What Happens If Your Presale Doesn’t Appraise at Closing?
Buying a presale home in North Vancouver or West Vancouver often means committing to a price years before the building is complete. In many cases, that works in a buyer’s favour. But as market conditions shift, some buyers are now approaching completion only to discover that their property appraises for less than what they originally agreed to pay.
If you’re in that situation, it’s important to understand exactly what it means — and what your options are.
Disclaimer: This article is for general informational purposes only and does not constitute legal, financial, or professional advice. Buyers should seek independent legal or professional advice specific to their situation.
What Is an Appraisal Shortfall?
When you secure a mortgage, the lender will order an appraisal to determine the current market value of the property. This happens shortly before closing.
The key point:
The lender will base your mortgage on the lower of the purchase price or the appraised value.
For example:
- Purchase price: $1,000,000
- Appraised value: $900,000
If your lender is offering an 80% loan-to-value mortgage, they will lend 80% of $900,000 — not $1,000,000.
That leaves a gap.
Why Does This Happen?
Appraisal shortfalls have the potential to become more common across North Vancouver and West Vancouver for a few reasons:
- Prices have flattened or adjusted from peak levels
- Some presales were purchased at premium pricing during stronger markets
- New construction can carry a premium compared to resale homes
- Certain unit types may not align with today’s buyer demand
In short, the value today may not match expectations from when the contract was signed.
What Are You Required to Do?
This is the most important takeaway:
You are still contractually obligated to complete the purchase at the agreed price.
If the appraisal comes in low, the difference is your responsibility to cover.
In practical terms, that usually means increasing your down payment to bridge the gap between what the bank will lend and the purchase price.
What Are Your Options?
While there’s no simple workaround, there are a few strategies buyers in the North Shore market can explore:
1. Bring Additional Funds
This is the most common solution. Buyers increase their down payment to make up the shortfall and proceed with closing.
2. Try Another Lender
Different lenders may use different appraisers, and valuations can vary. Working with a mortgage broker can help you explore alternative financing options.
3. Renegotiate with the Developer
This is not guaranteed, but in softer markets — especially if a developer has remaining inventory — there may be some flexibility.
4. Assignment Sale (If Permitted)
If your contract allows, you may be able to sell your presale agreement before closing. This can help avoid completing on the property, but may involve selling at a loss.
No Easy Exits
It’s important to be clear:
A low appraisal does not void your contract.
Walking away can mean losing your deposit and potentially facing legal consequences.
Planning Ahead Matters
For buyers approaching completion in North or West Vancouver, the best approach is to be proactive:
- Speak with a mortgage professional early
- Understand current market values in your building
- Explore financing options before closing
- Have a contingency plan
Final Thoughts
Appraisal shortfalls can be stressful, but they’re manageable with the right preparation. As the North Shore market adjusts, situations like this are becoming more common — particularly for buyers who purchased presales several years ago.
If you’re nearing completion and want a clear understanding of your options, we’re here to help you navigate the process with local insight and practical guidance.