Why Lenders Reject Appraisals and How to Avoid It

Imagine this: you’ve paid for a home appraisal, the report is complete, the value looks good—and then your lender rejects it. Suddenly, your financing is delayed, your mortgage approval stalls, or your deal risks falling apart entirely.

Unfortunately, appraisal rejections are more common than most homeowners and investors realize. And they’re often avoidable.

At Cade Appraisals Inc., we’ve helped countless clients fix, revise, or prevent lender rejections before they become a problem. This blog breaks down the top reasons appraisals are rejected and offers simple strategies to avoid them—whether you’re buying, refinancing, investing, or applying for a second mortgage.

Why Appraisals Matter to Lenders

Before diving into the reasons for rejection, it’s important to understand how lenders use appraisals:

• Collateral Risk: The appraisal helps lenders determine the market value of the property backing the loan. If you default, they need to know what the home is worth for recovery purposes.

• Loan-to-Value (LTV): Lenders calculate risk based on the value provided in the report. If the appraisal comes in too low, you may not qualify for the full loan amount.

• Compliance: Lenders must adhere to regulations (including OSFI and insurer guidelines), meaning reports must meet strict format, content, and quality standards.

If something’s off—even slightly—the lender can reject the appraisal outright.

1. Wrong Client or Borrower Name

One of the most common administrative errors is listing the wrong client name or borrower.

Why It Matters:

• The appraiser is bound to confidentiality and liability limitations.

• Lenders require the report to be addressed to them directly or include them in the "intended user" section.

• If the borrower’s name is missing or incorrect, it could violate disclosure requirements or fraud prevention policies.

  
  

How to Avoid It:

• Ensure the appraiser has the full legal name of the borrower(s).

• Confirm the correct lender name exactly as they want it to appear (e.g., “First National Financial LP” vs. “First National”).

• Ask your mortgage broker or bank rep to provide a written instruction for the appraiser to avoid ambiguity.

2. The Appraiser Isn’t on the Lender’s Approved List

Most large financial institutions—and mortgage insurers like CMHC, Sagen, and Canada Guaranty—use approved appraiser panels.

Why It Matters:

• Appraisals from non-approved appraisers are typically rejected, even if the report is technically correct.

• Lenders want to ensure appraisers meet their internal quality standards and credentials.

• This protects lenders against fraud and ensures consistent methodology.

  
  

How to Avoid It:

• Ask your broker or lender: “Do you have a preferred or approved appraiser list?”

• Work only with recognized, designated appraisers (CRA or AACI) with lender experience.

• Use a firm like Cade Appraisals Inc., which is on the panel for major Canadian lenders and has extensive residential and investment property experience.

3. Incorrect or Unsupported Assumptions

Appraisal reports must be based on facts and observable data—not assumptions or speculation.

Examples of Unsupported Assumptions:

• “The property is assumed to be free of contamination.”

• “The basement is assumed to be legally permitted.”

• “It is assumed the renovations will be completed within 30 days.”

Lenders may reject reports if:

• The appraiser makes too many assumptions without verification.

• Critical information is missing (e.g., permits, legal use, property access).

• The assumption could significantly impact value or marketability.

  
  

How to Avoid It:

• Provide all documents requested: permits, surveys, legal use confirmations.

• Be transparent about unfinished work or known issues.

• Ask your appraiser to verify rather than assume whenever possible.

4. The Wrong Appraisal Form Was Used

In Canada, the form of the appraisal report matters—especially in lending scenarios.

Common Form Types:

• Full Residential Form (AIC) – required for most institutional lenders.

• Short Narrative or Desktop Reports – may be acceptable for private lenders but often not for banks.

• Drive-by Appraisals – used in low-risk or refinance scenarios only.

If the wrong form is used (e.g., a desktop for a high-ratio insured loan), the lender may reject it.

How to Avoid It:

• Tell the appraiser exactly what the appraisal is for (e.g., CMHC-backed refinance, HELOC, private second mortgage).

