If your Toronto pre-construction condo appraises below what you agreed to pay, your lender will only finance the appraised value, not your purchase price. You will need to cover the difference in cash, arrange alternative financing, or walk away and forfeit your deposit. Appraisal gaps of $150,000 to $300,000 are common on units bought at the 2021 to 2022 market peak, and walking away can expose you to more than just your deposit if the seller pursues damages. Talk to your real estate lawyer as soon as you get the appraisal, ideally 60 to 90 days before closing, not the week of.
If you bought a preconstruction condo in Toronto during 2021 or 2022 and it's closing this year, there's a good chance the number on your appraisal report doesn't match the number on your Agreement of Purchase and Sale. That gap is not something you did wrong, and it's not a paperwork glitch. It's the defining story of the 2026 GTA condo market. Thousands of buyers who made a sound decision at the time are now facing the same surprise, and if you're one of them, what you need right now is a clear plan, not a reason to second guess a decision that made complete sense when you made it.
I've sat across the table with many buyers going through exactly this, and I understand how unsettling it feels. It's one of the most common calls I get right now from clients who bought pre-construction in the last cycle. The story is almost always the same: you bought in good faith in 2021, based on the strongest information available at the time, and years later the market has shifted in a way nobody could have predicted with certainty. Now a lender-ordered appraisal is landing tens or hundreds of thousands of dollars below what you signed for, through no fault of your own. This is a financing and timing problem, not a reflection of your judgment, and it's tied to a specific wave of supply that is already the biggest it's going to get, more on that below.
Here's the mechanics. Lenders don't finance your contract price. They finance whatever a licensed appraiser says the unit is worth today, using recent comparable sales. When you signed your Agreement of Purchase and Sale in 2021 or 2022, comparable sales were still climbing. By the time your building registers and your unit closes in 2026, the market has moved, and in many cases it has moved down.
Appraisers are seeing preconstruction units come in 10 to 30 percent below original contract prices across the GTA, and it's not limited to any one neighborhood. It's happening in luxury towers and entry-level buildings alike.
The good news, if there is one, is that this is the peak of the cycle, not the start of a longer trend. Urbanation is projecting roughly 30,793 new condo units completing across the GTA and Hamilton region in 2026, the largest completion year on record. Every one of those closings is a moment where a buyer's 2021 contract price meets a 2026 appraisal, and for thousands of buyers, those two numbers don't agree, but you are part of a very large group of buyers navigating the same shift, not an outlier.
Those units were mostly started back in 2021 and 2022, when sales were running at record highs and dozens of projects broke ground. Very few new projects have launched since 2023, so the pipeline behind this wave is thin. Urbanation is projecting completions falling to roughly 14,659 units in 2027 and around 13,039 in 2028, less than half of what's completing this year. Fewer completions ahead should mean less new inventory competing for buyers and, over time, tighter comparable sales for appraisers to work from. TD Economics expects GTA resale condo prices to keep softening through 2026, with the decline easing in 2027 and a return to a sustained uptrend by 2028. None of that changes the math on your closing today, but it does mean the gap you're facing right now is tied to a specific, unusually large, and already fading wave of supply, not a permanent repricing of Toronto real estate.
One Toronto buyer's situation, reported by the Globe and Mail, illustrates just how wide that gap can get. He'd agreed to pay $2.195 million for a Leaside preconstruction unit in late 2020, with a $439,000 deposit already down. When the appraisal came back at closing, it landed at $1.6 million, a $595,000 shortfall he'd have to bridge with a new mortgage. Rather than refinance his existing home to cover the gap, he chose to forfeit the deposit. "It comes down to simple math," he said. "By me walking away, I am saving money." When the developer's lender offered him a workaround that would have financed him at his original contract price rather than current market value, he turned it down: "I wasn't financially comfortable to take a mortgage out against a value I know isn't real. I won't do it."
That's an extreme case in dollar terms, but the decision logic is the same one every buyer in this position has to work through, and it's a decision worth making with clear information, not pressure or guilt.
If your appraisal comes in below your purchase price, you generally have a handful of paths forward. None of them are painless, and the right one depends entirely on your numbers, your timeline, and how much risk you can carry. There is no single correct answer here, and the best path is the one that fits your actual situation.
A lot of people assume the worst case is losing their deposit.
Under Ontario law, when a buyer is unable to close on an Agreement of Purchase and Sale, the seller or developer can generally keep the deposit and still pursue additional damages. That includes the difference between your contract price and whatever the unit eventually resells for, carrying costs like mortgage interest and property taxes during the delay, legal fees, re-listing costs, and a second real estate commission.
On a $1,000,000 deal, a buyer whose standard 5 percent deposit ($50,000) is at risk can end up facing total damages well over $200,000 once all of those costs are added and the deposit is credited against them. The deposit is the floor of your exposure, not the ceiling.
