Blog > What Happens If My Pre-Construction Condo Appraises Low? A Closing Guide for Markham Buyers
What Happens If My Pre-Construction Condo Appraises Low? A Closing Guide for Markham Buyers
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What happens if my pre construction condo appraises low?
If your pre-construction condo appraises below your purchase price, your lender will usually lend based on the lower appraised value, and you must cover the difference in cash on closing day. For example, on an $800,000 condo that appraises at $720,000, a buyer planning 20% down would need about $64,000 more. Your obligation to the builder does not change: the agreement still has to close at the full price. Options include adding cash, a family gift, a different lender, an assignment if your agreement allows it, or asking the builder for help. Walking away usually means losing the deposit, and Ontario courts have held buyers liable for further losses. Start planning six months or more before final closing.
Why Appraisals Are Coming In Low
Many Greater Toronto Area buyers signed pre-construction agreements in 2021 and 2022, when prices and expectations were higher. Those buildings are now finishing. Meanwhile, resale condo prices have softened, and buyers today can compare a new unit with many similar resale listings.
An appraiser values the unit based on what similar units are selling for now, not on the original price. Zoocasa, citing CMHC, reported in May 2026 that some Toronto pre-construction buyers who closed in 2024 faced losses of up to 6%. Results vary by building, unit size and location.
Michael John Lau, a REALTOR® with the Kaizen Real Estate Team, one of the most active real estate teams in Markham and York Region, helps pre-construction buyers review recent resale and assignment sales in their building or nearby buildings well before closing, so the appraisal does not come as a surprise.
How the Appraisal Gap Works
Lenders base the mortgage on the lower of the purchase price or the appraised value. Here is the example from above:
| Planned | After a low appraisal | |
|---|---|---|
| Purchase price | $800,000 | $800,000 |
| Value the lender uses | $800,000 | $720,000 |
| Mortgage at 80% | $640,000 | $576,000 |
| Cash needed (before closing costs) | $160,000 | $224,000 |
The numbers are an illustration only. Your lender, down payment and closing costs will change the result. Remember to add land transfer tax, legal fees and closing adjustments from the builder. If your unit has an interim occupancy period first, see the difference between occupancy and closing in Ontario.
Your Options Before Closing
1. Cover the gap
Savings, the sale of another asset or a gift from family can close the gap. Lenders will want to see where the money comes from, so organize documents early.
2. Try a different lender
Another lender may order a different appraisal or accept a different loan-to-value. Alternative and private lenders can sometimes help, but usually at higher rates and fees. A mortgage professional can compare options.
3. Sell by assignment before closing
If your agreement allows it, you may be able to assign the unit to another buyer before final closing. Builders often charge a fee and require approval, and tax rules apply to any profit. In a soft market, assignments may sell for less than the original price.
4. Ask the builder
Some builders offer extensions, credits or other help when many buyers in a building face the same problem. This is up to the builder, so ask early and get any change in writing through your lawyer.
5. Close and rent the unit
Closing and renting the unit can work if the rent and your budget cover the carrying costs. Review the new rental housing coming to Markham to understand the competition for tenants.
Closing on a pre-construction unit in the next year? Call Michael John Lau, REALTOR®, at (416) 700-0286 to review recent sales in your building and your options before the appraisal.
What Happens If You Do Not Close
Walking away is the most expensive option for most buyers. The builder can usually keep your deposit and resell the unit. If it resells for less, the builder may sue for the difference.
In Mattamy (Jock River) Ltd. v. Ishola, 2024 ONSC 6231, an Ontario court awarded a builder about $87,700 in damages after crediting the buyer’s $14,000 deposit, because the buyer failed to close and the home resold for less. As commentators have put it, the deposit is a floor, not a ceiling.
Every agreement is different. Speak to a real estate lawyer before you decide not to close.
A Six-Month Closing Plan
- Read your agreement with your lawyer: closing adjustments, assignment rules and deadlines.
- Check recent sales of similar units in your building and nearby buildings.
- Speak to your lender about the appraisal process and what happens if the value comes in low.
- Build a cash cushion for a possible shortfall and closing costs.
- Decide your plan: live in it, rent it or assign it.
Ultimately, the decision is yours. The goal is to make sure you have all the information early, while you still have choices.
What This Means for Markham Condo Buyers
Markham has many condo projects along Highway 7 and in Markham Centre. For buyers shopping today, the same conditions can work in your favour: resale condos give you a finished unit, a known price and an appraisal before you firm up. With the market favouring buyers in fall 2026, see whether Markham is a buyer’s market right now before choosing between new and resale.
Next Steps
- Markham condos: compare resale and new condo options.
- Investing in Markham real estate: plan rent, carrying costs and exit options.
- Get a closing review: a confidential look at your unit and timeline.
Frequently Asked Questions
What happens if my pre-construction condo appraises for less than I paid?
Your lender will usually lend based on the lower appraised value, so you must cover the difference in cash. You are still required to close at the full purchase price in your agreement.
How much extra cash do I need if my condo appraises low?
With 20% down, you typically need about 80% of the gap. For example, if an $800,000 unit appraises at $720,000, the extra cash needed is about $64,000 before closing costs.
Can I walk away from a pre-construction condo in Ontario?
You can refuse to close, but the builder can usually keep your deposit and sue for further losses if the unit resells for less. Speak to a real estate lawyer before making that decision.
Can I assign my pre-construction condo before closing?
Only if your agreement allows it. Builders often require approval and charge a fee, and tax may apply to any profit. Your lawyer can confirm the rules in your agreement.
Will the builder lower the price if the appraisal is low?
Builders are not required to change the price. Some offer extensions, credits or other help when many buyers face the same issue, so it is worth asking early.
When should I start planning for my pre-construction closing?
Start at least six months before the expected final closing. Review your agreement, check recent sales in your building, speak to your lender and build a cash cushion.
Work With Michael John Lau in Markham
Michael John Lau helps Markham pre-construction buyers prepare for closing well before the appraisal. That includes reviewing recent sales in the building, explaining options such as leasing or an assignment, and working alongside your lawyer and lender. The goal is to give you time and choices, not surprises.
📞 Contact Michael John Lau, REALTOR®
🌐 www.callmikelau.com
Closing on a pre-construction condo?
Michael John Lau reviews recent sales in your building and helps you plan for the appraisal, closing costs and next steps.
Michael John Lau, REALTOR® · Markham, Ontario · (416) 700-0286
Disclaimer. Michael John Lau is a licensed REALTOR® serving buyers and sellers in Markham, Ontario and the Greater Toronto Area. The appraisal example is an illustration only. Market context is from Zoocasa (27 May 2026, citing CMHC). The court decision is Mattamy (Jock River) Ltd. v. Ishola, 2024 ONSC 6231, as summarized in public legal commentary. Michael John Lau is not a lawyer, and this article is not legal, tax or financial advice. Speak to a real estate lawyer about your agreement, a lender about financing and an accountant about tax on any assignment.