Appraisal Comes in Low? What Happens and Your Four Options (2026)
If a $900,000 purchase appraises at $850,000, the lender lends on $850,000, a $45,000 cash gap at 10% down. What causes low appraisals and the four options.
The lender lends against the lower of price and appraised value, not what you agreed to pay. Offer $900,000 with 10% down, and the appraisal comes back at $850,000: the lender's maximum is 90% of $850,000 ($765,000), not $810,000. You still owe the seller $900,000. That $45,000 difference comes from you, in cash, on closing. Your options are to pay the gap, renegotiate the price, challenge the appraisal, or walk away if you still have a financing condition. Without one, walking away costs you the deposit, and possibly a lawsuit for the difference.
Figures come from the CostToClose guided buying flow.
The arithmetic
| Metric | Expected | After a $850,000 appraisal |
|---|---|---|
| Purchase price | $900,000 | $900,000 |
| Lender's value | $900,000 | $850,000 |
| Maximum mortgage (90%) | $810,000 | $765,000 |
| Cash required from buyer | $90,000 | $135,000 |
| Shortfall | — | $45,000 |
| CMHC premium (3.10%) | $25,110 | $23,715 |
This example was computed with the CostToClose calculator, 14 September 2026. The premium falls slightly because theloan is smaller; that does not help the cash position.
Why it happens
- Bidding wars. The winning bid outran the last three months of comparable sales, and the appraiser is bound to those sales.
- Unique properties with few comparables: rural acreages, unusual layouts, heavy renovations.
- A falling market, where recent comparables are below the contract price.
- Appraisal timing. The appraiser visited after a market shift.
Insured mortgages (under 20% down) are often approved on an automated valuation without a site visit; a low result there can sometimes be overturned with a full appraisal.
Your four options
- Pay the difference. From savings, a gift, or an RRSP or FHSA withdrawal you had not planned. It is the cleanest fix if the money exists; check that it does not empty the closing-cost reserve the lender also needs to see.
- Renegotiate. Sellers in a slow market sometimes meet you partway rather than relist; in a hot market they usually do not. The appraisal report is confidential to you and the lender, but you can tell the seller the number.
- Challenge the appraisal. Ask the lender for a reconsideration with better comparables, or for a second appraisal (at your cost, $300 to $500). Success is uncommon but not rare when the first appraiser missed a relevant sale.
- Walk. Only if the offer is still conditional on financing. See What you lose when a deal falls apart post-conditions.
A fifth path exists: a second mortgage or private lender for the gap. It runs 10% to 14% interest and fees, and your first lender has to consent to it. You'd be trading a cash problem for an expensive one you carry for years.
Worked example from the calculator
Buyer with $95,000 saved, $900,000 offer with 10% down, firm offer, appraisal at $850,000:
| Item | Amount |
|---|---|
| Cash required after appraisal | $135,000 |
| Closing costs (Ontario, first-time buyer) | ≈ $16,400 |
| Total cash needed | ≈ $151,400 |
| Cash available | $95,000 |
| Gap | ≈ $56,400 |
With a financing condition, this buyer declines and recovers the deposit. Without one, they are in breach on closing day. Reproduce this.
Before you make the offer
- Keep a financing condition, or ask the lender to appraise before you go firm (some will, for a fee, if the seller allows access).
- Bid with room: if you are at the minimum down payment, a 5% appraisal miss is a 45% jump in cash required.
- Ask the lender whether the approval is on an automated valuation or a full appraisal.
Frequently asked questions
What happens if the appraisal is lower than the offer price?
The lender bases the mortgage on the appraised value, so your maximum loan shrinks. You must cover the difference in cash, renegotiate, or exit under a financing condition.
Can the seller see the appraisal?
Not automatically. It belongs to the lender and you. You can share the figure to support a renegotiation.
Can I get a second appraisal?
Usually, at your expense, if the lender agrees to consider it. Bring comparable sales the first appraiser may have missed.
Does a low appraisal affect CMHC insurance?
The insurer also uses the lower value. Below 20% down, both lender and insurer must accept the value.
How common are low appraisals?
Rare in stable markets, common after bidding wars and during price declines. Buyers going firm in competitive markets should assume some risk.
Sources
- CMHC, mortgage loan insurance — property valuation — checked 14 Sept 2026
- Appraisal Institute of Canada, appraisal standards and reconsideration — checked 14 Sept 2026
- Financial Consumer Agency of Canada, mortgage approval conditions — checked 14 Sept 2026
This is general information for Canadian home buyers and sellers, checked against the sources listed above on the date shown, and it is not legal, tax, or mortgage advice. Rules and rates change, so confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before relying on them.