and agricultural
What the lender is testingWhether the security supports the loan todayWhether the work completed supports the next advanceWhether the building's income supports the debtWhether land, buildings and production together support the loan
Basis of valueMarket value as of the effective dateValue as of each inspection stage, against the approved plansIncome approach, using market rents, vacancy and capitalisation evidenceLand, improvements, water rights and production capacity assessed together
Typical propertiesOffice, retail, industrial, mixed use, investment propertyGround-up builds, additions, major renovationsApartment buildings, purpose-built rentals, multi-unit holdingsWorking farms, orchards, vineyards, ranches, farmland
Who usually orders itThe lender or the brokerThe lender, at each draw stageThe lender or the borrower's advisorThe lender or the borrower

Full Inspection, Drive-By, or Desktop

Not every financing file needs the same depth of work, and the difference shows up in both the fee and the turnaround.

Full Inspection

The appraiser attends the property, measures and inspects inside and out, and reports on condition. This is the standard for commercial, multi-unit and agricultural financing, and for anything unusual.

Drive-by

The exterior is inspected from the street, with the interior taken from other sources. Faster and cheaper, used by some lenders on lower-risk files.

Desktop

No site attendance. The value is built from records, listings and market data alone.

The lender decides which is acceptable, not the borrower and not the appraiser. The Appraisal Institute of Canada sets out criteria for when the lighter formats may be relied on for mortgage financing, and lenders apply their own rules on top. Ask your broker which one your file calls for before instructing anyone, because ordering the wrong one means paying twice.

How the Value Is Arrived At

A commercial appraisal applies up to three approaches, and the property decides which carry weight.

Direct Comparison

What similar properties have actually sold for, adjusted for the differences between them and yours.

Income

What the property earns, capitalised into a value. This is the leading approach for anything held as an investment, including apartment buildings and leased commercial space.

Cost

Land value plus what it would cost to replace the improvements, less depreciation. It carries most weight on new construction and on special-purpose buildings with little sales evidence.

A report that applies one approach and ignores the other two without saying why is a report a credit officer will send back.

Why a Realtor Opinion or an Assessment Notice Will Not Clear the File

Both get offered to lenders, and both get sent back.

A comparative market analysis from a realtor is a pricing opinion, prepared to help set a list price. It is useful for that. It is not an appraisal, the person preparing it usually stands to earn a commission on the sale, and no lender treats it as independent evidence.

A property assessment notice is a mass-appraisal figure produced for taxation. The assessing authority values thousands of properties at once, against a valuation date set in legislation rather than the date your financing needs. It was never built to support a lending decision on a single property.

An appraisal is not a pricing opinion or a mass estimate. It is a single property, physically inspected, valued as of the date your lender actually cares about, by a licensed appraiser who gains nothing from the number landing high or low. Every comparable and adjustment is documented, which is what makes the file reviewable.

When Financing Calls for an Appraisal

Buying a commercial or investment property

The lender needs to know the security is worth what is being paid before committing to the advance.

Refinancing or renewing

Values move. A lender setting new terms wants a current figure rather than the one from the last cycle

Drawing on a construction loan

Funds release against progress. Each draw needs confirmation that the work in place supports the next advance.

Financing a multi-unit residential building

These are underwritten on income, so the appraisal has to establish market rents, vacancy and capitalisation evidence rather than comparable sales alone.

Borrowing against farmland or a working farm

Land, buildings, water rights and production capacity all carry value and all have to be addressed.

Buying out a partner or shareholder

Where one party is financing the purchase of another’s interest, the lender needs an independent value of the underlying real estate.

Private or alternative lending

Private lenders often require more supporting analysis than a bank, not less, because they carry the risk directly.

Vendor take-back or seller financing

A seller carrying part of the price is a lender too, and is entitled to the same independent evidence.

Who Orders the Appraisal, and Who It Is Written For

In most financing, the lender or the mortgage broker orders the appraisal, and the report is addressed to the lender. The borrower usually pays for it. That catches people out, because paying for a report does not make you its intended user.

