What a home appraisal is, and why your lender orders one
When you take out a mortgage, your lender wants its own opinion of what the home is worth. Here is why — and what happens if the number comes in low.
A home appraisal is an independent, expert estimate of a property’s market value, prepared by a certified appraiser. It is a routine step in getting a mortgage — and, importantly, it is ordered for the lender, not for you.
Why your lender orders one
Your mortgage is secured against the home, so the lender wants to confirm the property is genuinely worth what you are paying. The appraisal establishes the loan-to-value ratio — how much the lender is willing to advance against the home’s value.
What a “low appraisal” means for you
Your mortgage is based on the lower of the appraised value or the purchase price. If the appraisal comes in under your price, the lender funds the lower figure and you cover the difference in cash. Pay $850,000 for a home that appraises at $820,000, and you would need to make up the $30,000 gap yourself.
How an appraiser estimates value
For a typical home, the appraiser uses the direct comparison approach — weighing recent arm’s-length sales of similar nearby properties and adjusting for differences in size, age, condition and finishes. (Other methods, the cost and income approaches, are reserved for special-purpose or income-producing properties, not ordinary homes or strata units.)
Key facts
- Prepared by an independent, certified appraiser.
- The lender is the client — you may not receive a copy of the report.
- The buyer commonly pays the fee, often around $300–$500.
- More often required on uninsured mortgages (20%+ down payment).
- Built primarily on recent comparable sales.
Three different value numbers
An appraisal is not your BC Assessment (the annual tax valuation) and not a REALTOR®’s comparative market analysis — three estimates, for three different purposes. See inspection vs. appraisal for the related mix-up.
Sources
GeoHouse is a technology company — not a licensed real estate brokerage, REALTOR®, lawyer, or financial advisor. This article is general education about how the process works in British Columbia, not advice for your specific transaction. Rules and figures change; confirm current details through the official sources linked above and consult a licensed REALTOR®, mortgage broker, lawyer, or notary before making decisions.