What Is a Blanket Appraisal?
Pre-construction purchases can be a smart move whether you're investing or buying your first place — but they come with risks you need to understand before you sign anything.
One practice that's causing trouble, especially in markets like Toronto, is the blanket appraisal.
A blanket appraisal is when a lender assigns the same value to a whole group of units in a development instead of evaluating each one individually. It's usually based on the original purchase price or a general market estimate, and it's set up between the lender and the builder to speed up mortgage approvals close to completion.
Sounds efficient. In reality, it can create serious financing problems for you if the numbers don't line up.
Here's How It Can Go Sideways
Imagine 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 — no matter if it's a lake-view corner unit or a ground-floor suite facing a wall.
Buyer A paid $799,000. They feel like they got a deal.
Buyer E paid $900,000. Now they're short $50,000 in financing.
Your lender doesn't fund 80% of what you paid. They fund 80% of what they say it's worth.
Why This Is a Problem Right Now
With rising interest rates and market shifts in many urban centres, blanket appraisals can put you in a tough spot:
Mortgage shortfalls: If the blanket appraisal comes in lower than your purchase price, you have to cover the difference — often tens of thousands of dollars out of pocket.
No consideration for unit differences: A premium layout or view gets treated the same as a less desirable unit.
Last-minute surprises: You often don't find out until just before closing. That can mean delayed closings, renegotiated financing, or even the risk of losing your deposit.
A Real Example
A high-profile case 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.
How to Protect Yourself
You don't need to become an appraiser, but you do need to anticipate this risk before you're scrambling for cash at closing. Here's what to do:
Understand that your mortgage is based on appraised value, not purchase price — especially if closing is a year or more out.
If you're uncomfortable with the blanket approach, get your own appraisal to better understand what your unit is actually worth.
In highly competitive or overheated pre-construction markets, remember that conditions at the time you buy may not match what things look like at closing.
Work with a mortgage broker who can prep multiple lender options or help with a bridge strategy if surprises arise. Having options lined up ahead of time can save the deal.
Your Questions Answered
Are blanket appraisals legal? Yes. They're common in pre-construction, but they don't always reflect what your individual unit is worth.
Can you request your own appraisal? Absolutely. An independent appraisal is one of the best ways to avoid surprises.
What if the appraisal comes in low? You have to make up the shortfall with cash — or risk losing your deposit if you can't close.
Should you avoid pre-construction altogether? Not necessarily. But you need to go in with open eyes, do your homework, and work with professionals who know how to navigate this stuff.
What to Do Next
If you're considering a pre-construction purchase or you're nearing completion on one, talk to a mortgage broker now — not two weeks before closing. The earlier you understand your financing position, the more options you have if the appraisal doesn't go your way.
