Real Estate

Mortgage appraisal value on hot market

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  • Feb 23rd, 2021 11:12 am
[OP]
Newbie
Aug 18, 2018
36 posts
27 upvotes

Mortgage appraisal value on hot market

Hi all,

With hot market like right now the market price can increase within a month.
How this will impact the appraisal value.
E.g a 3 bed home sold price:
Nov 2020: 650K
Dec 2020: 700K
Jan 2021: 750K
And now in Feb it can be 800K, since only the purchase on Nov-Dec ones are closed will the appraisal still around 650K?

With the closing date 2-3 months, is it possible to get the appraisal later on March rather Feb? to get better appraisal price.. To avoid the need higher down payment.

Thanks.
36 replies
Deal Addict
Mar 2, 2017
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Toronto
jimmod wrote: Hi all,

With hot market like right now the market price can increase within a month.
How this will impact the appraisal value.
E.g a 3 bed home sold price:
Nov 2020: 650K
Dec 2020: 700K
Jan 2021: 750K
And now in Feb it can be 800K, since only the purchase on Nov-Dec ones are closed will the appraisal still around 650K?

With the closing date 2-3 months, is it possible to get the appraisal later on March rather Feb? to get better appraisal price.. To avoid the need higher down payment.

Thanks.
This is the concern I had early on for some clients, pretty much anywhere in the GTA has been appraising at these insane month over month increases, even places like Durham. Seems to be low risk of not appraising at this point.

Would like to hear what the rfd mortgage people are seeing.
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Mar 30, 2010
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RichmondCA wrote: This is the concern I had early on for some clients, pretty much anywhere in the GTA has been appraising at these insane month over month increases, even places like Durham. Seems to be low risk of not appraising at this point.

Would like to hear what the rfd mortgage people are seeing.
@RichmondCA I didn't get what you meant by that.

Are you saying that appraisal values are also going up?

Also what do you mean by "low risk of not appraising"?
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Mar 2, 2017
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Lenders are appraising properties even if they've had a 30% run up in the last 6 months.

Low risk of not appraising: See above, the lender will appraise at the inflated price and therefore give you the loan. The risk of not getting appraised at inflated price means you need to come up with the cash to bridge the difference between mortgage available and price of house - this is how deals fall apart, but this hasn't been a risk so far while many (myself included) thought it would be.
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Jul 3, 2007
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jimmod wrote: Hi all,

With hot market like right now the market price can increase within a month.
How this will impact the appraisal value.
E.g a 3 bed home sold price:
Nov 2020: 650K
Dec 2020: 700K
Jan 2021: 750K
And now in Feb it can be 800K, since only the purchase on Nov-Dec ones are closed will the appraisal still around 650K?

With the closing date 2-3 months, is it possible to get the appraisal later on March rather Feb? to get better appraisal price.. To avoid the need higher down payment.

Thanks.
no because lenders mortgage the LOWER of the purchase price or appraisal....it wont matter if it appraises higher
[OP]
Newbie
Aug 18, 2018
36 posts
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joepipe wrote: no because lenders mortgage the LOWER of the purchase price or appraisal....it wont matter if it appraises higher
The problem is when the appraisal is a lot lower than the market price and the buyer has small down payment.
E.g 800K purchase and appraisal value turn out only 650K with the buyer only has 100K down payment.
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Mar 30, 2010
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jimmod wrote: The problem is when the appraisal is a lot lower than the market price and the buyer has small down payment.
E.g 800K purchase and appraisal value turn out only 650K with the buyer only has 100K down payment.
I hope you're working with a broker. They can help you with things like this.

Lenders sometimes do drive by appraisals that come in lower. You need to ask them to do a full appraisal which may be higher.

Lastly if that doesn't work, my advice is to keep shopping around. I know someone who had issues getting approved because the appraisal came in low, so they switched to a different lender that somehow waived the appraisal condition.
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Oct 27, 2012
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I question whether banks are really even doing appraisals! I know for mine (a condo), they said the appraisal was done, but I never got a call or anything to set up an appointment for the appraisal, I just asked about the approval conditions and when the appraisal would be done and they said it was already completed.
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ozzie16 wrote: I question whether banks are really even doing appraisals! I know for mine (a condo), they said the appraisal was done, but I never got a call or anything to set up an appointment for the appraisal, I just asked about the approval conditions and when the appraisal would be done and they said it was already completed.
Yeah they probably did an auto appraisal or were advised by insurance if your down was less than 20%.

