Your lender orders a valuation on every property you want to buy. That valuation determines how much you can borrow, whether you pay LMI, and occasionally whether your purchase can proceed at all.
The valuation is not the same as the purchase price. A property might sell for $750,000, but if the lender's valuer assesses it at $720,000, your loan is calculated on $720,000. That $30,000 gap comes directly out of your borrowing capacity and deposit position.
What the valuer actually checks
The valuer assesses the market value of the property, not what you agreed to pay. They compare recent sales of similar properties in the same area, adjust for differences in land size, condition, and features, and apply their professional judgement to arrive at a figure.
Most lenders use desktop valuations for lower-risk loans or kerbside inspections where the valuer photographs the property from the street. Full inspections, where the valuer enters the property, are ordered when the loan amount is high, the property type is unusual, or the lender identifies risk in the initial assessment.
Consider a buyer purchasing a unit in a block where multiple units are listed for sale at the same time. The valuer notes the high supply, checks how long comparable units have been on the market, and may discount the contract price if they believe the market is softening. The buyer might have secured the property at $680,000, but the valuation comes in at $665,000. The lender calculates LVR and loan amount on $665,000, not on the $680,000 the buyer is paying.
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Why valuations fall short of the sale price
Valuers rely on settled sales, not current listings. If the market has moved quickly or if you paid a premium for a specific feature the market does not broadly value, the valuation may not reflect what you paid.
In areas where ambulance workers often buy, such as growth corridors or regional centres near major hospitals, new estates can see rapid turnover and price variation. A property on a larger block or backing onto reserve might command a higher sale price, but if recent sales in the estate were all smaller blocks, the valuer uses those as comparables. The premium you paid for the larger block may not be fully recognised.
Your borrowing capacity is tied to the lower of the purchase price and the valuation. If you are buying at the upper end of what you can afford, a shortfall can mean you need to increase your deposit or renegotiate the sale price.
When the valuation affects your LMI premium
LMI is triggered when your LVR exceeds 80 per cent. The premium is calculated on the loan amount and the LVR, both of which are based on the valuation.
If you are relying on an LMI waiver available to paramedics and ambulance officers, the waiver terms are also applied to the valuation figure. Some waivers cap the loan amount or require the LVR to remain below a specific threshold. A lower valuation can push you outside the waiver terms, even if your deposit percentage looked sufficient based on the contract price.
In a scenario where you have a 10 per cent deposit and are purchasing at $700,000, your loan amount is $630,000 and your LVR is 90 per cent. If the valuation comes in at $680,000, your LVR increases to 92.6 per cent on the same loan amount. Some waiver programs cap LVR at 90 per cent, meaning the lower valuation moves you outside eligibility unless you increase your deposit.
How to check valuation risk before you make an offer
You can order a pre-purchase valuation through some lenders or independent valuation firms before signing a contract. The cost is typically a few hundred dollars. The report gives you a realistic view of what the lender is likely to accept and whether the asking price is supported by recent sales.
Pre-purchase valuations are worthwhile when you are buying in a street with limited comparable sales, purchasing a property with non-standard features, or stretching your deposit to meet a price. They are less useful in established suburbs with consistent turnover of similar stock, where the valuation risk is lower.
Your broker can also pull recent sales data and flag whether the contract price sits within the range of settled sales. If you are purchasing well above recent comparables, you know a shortfall is possible and can adjust your deposit or offer accordingly.
The difference between a valuation and a property report
A property report from a real estate website shows you the price history, recent sales in the area, and an estimated value range. It is useful for research, but lenders do not accept it as a valuation.
The lender's valuation is a formal assessment completed by a qualified valuer who is independent of the sale. The valuer must meet the requirements of APS 112 and provide the lender with a defensible opinion of market value. The lender uses that figure to calculate risk, determine your loan amount, and set the LVR.
Some buyers assume that because a property report shows a value estimate close to the sale price, the lender will accept the same figure. The lender's valuer has access to more detailed sales data, applies stricter methodology, and may reach a different conclusion. If you are considering a property and want insight into how it might be valued, obtaining your own report before the lender orders theirs can inform your decision, though it does not bind the lender.
What happens if the valuation kills the deal
If the valuation comes in below the contract price and you cannot increase your deposit to cover the gap, you have three options. You can renegotiate the sale price with the vendor, walk away if your contract includes a finance clause, or find additional funds to cover the shortfall.
Renegotiation is more likely to succeed if the market has softened since the contract was signed or if the vendor is motivated. If the valuation reflects an accurate view of the market and the sale price was inflated, the vendor may accept a reduction rather than relist.
If you are using the Australian Government 5% Deposit Scheme, both the purchase price and the lender's valuation must be at or below the applicable cap for your state or region. A valuation that falls below the contract price does not disqualify you from the scheme, but a contract price above the cap does, even if the valuation is within the limit.
Most home loan pre-approvals are conditional on a satisfactory valuation. The lender commits to the loan amount based on the information you provided, but the valuation is the final check. If the valuation does not support the loan, the pre-approval does not convert to formal approval, and you are not obliged to proceed with a purchase you cannot fund.
Call one of our team or book an appointment at a time that works for you. We work with lenders who value properties consistently, flag valuation risk early, and structure your application to handle gaps before they derail your settlement.
Frequently Asked Questions
Can I use my own valuation instead of the lender's valuation?
No. Lenders require an independent valuation completed by a valuer on their panel who meets the requirements of APS 112. You can order a pre-purchase valuation for your own information, but the lender will not accept it in place of their own assessment.
What happens if the lender's valuation is lower than the purchase price?
The lender calculates your loan amount and LVR on the lower figure. If the valuation is $20,000 below the contract price, you need an extra $20,000 in deposit to maintain the same LVR, or you need to renegotiate the sale price with the vendor.
Does a low valuation mean I paid too much for the property?
Not necessarily. Valuers rely on settled sales and may not fully account for features that attracted a premium in your purchase. A low valuation reflects the lender's risk assessment, not a definitive statement of what the property is worth to you.
Can I challenge a valuation if I think it is too low?
You can request a review or provide additional sales evidence to the lender, but the lender is not obliged to change the valuation. Some lenders will order a second valuation at your cost, though the result may be the same.
Do all lenders use the same valuation figure for the same property?
No. Different lenders use different valuation panels, and valuers can reach different conclusions based on the sales data they prioritise and the methodology they apply. A property might be valued at $700,000 by one lender and $720,000 by another.
