How Lenders Actually Use Your Appraisal Report Behind the Scenes

Most homeowners think the appraisal is just a quick “thumbs up or thumbs down” on value.

An appraiser visits the property, takes photos, fills out a report, sends it to the bank… and then mystery. Was it good? Bad? Did anyone really read all those comments?

Behind the scenes, your appraisal report is actually one of the most important pieces of your mortgage file. It affects how much you can borrow, which mortgage products you qualify for, and in some cases whether your deal closes at all.

As an appraisal firm working with lenders across Niagara, Hamilton, and the surrounding area, we see how this process works from the inside. Here’s a plain-English look at how lenders actually use your appraisal report after it’s submitted.

1. What an appraisal really is (from a lender’s point of view)

To a borrower, an appraisal might feel like a test of your home’s “worth.”

To a lender, it’s primarily a risk tool.

The appraiser’s job is to provide an independent, unbiased estimate of market value as of a specific date, based on recent comparable sales and market data. The lender uses that value to answer questions like:

• If this borrower stopped paying, could we resell the property and recover the loan?

• Is the purchase price realistic for this neighbourhood?

• Does the property itself create extra risk (condition, location, legal use, etc.)?

So the appraisal is not just about number-picking. It’s about whether the property makes sense as security for the loan.

2. Who at the lender actually reads your appraisal?

After your appraiser uploads the report to the lender or appraisal management company (AMC), it usually passes through several sets of eyes:

1. Automated risk tools Many lenders run appraisals through automated systems that check:

   • Are the comparables recent and nearby?

   • Is the appraised value in line with local sale prices?

   • Are there any red flags (short exposure time, declining market, unusual conditions)?

2. A human underwriter or risk analyst This person is responsible for your overall file. They look at:

   • Purchase price vs. appraised value

   • Loan-to-value ratio (LTV)

   • Property type and condition

   • Any special comments or concerns raised by the appraiser

3. Mortgage insurer (for high-ratio loans)If your down payment is under 20% and the mortgage is insured (e.g., CMHC, Sagen, or Canada Guaranty), the insurer may review the appraisal as well and apply their own risk guidelines.

4. Quality control / audit staff (random or targeted)Some files are pulled for extra review to make sure the appraisal meets internal policies and industry standards.

You may never hear about these internal checks—but they’re happening.

3. Step-by-step: what happens to your appraisal once it’s submitted

Let’s walk through a typical flow for a purchase or refinance in Ontario.

Step 1: The lender orders the appraisal

The lender or broker typically orders the appraisal through:

• An approved appraiser list (like Cade Appraisals), or

• An Appraisal Management Company (AMC) that assigns the file to a qualified appraiser.

The order includes details such as:

• Borrower name

• Property address

• Purpose of the appraisal (purchase, refinance, equity take-out, divorce, estate, etc.)

• Target closing date

Step 2: The appraiser inspects and completes the report

The appraiser inspects the property (or completes a desktop/drive-by assignment), researches comparable sales, analyzes the market and prepares a report that includes:

• A final estimated market value

• Photos and descriptions of the subject and comparables

• Market and neighbourhood commentary

• Zoning and land use info

• Any extraordinary assumptions or limitations

• Comments on condition, quality, and any issues that may affect marketability

Step 3: Initial automated review

When the report hits the lender’s or AMC’s system, it’s often run through automated checks, looking for:

• Missing data or required fields

• Inconsistent information (e.g., different lot sizes in two sections)

• Values that don’t line up with known sales trends

If something doesn’t fit, the system may flag it for the underwriter to look at more closely or ask the appraiser for clarification.

Step 4: Underwriter review – does the value support the deal?

The underwriter then looks at the relationship between:

• Purchase price / requested loan amount, and

• Appraised value

Some common scenarios:

• Appraised value ≥ purchase price Great news. The lender usually proceeds, using the lower of the two (purchase price vs. appraised value) to calculate the loan-to-value ratio.

• Appraised value slightly below purchase price This is where it gets interesting. The lender may:

  • Ask you to increase your down payment

  • Reduce the loan amount

  • Re-examine the rest of the file to see if the risk still fits their guidelines

• Appraised value significantly below purchase price The lender might:

  • Decline the file as submitted

  • Ask the appraiser to confirm whether there were any higher, truly comparable sales

  • Suggest you and the seller renegotiate the price

Step 5: Property risk assessment (beyond just the number)

Underwriters also read the comments carefully. Even if the value looks fine, they’re scanning the report for risk clues, such as:

• Location issues

  • Next to heavy industry, hydro corridor, major highway, rail line

  • Floodplain, erosion risk, unstable slopes

• Condition issues

  • Gutted or under major renovation

  • Structural concerns, obvious settlement or moisture issues

  • Major systems at or beyond typical life expectancy

• Legal and zoning issues

  • Non-conforming uses

  • Unpermitted additions

  • Illegal second units or short-term rentals that don’t meet municipal rules

• Market concerns

  • Oversupply of similar homes

  • Declining or very soft market segment

  • “Limited market” properties (unique, very rural, or highly specialized)

If the appraiser has noted any of these, the lender may adjust the type of mortgage, ask for more documentation, or—occasionally—decline the file.