This matters in two practical ways:

  • A report addressed to one lender cannot simply be handed to another. If the deal moves, the second lender will usually want the report re-addressed or a new one prepared.
  • And a report prepared for financing is not automatically suitable for a different purpose. A value prepared to support a loan is not written to answer a tax question or a family property question, even when the property and effective valuation date remain unchanged.

If you are not sure who should be ordering it, ask your broker or lender before instructing anyone. It saves paying twice.

What We Appraise

  • Office, retail and mixed-use property
  • Industrial, warehouse and manufacturing
  • Apartment buildings and multi-unit residential
  • Development land, raw and serviced
  • Working farms, orchards, vineyards and ranches
  • Hospitality, hotels and resort property
  • Special-purpose and owner-occupied commercial
  • Machinery, equipment and fixed plant where it forms part of the security

The Report, and What It Costs

A financing appraisal is a narrative report. It sets out the property, the inspection, the approaches applied, the evidence relied on and the reasoning that connects them to the final value. The report is prepared to allow lenders and other intended users to understand and evaluate the appraiser’s conclusions without having personally inspected the property.

Appraisal fees vary depending on the property type, complexity of the assignment, lender reporting requirements, and property location. A straightforward single-tenant retail property, for example, requires a different level of research and analysis than a working farm or a specialized commercial property. Each assignment is therefore quoted individually to reflect the scope of work, time, and expertise required to produce a thorough and well-supported valuation.

Tell us the property, the purpose and the lender’s deadline, and we will give you a fee estimate the same day, with no obligation.

How to Start

Step 1:

Tell us the property and the purpose.

Address, property type, and what the financing is for. If your lender or broker has given you instructions, send those too.

Step 2:

We confirm the fee and the timeline.

Same day, no obligation, before any work starts.

Step 3:

We inspect and research.

The property itself, and the market evidence that supports the value.

Step 4:

You get the report.

Delivered to you and to the lender or broker you name.

Where We Appraisals for Mortgage Financing

Frequently Asked Questions

You can, but check with the lender first. Many require that they or the broker instruct the appraiser directly, and a report ordered outside that process may not be accepted.

The lender sizes the loan against the appraised value, so the gap falls to you. That usually means a larger down payment, renegotiating the price, or finding a lender with different terms.

That is the lender’s decision and it varies by file. Ask your broker before ordering, because the wrong format means paying for a second report.

Not necessarily. Lists vary by lender and by region, and many lenders will accept a designated appraiser who is not on the list, particularly for property types that need specialist experience. Ask your broker.

Usually not as it stands. The report is addressed to a named client. A second lender will normally want it re-addressed, and sometimes updated, before relying on it.

That is the lender’s call and it varies. Effective dates have a shelf life, and in a moving market a lender will want a current figure rather than one from several months ago.

An assessment is a mass-appraisal figure produced for taxation, valued as of a date set in legislation. An appraisal values one property, inspected, as of the date your financing needs.

That is much of what we do. Working farms, vineyards, special-purpose commercial and rural property often fall outside a standard residential appraiser’s scope, which is why lenders send them to a designated commercial appraiser.

A designation from the Appraisal Institute of Canada, AACI or CRA depending on the property, and a report written to CUSPAP. Our appraisers hold both designations.

It depends on the property, the report format and how far it is. Tell us the lender’s deadline when you make contact and we will tell you straight away whether we can meet it.

The address, the property type, the purpose of the financing, and your lender or broker’s contact details if they are instructing.

Why Quality Appraisals

Appraising property since 1990, across British Columbia, Alberta, Yukon and Ontario

AACI and CRA designated, members of the Appraisal Institute of Canada

CUSPAP compliant reports written for lawyers, mediators and the court

Familiar with the different valuation date rules in each province we serve

Residential, agricultural, commercial and equipment valuation under one roof

Direct access to the appraiser working on your file

Get the Appraisal Your Lender Will Accept

Tell us the property, the purpose and the deadline. We will come back the same day with a fee and a timeline.

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