This is exactly why I tell every client in this situation the same thing: talk to a real estate lawyer the moment you get a low appraisal, not the week before closing. A financing condition that's still active in your agreement can change your options entirely. Once it's waived or expired, you're generally on the hook to close, appraisal gap or not. This is not tax or legal advice, and every Agreement of Purchase and Sale is different, so you'll want a lawyer reviewing your specific contract language before you decide anything.
None of the above changes anything for buyers already mid-closing, this section is really for anyone still deciding whether to buy pre-construction today, now that this pattern is well understood across the market.
Ask what happens if the appraisal comes in 10 percent low. Ask what happens if it comes in 20 percent low. If your mortgage broker or agent can't answer both questions clearly before you sign, that's a sign to slow down.
For buyers weighing new construction against resale in Toronto, this appraisal gap risk is one of the clearest arguments for understanding exactly what you're buying and when it will actually close, not just what the price sheet says today. It's also part of why I walk every pre-construction client through a realistic closing-day scenario, not just the marketing numbers, before they put down a deposit.
Development charges are part of what's driving the final closing numbers higher too. In downtown Toronto, per-unit development charges have been running $36,000 to over $54,000 depending on unit size, and those costs can be passed to buyers at final closing if your agreement doesn't include a capped levy clause. If you're still in your 10-day cooling-off period on a new purchase, that's exactly the kind of clause your lawyer should be negotiating before it expires.
Some buyers try to solve an appraisal gap through an assignment sale, selling their contract rights to a new buyer before their own closing. If you go this route, know that the HST new housing rebate that comes with closing can get complicated. When you buy directly from a builder, the rebate is often credited to you at closing. On an assignment, that credit doesn't always flow the same way, and buyers sometimes need to apply directly to the CRA to recover the rebate they're owed. If you're navigating an assignment sale in Toronto, loop in both your lawyer and your accountant early. This is not tax advice, and rebate eligibility depends on the exact terms of your original agreement and assignment agreement, so verify your specific situation before you count on any number.
An appraisal gap on a pre-construction closing is a financing problem with real legal consequences attached, not a personal setback and not something you should have seen coming in 2021. If you're facing one, the first 48 hours after you see that appraisal matter more than almost anything else in the process. Get your lawyer involved immediately, document every conversation, and understand your actual exposure before you decide anything, whether that's bridging the gap, negotiating an extension, or walking away.
Every closing is different, and the only way to know your real numbers, what you'd owe if you walk, what financing options might actually work for your situation, is to run them with someone who understands both the Toronto pre-construction market and what's happening to prices right now. This is exactly the kind of situation I walk clients through, calmly and without judgment, before they panic and before they sign anything they don't fully understand. Whichever path you take, you're getting through the trough of a supply cycle that is already narrowing behind you, not the start of a new normal.
You can, but it isn't free. A low appraisal on its own is not automatically a legal way out of your Agreement of Purchase and Sale unless you still have an active financing condition. If you walk away without one, the seller or developer can typically keep your deposit and pursue you for additional damages. Talk to a real estate lawyer before you decide anything.
In most cases, yes. Ontario courts generally enforce deposit forfeiture when a buyer breaches an Agreement of Purchase and Sale. Relief from forfeiture exists but is discretionary and rarely granted, based on proportionality and fairness. This is not legal advice, and outcomes depend on the specific facts of your contract.
Appraisers report preconstruction units coming in 10 to 30 percent below original contract prices in 2026, with typical dollar gaps in the $150,000 to $300,000 range on units purchased near the 2021 to 2022 market peak. Every building and unit is different, so treat these as general ranges, not a prediction for your specific unit.
Sometimes, if your builder allows assignments and the building has hit the resale threshold in your agreement, often 90 percent of units sold. In a softer market, assignment sales frequently happen at a loss, but that loss can still be smaller than the damages you might face from defaulting on your original closing. Builder consent and fees vary significantly, so review your specific agreement with a lawyer.
Yes, in some cases. On a direct purchase from a builder, the HST new housing rebate is often credited to you at closing. On an assignment, that credit doesn't work the same way, and you may need to apply to the CRA directly to recover the rebate you're owed. This is not tax advice. Confirm your specific rebate eligibility with a tax professional before you rely on any number.
If you're staring down a closing number that doesn't match your contract, I'm happy to walk you through your actual options, what you'd realistically owe under each scenario, and what a lawyer or lender conversation should look like before you make a decision. You did nothing wrong here, the market simply moved, and my job is to help you find the least painful way through it. Reach out anytime at ryan@connect.ca, or send your details through this form and we'll get back to you.
About Ryan Coyle: Ryan Coyle is a Toronto real estate broker and investor with more than 20 years in the industry and over $2 billion in real estate transactions. He personally holds a portfolio of 40+ doors and helps buyers, sellers, and investors build long-term wealth through Toronto real estate. Ryan leads Connect, a full-service GTA brokerage focused on the downtown core and north Toronto's luxury market.
