Blanket appraisals are one of the biggest issues in Canadian real estate right now, and almost nobody outside the industry is talking about them.
Pre-construction condos are closing at prices far above what they could sell for today. That leaves me asking two simple questions: how are lenders justifying these mortgages, and who gets stuck with the loss if the borrower can’t pay?
The Market Has Changed
For years, pre-construction condos were one of the easiest ways to make money in Toronto real estate. That’s not the market we’re in anymore.
A 2026 Bank of Canada analysis found that many new Toronto condos are now worth less than their presale purchase prices. Between 2015 and 2022, investors earned average gains of more than 40% from presale to completion. Today, the math simply doesn’t work.
A Nearly $400,000 Appraisal Gap at Vincent Park in Vaughan
Let me give you a real example from Vincent Park, a pre-construction condominium development in Vaughan, Ontario.
A buyer agreed to purchase a unit at Vincent Park for approximately $863,790. When the unit was ready to close, an independent appraisal came back at approximately $465,000.
That’s a gap of almost $400,000. The property lost close to half its value before the buyer ever had a chance to build equity.
To be clear, this isn’t about one building or one builder. Vincent Park is simply a clear example of what’s happening across the pre-construction market, where units are closing at values far below what buyers agreed to pay years ago.
Under normal lending rules, a gap like that should set off alarm bells, because the property is the lender’s security for the loan. Yet some buyers can still get financing based on values far above what today’s market supports. That’s where blanket appraisals come in.
What Is a Blanket Appraisal?
A blanket appraisal values many units in a condo development at once, instead of ordering a separate appraisal for each unit at closing. Often, the lender simply relies on the original purchase price or one broad estimate for the whole project.
I’m not saying blanket appraisals are wrong. They can speed up financing on large developments. The problem starts when that value is years old, or when one number is applied to units that are nothing alike.
A corner two-bedroom with a lake view and a one-bedroom facing the building next door are not the same property. As Deeded explains in its guide to blanket appraisals, one value applied across a building ignores the features that made certain units more expensive.
What Happens When the Appraisal Comes In Low?
Here’s what many buyers don’t realize: lenders base your mortgage on the appraised value, not on what you agreed to pay.
Go back to the Vincent Park unit. At 80% of $465,000, a lender would advance about $372,000 against an $864,000 purchase. That leaves nearly $492,000 the buyer has to cover to close, including deposits already paid.
Most people can’t do that. When they can’t, closings get delayed, disputes start, and buyers can lose their deposits.
OSFI Has Already Warned About Blanket Appraisal Risk
This isn’t just my opinion. Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), has already flagged it.
OSFI’s main concern is timing. A blanket appraisal done during pre-construction can be badly out of date by the time the mortgage closes. The regulator has made it clear that a valuation that doesn’t reflect current prices when the mortgage is advanced doesn’t meet its expectations.
The warnings have since gotten stronger. According to reporting on OSFI’s meetings with bank executives, the regulator cautioned that relying on blanket appraisals could push uninsured mortgages above 80% of a property’s market value, which could breach the Bank Act.
In my view, that’s the real issue. It’s not whether blanket appraisals should exist. It’s whether the value a lender relies on reflects what the property is actually worth on the day the lender advances the mortgage.
Canada’s Underwater Condo Problem
Being underwater means you owe more on your property than it’s worth.
Many investors bought pre-construction units expecting prices to rise and rent to cover their costs. Now, for a lot of owners, the mortgage, condo fees, taxes and insurance cost more than the rent coming in. Selling may mean bringing money to closing just to get out. Without that money, they have no way out.
When enough of these owners default, someone absorbs the losses. That could be the borrower, the lender, a mortgage insurer or several parties. Blanket appraisals may help buyers close, but they don’t change what the unit is worth on the resale market.
Let’s Keep This in Perspective
I’m not telling anyone to panic. According to OSFI, newly built condo purchases made up about 1.2 per cent of mortgage originations between 2022 and 2024, and about 1.4 per cent of outstanding mortgages as of February 2025.
This isn’t a sign that Canada’s banking system is about to collapse. But for the buyers caught in these gaps, the impact is very real.
How Pre-Construction Buyers Can Protect Themselves
If you’re closing on a pre-construction condo, here’s what I’d tell you to do.
First, ask your lender early whether it’s using a blanket appraisal or an individual appraisal at closing. Second, get your own independent appraisal well before closing so you know if there’s a gap. Next, read your purchase agreement carefully and understand what happens if you can’t close. Finally, talk to a real estate lawyer and a licensed mortgage professional well before closing day, not on it.
Blanket Appraisals: Frequently Asked Questions
Are blanket appraisals legal?
Yes. They’re a common and legal part of pre-construction financing. However, OSFI expects federally regulated lenders to make sure valuations reflect current prices when the mortgage is advanced.
Can I get my own appraisal on a pre-construction condo?
Yes, and I recommend it. Doing it before closing is one of the best ways to spot a problem early.
What happens if my appraisal is lower than my purchase price?
Your lender will usually base the mortgage on the lower value, and you’ll have to cover the difference. If you can’t close, you could lose your deposit and may face further claims under your purchase agreement.
So Who Is Left Holding the Bag?
If buyers who purchased near the peak can’t carry properties worth far less than their mortgages, someone is going to absorb those losses. That could be the homeowner, the lender, the mortgage insurer or some combination of them.
We don’t need to wait for a wave of defaults before we start asking these questions. At the end of the day, the market decides what a property is worth, not a blanket appraisal from years ago. And when an $864,000 condo appraises for $465,000, somebody carries the difference.
Closing on a pre-construction condo and worried about your appraisal? Contact me and let’s talk through your options.