Appraisal Came in Low: What Happens Next
You agreed to pay one number; the lender's appraiser says the home is worth less. The difference doesn't vanish — it moves, onto your cash, the seller's price, or the deal itself. Here is exactly how a low appraisal works in Ontario and the order in which to try your options.
Why the appraised value rules the mortgage
A lender lends against the appraised value, not the purchase price. If you bought at $900,000 with 20% down expecting a $720,000 mortgage, and the appraisal lands at $850,000, the lender's math restarts from $850,000: your mortgage tops out around $680,000, and the remaining $40,000 of the gap is yours to find in cash — on top of your down payment and closing costs. The appraisal itself is ordered by the lender, done by a licensed appraiser using recent comparable sales, and usually happens after your offer is firm. That timing is the whole problem: by the time you learn the number, you're usually already committed.
Option 1: Cover the gap
The most common outcome, when the gap is manageable: you bring the extra cash and close as agreed. Before raiding accounts, check the true consequences — money pulled from an FHSA or RRSP plan has rules attached, and draining your reserve leaves nothing for the costs that follow every move. This option is why disciplined buyers decide their walk-away gap before offer night, a point we make in our guide to bidding wars from the buyer's side: in the moment, every gap looks coverable.
Option 2: Ask the seller to renegotiate
On a conditional deal with a financing condition still open, a low appraisal is precisely what the condition exists for — your leverage is real and the conversation is straightforward. On a firm deal, you can still ask; the seller can refuse, and their math matters: if you default, they keep your deposit only as a starting point — a seller who resells for less can pursue the difference and their costs. Sellers facing a collapsing deal and a softer resale market often split the gap rather than restart. What conditions protect, and when, is covered in firm vs. conditional offers.
Option 3: Challenge the appraisal
Appraisals are opinions built from comparable sales, and occasionally they're built from the wrong ones — a stale sale, a non-comparable property, a missed feature. Through your mortgage broker or lender, you can submit better comparables and request a review or a second appraisal. It works sometimes, particularly where the first appraisal leaned on a single weak comp. It is not a negotiation tactic with a good base rate, and it costs time you may not have — start it in parallel with Option 1 or 2, not instead of them.
Option 4: Change lenders
A different lender orders a fresh appraisal, which may land differently — appraisers vary. The constraints are time (a full application and underwriting inside your closing window), cost (a second application, possibly a new rate), and the file notes: if your broker shops the deal sloppily, two appraisals on record with two values can harden the lower one into the answer. This is a broker-led decision; it's also the reason pre-approval quality matters — a lender that knows the file can move faster than a stranger.
What doesn't work
Asking the appraiser directly (they answer to the lender, not you). Inflating the stated price of included chattels to shift value around (lenders and appraisers see it instantly, and it poisons the file). And simply walking away from a firm deal assuming the deposit is the whole cost — it usually isn't, as Option 2 explains.
Prevention, for next time
The buyers who shrug off low appraisals share three habits: they bid from recent comparable sales rather than from the offer-night temperature; they keep a cash buffer beyond the down payment sized to a plausible gap; and on the most competitive homes, they ask their lender in advance how the property type appraises in that neighbourhood. Appraisers anchor on the same sold data you can see — bidding in line with it is the only true protection.
Next step
Shopping now, and want to bid with the appraisal in mind? Start from the sold-anchored side of the market: browse current listings with your lender's maximum — and your appraisal buffer — already decided.