Step 6: Conditions and “subject-to” requirements

Sometimes the appraisal is accepted with conditions. For example:

• “Subject to completion of repairs noted” (e.g., missing handrails, damaged shingles, unsafe wiring)

• “Subject to confirmation of permits/approvals for basement apartment”

• “Subject to completion as per plans and specifications” for new construction or major renovations

In those cases, the lender might require a follow-up inspection (sometimes called a progress inspection or re-inspection) once the work is done.

Step 7: Final sign-off and funding

Once the underwriter is satisfied that:

• The property value is supported

• The condition of the property is acceptable

• Any conditions have been met

…the appraisal is approved as part of your overall mortgage file. At that point, the lender can move toward final approval and funding, assuming income, credit, and other criteria are also satisfied.

4. Why a lender might not “accept” an appraisal

Every appraiser has had this question from a confused borrower or Realtor:

“Why won’t the bank use the appraisal we already paid for?!”

There are a few common reasons:

1. The appraiser isn’t on their approved list Many lenders only accept reports from appraisers who meet specific qualifications, insurance levels, and panel standards.

2. The report was ordered by someone else for another purpose For example, a private appraisal for a divorce or estate file may not meet the lender’s format and scope requirements for mortgage financing.

3. The report is too old Markets change. Some lenders have strict limits (e.g., 60–90 days) after which an update or completely new appraisal is required.

4. The property or file is considered high-risk If the property is very unusual, in a remote location, or has serious condition issues, a lender may decide it falls outside their risk appetite—no matter what the value is.

5. Data or compliance issues If the report is incomplete, missing required photos, or not compliant with industry standards, the lender may request revisions—or a second opinion from another appraiser.

5. How the appraisal affects your loan-to-value ratio (LTV)

One of the most practical ways lenders use the appraisal is to calculate your loan-to-value ratio:

LTV = Loan Amount ÷ Lender’s Value

And the lender’s value is usually the lower of:

• purchase price, and

• appraised value.

Example:

• Purchase price: $700,000

• Appraised value: $680,000

• Desired loan: $560,000

LTV is calculated as:$560,000 ÷ $680,000 = 82.35% LTV (not 80% of $700,000)

That can change:

• Whether you need mortgage insurance

• The interest rate or product you qualify for

• How large your down payment needs to be

6. What borrowers and Realtors can do to avoid surprises

You can’t (and shouldn’t) “control” the appraiser—but you can help make sure the lender sees a clear, accurate picture of the property.

Here are a few tips:

1. Be upfront about anything unusual If there’s a basement unit, recent major renovation, or special easement, have documentation ready: permits, engineer’s reports, survey snippets, etc.

2. Have a simple list of upgrades A one-page summary of recent improvements (with approximate dates and costs) helps the appraiser comment clearly, which helps the underwriter justify the value.

3. Make the property reasonably accessible and presentable Appraisers are not judging your housekeeping—but they are noting overall condition and whether they can see key areas (electrical panel, furnace, basement, etc.).

4. Use local, experienced appraisers A firm that knows the Niagara & Hamilton markets understands local nuances—like how being near the QEW vs. a quiet crescent, or being in a certain school catchment, can impact value.

5. Consider a pre-listing or pre-refinance appraisal

6. For complex or unique properties, getting an independent opinion before you list or sign a purchase agreement can prevent last-minute financing problems.

7. The bottom line: the appraisal is your lender’s safety net

To you, the appraisal might feel like just another item on the mortgage checklist.

To your lender, it’s a crucial safety net that:

• Confirms the property is suitable collateral

• Helps set the right loan amount and product

• Highlights any risks tied to location, condition, or legal use

• Protects both the bank and you from over-borrowing on a weak asset

When the appraisal is done properly—by an experienced, local, independent appraiser—it makes the rest of the lending process smoother, faster, and more predictable.

Need an appraisal for a mortgage in Niagara or Hamilton?

If you’re buying, refinancing, or changing lenders and want to avoid surprises at the financing stage, a well-supported, lender-ready appraisal can make all the difference.

Cade Appraisals regularly completes reports for:

• Conventional and insured mortgages

• Refinances and equity take-outs

• New construction and progress inspections

• Complex, rural, and unique properties

Serving Niagara, Hamilton, and surrounding communities.

👉 Have questions about how a lender will view your specific property?Contact us today to discuss your appraisal needs or request a quote.