Many buyers are now facing the painful reality that their pre-construction condo purchases are worth significantly less than what they paid years ago. When it comes time to close, the appraised value, determined by a third-party appraiser based on current resale market prices, can fall tens or even hundreds of thousands of dollars below the purchase price. Because the bank will only lend based on the lower appraised value, buyers must cover the gap with cash, often an impossible task for an average household.
To address this problem, the term “Blanket Appraisal” has entered conversations among buyers and mortgage professionals. A blanket appraisal means the bank has evaluated the entire building as one entity rather than each individual unit. When a buyer applies for a mortgage from the same bank that financed the project’s construction, the bank agrees to use the original purchase price in its loan assessment instead of today’s lower appraised market value. In simple terms, it allows the buyer to borrow based on the contract price, not the current resale price.
However, this does not mean every buyer is automatically safe. Only a few major banks, and only for certain developer partnerships, offer blanket appraisals. Even then, the buyer must still qualify under that bank’s internal lending criteria. The bank may recognize the contract price, but the actual loan amount still depends on the borrower’s income, existing debts, and overall financial situation. Some clients with blanket appraisal approval have still received only 50% financing, not the typical 80%, because their personal profiles or other mortgages limited what they could borrow.
From the developers’ side, banks like RBC, BMO, and others are not offering blanket appraisals out of generosity. Many of these banks are also the lenders providing the developers’ construction financing. If too many buyers walk away at closing due to low appraisals, the developer can’t collect the final payments, which in turn threatens the repayment of the construction loan. By approving mortgages at the original contract prices, the bank ensures the project completes and reduces its own exposure to bad loans. In essence, the bank shifts part of the risk to the end buyers while stabilizing its investment in the development.
For buyers, a blanket appraisal can indeed make closing possible and prevent an immediate default, but it also means taking on a mortgage that may exceed the current market value of the property. This imbalance can feel risky, similar to owing more on your mortgage than the property is worth. Yet from a legal standpoint, there’s no violation as long as the buyer agreed to the purchase contract and voluntarily accepted the loan. The blanket appraisal merely allows the transaction to proceed when the market turns against the buyer.
Lawyers emphasize that while this structure may feel controversial, it often serves a practical purpose: it prevents mass defaults, protects project completion, and buys time for the market to recover. From the buyer’s perspective, it’s a trade-off, avoiding immediate legal and financial trouble at the cost of potentially carrying short-term negative equity. In the long run, if the market rebounds, the property’s value may eventually align with or exceed the mortgage balance.
Ultimately, a blanket appraisal is not a magic shield. It can help qualified buyers close smoothly, but it cannot replace personalized financial planning. The key advice remains: consult lenders early, understand your borrowing capacity, and evaluate whether the long-term risk makes sense for your situation. For some, it’s a lifeline; for others, it’s a temporary fix with deeper financial implications.