Mortgage brokers operating in Canada’s alternative lending space need to understand a critical shift in how property appraisals work—and what’s driving recent market challenges, particularly in the GTA.
According to Appraisal Institute of Canada director Claudio Polito, many borrowers and brokers misunderstand appraisals as simply a property value assessment. In reality, appraisers tell a complete story that includes neighbourhood context, physical improvements, and market activity.
The stakes are particularly high in Toronto’s condo market, where values have dropped significantly since the 2021-2022 peak. Buyers who purchased preconstruction units years ago are now facing appraisal shortfalls that prevent them from securing mortgages at agreed-upon prices.
Polito emphasizes that brokers must prepare clients early by asking tough questions about unpermitted additions, basement apartments, and municipal approvals—issues that appraisers will inevitably discover. Managing expectations around declining property values is equally critical, especially for borrowers who bought at market highs.
The article also explores AI’s growing influence on valuations. While automated valuation models (AVMs) are increasingly used by lenders, Polito warns that algorithm-driven assessments may miss crucial details that human appraisers identify through physical inspection.
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