Mortgage & Wealth Strategies

Blanket Appraisals In Real Estate

July 14, 2025 | Posted by: Matt Broom-Hall

Pre-construction purchases have long been a go-to strategy for both investors and end-users—but they’re not without risk. One practice that’s coming under increased scrutiny, especially in markets like Toronto, is the use of blanket appraisals.

If you're working with clients considering new builds or nearing completion on a pre-construction purchase, this is one term you’ll want to keep on your radar.

What Is a Blanket Appraisal?

A blanket appraisal is a valuation method where a lender assigns the same appraised value to a group of units in a development—rather than evaluating each one individually.

It’s often based on the original purchase price or a general market estimate and is arranged between the lender and builder to streamline mortgage approvals close to completion.

In theory, it saves time. In practice? It can create serious financing issues for certain buyers.

A Quick Example:

Let’s say a developer is closing on a 20-storey condo tower. Five buyers locked in their purchases two years ago. Just before possession, a lender assigns a blanket value of $850,000 to every unit—regardless of whether it’s a lake-view corner unit or a ground-floor suite facing a wall.

• Buyer A paid $799,000 → Feels like they scored

• Buyer E paid $900,000 → Now short $50,000 in financing

The lender won’t fund 80% of the purchase price—they fund 80% of the appraised value.

Why It’s a Problem (Especially Now)

With rising interest rates and market adjustments in many urban centres, blanket appraisals can put buyers in a bind:

• Mortgage Shortfalls: If the blanket appraisal is lower than the purchase price, the buyer has to cover the difference—often tens of thousands of dollars out of pocket.

• No Consideration for Unit Differences: A premium layout or view is treated the same as a less desirable unit.

• Last-Minute Surprises: Buyers often don’t realize this until just before closing. That can mean delayed closings, renegotiated financing, or even the risk of losing deposits.

Real-World Impact

A high-profile example was recently featured in the Toronto Realty Blog: a buyer agreed to purchase a condo for $2.195M, but when the project closed, the appraisal came in at just $1.6M. That’s a 27% drop—and a massive financing gap.

The lender based the mortgage on the lower value, and the buyer had to come up with the difference or risk defaulting.

What Realtors Can Do:

You don’t have to be an appraiser—but you do need to help your clients anticipate risks before they’re stuck scrambling for solutions. Here's how:

Educate Early

Make sure your clients understand that their mortgage is based on appraised value, not purchase price—especially if closing is a year or more out.

Encourage Independent Appraisals

If your client is uncomfortable with the blanket approach, they can (and should) seek their own appraisal to better understand their unit’s true value.

Flag the Risks in Hot Markets

In highly competitive or overheated pre-construction environments, remind clients that market conditions at time of purchase may not match those at closing.

Connect Them With Trusted Mortgage Pros

Having a mortgage broker who can prep multiple lender options—or help with a bridge strategy if needed—can save the deal when surprises arise.

FAQ

Q: Are blanket appraisals legal?
Yes. They’re common in pre-construction, but they don’t always reflect individual unit value.

Q: Can buyers request their own appraisal?
Absolutely. An independent appraisal is one of the best ways to avoid surprises.

Q: What if the appraisal comes in low?
The buyer has to make up the shortfall with cash—or risk losing their deposit if they can’t close.

Q: Should I avoid pre-construction altogether?
Not necessarily. But Realtors and buyers need to approach it with open eyes, due diligence, and the right professionals by their side.

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