This is what my broker told me.
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Dec 12, 2010
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ozzie16 wrote: I question whether banks are really even doing appraisals! I know for mine (a condo), they said the appraisal was done, but I never got a call or anything to set up an appointment for the appraisal, I just asked about the approval conditions and when the appraisal would be done and they said it was already completed.
I had one done last week and because of COVID restrictions, it was all done with photos taken of each room including some of the outside of the home. It was kind of annoying as I felt I was doing the work for them, but at the same time I now have pictures for insurance purposes!
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Also while we're on the topic of valuation, just FYI, housesigma's estimations are inaccurate.

I know someone that had their detached house in Mississauga recently appraised at 1.2m while housesigma estimated it at 200k less.
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Sep 2, 2008
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RichmondCA wrote: This is the concern I had early on for some clients, pretty much anywhere in the GTA has been appraising at these insane month over month increases, even places like Durham. Seems to be low risk of not appraising at this point.

Would like to hear what the rfd mortgage people are seeing.
Just heard from my broker my purchase came in appraised low! Asked my broker if I can see the appraisal, if it's a full appraisal, or if it can be appealed somehow.
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Damn that sucks, this is the second one I heard of this week that came in short, I know of one that came in short in the east end. Time to come up with the cash.
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I watched a video a couple of days ago of a session with 2 Realtors, a Mortgage Agent and a Licensed Appraiser in Ottawa. The Licensed Appraiser made the comment that about 50% of her appraisals are coming back low - some a little less some a little more.
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During what time frame?
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Nov 27, 2020
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slowtyper wrote: Just heard from my broker my purchase came in appraised low! Asked my broker if I can see the appraisal, if it's a full appraisal, or if it can be appealed somehow.
I’m sorry, this must be very stressful. My friends bought in Orillia and their appraisal came in 190K short. They too are asking for another appraisal but the lender has said no, they only use their own chosen appraisers.
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Apr 29, 2010
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dc200 wrote: Also while we're on the topic of valuation, just FYI, housesigma's estimations are inaccurate.

I know someone that had their detached house in Mississauga recently appraised at 1.2m while housesigma estimated it at 200k less.
HouseSigmas estimate is bad. Its heavily driven by listing price. I saw a 2 car garage house with regular lot list for $1. The sigma estimate was like $80000

Also I've seen a houses estimate price change by almost 200k when it got relisted for a higher amount.
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Serasera wrote: I’m sorry, this must be very stressful. My friends bought in Orillia and their appraisal came in 190K short. They too are asking for another appraisal but the lender has said no, they only use their own chosen appraisers.
Was there any appeal process? I took a look at the report and I do have issues with the comparables chosen but maybe I'm biased. Because of lack of comparables they just chose the three closest 3 story townhouses but doesn't take into consideration my units much better location and school district. Two of them are also much smaller at 844sqft vs my 1122sqft and so the appraiser added an extra $42000 to the values to make up for the sqft. That itself seems way too low.

I've asked my realtor to assist finding more comparables and will try to write up a well worded appeal. Any tips would be appreciated as well as a way to quantify a better location and better school district.
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Nov 27, 2020
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slowtyper wrote: Was there any appeal process? I took a look at the report and I do have issues with the comparables chosen but maybe I'm biased. Because of lack of comparables they just chose the three closest 3 story townhouses but doesn't take into consideration my units much better location and school district. Two of them are also much smaller at 844sqft vs my 1122sqft and so the appraiser added an extra $42000 to the values to make up for the sqft. That itself seems way too low.

I've asked my realtor to assist finding more comparables and will try to write up a well worded appeal. Any tips would be appreciated as well as a way to quantify a better location and better school district.
I’ll find out what they are doing and I will post then. This only happened Wednesday so I don’t know if they’ve found a solution yet. I only know their lender wasn’t going to accept a different appraiser.
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Mar 30, 2010
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slowtyper wrote: Was there any appeal process? I took a look at the report and I do have issues with the comparables chosen but maybe I'm biased. Because of lack of comparables they just chose the three closest 3 story townhouses but doesn't take into consideration my units much better location and school district. Two of them are also much smaller at 844sqft vs my 1122sqft and so the appraiser added an extra $42000 to the values to make up for the sqft. That itself seems way too low.

I've asked my realtor to assist finding more comparables and will try to write up a well worded appeal. Any tips would be appreciated as well as a way to quantify a better location and better school district.
I'm going to echo what I said earlier and advise you to keep shopping around with other lenders.

Is that an option at this point or are you too close to the closing date?

Also is your down under 20%? The reason I ask is because if you're getting mortgage insurance, it's usually the insurer that advises the lender when it comes to appraisals. There are only three mortgage insurers in Canada AFAIK.

Your broker should know better though.
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