• Let them know if the lender has specific form or content requirements.

• Choose an appraiser experienced in working with lenders and familiar with required formats.

5. The Report Is Outdated

Most lenders require that appraisal reports are recent—usually within 90 days of the effective date.

Rejection Triggers:

• Report older than 3 months.

• Value based on comps that are now stale.

• A major market change (interest rate hike, local event) occurred since the effective date.

  
  

How to Avoid It:

• Order your appraisal close to when your mortgage application is being submitted.

• Ask the appraiser if they’ll update the report if delays occur.

• Keep communication open with your broker or lender to align timelines.

6. Major Omissions in the Report

Sometimes, appraisals get rejected due to missing data or incomplete sections:

• Photos (e.g., missing bathroom or basement shots)

• Sketches or floorplans

• Comparable sales analysis

• Market commentary

• Signature or license number

• Exposure and marketing time estimates

Lenders rely on this information for risk analysis. Missing it can lead to outright rejection or the need for a revised report.

How to Avoid It:

• Work with a professional appraisal firm that double-checks reports before submission.

• Ask for a copy of the report before it’s sent to the lender, if you're the client.

• If the report is for financing, make sure the appraiser includes everything your lender requires (many have specific photo and addenda rules).

7. Inconsistent or Weak Market Data

Even if a report is well-written, it can be rejected if:

• Comparables are too far away.

• The market commentary is vague or contradictory.

• Adjustments are poorly supported.

• The valuation appears inflated or overly conservative.

Lenders rely on data-backed conclusions, not guesswork. If they sense the report lacks support, they may order a second appraisal or decline the application.

How to Avoid It:

• Choose appraisers with local market expertise—not generic or national firms.

• Provide access to recent comparable sales (especially in rural or low-activity markets).

• If your home is unique, provide documentation or photos that help justify its value.

8. The Value Is Too High (or Too Low)

Believe it or not, an appraisal that’s too high can also be rejected.

Lenders may question inflated values when:

• The subject is superior to all comps without adequate adjustment.

• The appraiser gives “full credit” to upgrades that don’t impact value.

• The property value is inconsistent with neighbourhood norms.

Likewise, a low appraisal may cause:

• Rejected financing

• Renegotiated purchase terms

• A request for a second opinion

  
  

How to Avoid It:

• Provide a realistic picture of the property’s condition and market position.

• Share details of upgrades and costs with the appraiser (but don’t expect dollar-for-dollar returns).

• Avoid pressuring the appraiser for a “target value”—they must remain objective and independent.

9. Legal Issues or Title Problems

Sometimes, lenders reject appraisals due to concerns outside the appraiser’s control, such as:

• Title issues (e.g., liens, merged lots, easements)

• Illegal use (e.g., a duplex operating as a triplex)

• Encroachments or right-of-way disputes

Appraisers must disclose any red flags they observe, even if they’re not legally trained.

How to Avoid It:

• Obtain a copy of your parcel register and survey in advance.

• Ensure the current use aligns with zoning.

• Resolve known legal issues (lot mergers, easements) before applying for financing.

Conclusion: Avoiding Appraisal Rejections Is Easier Than You Think

Most appraisal rejections are preventable with better communication, preparation, and professional execution.

To recap, here’s how you can avoid costly delays:

✅ Make sure the correct client and borrower names are used

✅ Confirm your appraiser is on your lender’s approved list

✅ Provide permits, documentation, and access

✅ Communicate the purpose clearly (purchase, refinance, HELOC, etc.)

✅ Avoid unrealistic expectations or unsupported assumptions

✅ Use a local, experienced, and designated appraiser

At Cade Appraisals Inc., we work closely with homeowners, mortgage brokers, and lenders across Ontario to ensure appraisal reports are compliant, complete, and delivered on time.

Need an appraisal that gets approved the first time?Contact Cade Appraisals Inc. for CUSPAP-compliant, lender-friendly appraisal services across Niagara, Hamilton, and beyond.