💰 You Found the House. The Offer Was Accepted. Then the Valuation Comes In…
You've found the right home, negotiated the price and your offer has been accepted.
Then your lender orders a valuation — and the property is valued at less than what you've agreed to pay.
So, what happens now?
A lower valuation doesn't automatically mean your purchase is over, but it can affect how much the lender is willing to lend and how much money you need to contribute.
Here's how it works.
🏦 What Is a Bank Valuation?
A bank valuation is an assessment of what a property is worth for lending purposes.
The lender uses the valuation to help determine whether the property provides suitable security for the loan.
Importantly, the valuation isn't necessarily the same as the price you agreed to pay.
You might agree to buy a property for $600,000, for example, while the lender's valuation comes in at $570,000.
📉 Why Might a Valuation Come in Lower?
There are several reasons this can happen.
A valuer may consider:
Recent comparable property sales
The property's location
The condition of the property
The size and features of the home
Current market conditions
Any factors that could affect the property's value
The amount you offer and what a valuer determines the property is worth aren't always the same thing.
💸 Does a Low Valuation Mean You Can't Get the Loan?
Not necessarily.
The impact depends on your circumstances, the lender's requirements and how much you're borrowing.
However, if the lender bases its maximum lending amount on the lower valuation, you may need to contribute more of your own funds to complete the purchase.
For example:
You agree to buy a property for $600,000.
The lender values it at $570,000.
If the lender is willing to lend a certain percentage of the valuation, the amount they will lend may be based on the $570,000 valuation rather than the $600,000 purchase price.
That could leave you needing to find additional funds to cover the difference.
🤔 What Can You Do If the Valuation Is Low?
If your valuation comes in lower than expected, don't panic.
Depending on the circumstances, your broker may be able to:
✔️ Discuss the valuation with the lender.
✔️ Review whether another valuation is possible.
✔️ Look at alternative lending options.
✔️ Reassess the loan structure.
✔️ Work out whether you have enough funds to cover the difference.
The options available will depend on the lender, property and your individual circumstances.
📍 Why This Matters for Mackay Buyers
It's easy to assume that if you've agreed on a purchase price, the bank will automatically lend based on that amount.
That's not always the case.
Understanding valuations before you make an offer can help you better understand the potential risks and the funds you may need to have available.
❓ Frequently Asked Questions
What happens if the bank valuation is lower than the purchase price?
The lender may calculate the maximum loan amount using the lower valuation. This can mean you need to contribute more money towards the purchase.
Can you still buy the property if the valuation is low?
Potentially, yes. It depends on your loan, the lender's requirements and whether you have enough funds to cover any shortfall.
Can you challenge a bank valuation?
In some circumstances, your broker or lender may be able to request a review or further valuation. The process and availability of this option varies between lenders.
Can a low valuation affect LMI?
It can. Because LMI and loan-to-value calculations can be based on the lender's accepted property value, a lower valuation may affect the amount you need to contribute and whether LMI applies.
Should I get a valuation before making an offer?
You can discuss valuation considerations with your broker before making an offer, particularly if you're concerned about paying above comparable market values.
🤝 The Bottom Line
A bank valuation can be different from the price you've agreed to pay.
If the valuation comes in lower, it may affect how much the lender is prepared to lend and how much money you need to contribute.
That's why it's important to understand your finance position before making an offer.
If you're buying in Mackay and want to understand how a property valuation could affect your loan, our team can help you work through your options.
📱
(07) 4953 2799💻
www.gardian.com.au📍
11–13 Gordon St, Mackay
