When the valuation comes in under the contract price. What your options are.

A valuation shortfall is when the lender's valuer assesses a property at less than the price on the contract. Lenders base the loan on the lower of the two figures, so the buyer has to cover the difference with extra funds, or change something: the evidence, the lender, the loan or the price.

On episode 103 of the podcast, Dion walked through a purchase where the valuation was tracking well under the contract price and how it was handled. This article sets out the general position for any buyer.

Why does the valuation matter more than the price?

Because the loan is calculated on it. The lender applies its maximum loan-to-value ratio to the valuation, not to what you agreed to pay. A lower valuation means a smaller loan for the same purchase.

Illustrative figures only, not an offer or a quote. A 5 per cent difference in the valuation adds $32,000 to the funds the buyer needs in this example.

Why do valuations come in short?

• The market has moved. A valuer works from settled sales, which lag the market. According to Cotality, Brisbane dwelling values in August 2026 were 2.7% below their May 2026 peak (our lending snapshot). A price agreed on the way up can meet a valuation written on the way down.
• Few comparable sales. Unusual properties, new estates and thinly traded areas give the valuer less to work with.
• The price was competitive. A contested sale can settle above what the evidence supports.
• The asset is valued on income. Rooming houses and commercial property are assessed on what they earn. If the rents are under the market, so is the value.
• The valuer is cautious. A valuation is a professional opinion, and opinions carry a range.

What are the options when a valuation is short?

1. Contribute more. Cover the gap with cash or with equity released from another property.
2. Put forward evidence. Comparable sales or rental evidence the valuer may not have had. This is a request for consideration, not a negotiation.
3. Try another lender. A different lender will order its own valuation. It may be higher, the same or lower.
4. Change the loan. A higher loan-to-value ratio may be available, usually at added cost and subject to assessment.
5. Revisit the price. A valuation can support a conversation with the vendor.
6. Rely on the finance clause. If the contract allows it and the dates have not passed. That is a question for your solicitor.

Which of these is open depends on the contract, the time left on the finance clause and your wider position. The earlier the shortfall is known, the more of them remain.

What happened in the rooming house example?

The purchase was under contract at $1.435 million, and on the evidence available the valuation looked set to land about $130,000 lower. The cause was the rent roll. The rooms were let below what the market would pay, and a rooming house is valued on its income.

An independent property manager appraised what the rooms could realistically achieve, a commercial valuer experienced in the asset class was engaged and the rental evidence was presented. The property was assessed at the contract price.

Real client engagement. Individual circumstances differ; outcomes depend on assessment and lender criteria.

That was the outcome on that asset, with that evidence. It is not a template. Valuations are not changed on request, supporting evidence does not always exist and no result can be assured before an assessment is made.

How do you reduce valuation risk before signing?

• Check the evidence yourself. Look at recent settled sales, not asking prices.
• Hold a buffer. Funds or available equity beyond the minimum, so a modest gap is not fatal.
• Size the finance clause. Long enough for the valuation to be ordered, completed and reviewed.
• Match the lender to the asset. Some lenders and valuers know an asset type far better than others.
• For income assets, review the rents. Under-market rents reduce the value before the valuer arrives.

Knowing how much equity you can actually reach before you need it is part of the same preparation. See equity mapping.

Common questions

What happens if the bank valuation is lower than the purchase price?

The lender bases the loan on the valuation, not the contract price, so the loan is smaller than expected. The buyer needs to cover the difference with extra funds, or change the evidence, the lender, the loan or the price. The contract price itself does not change unless the vendor agrees.

Can you challenge a bank valuation?

You cannot negotiate a valuation, but additional evidence such as comparable sales or rental evidence can be put forward for the valuer to consider. The valuer may or may not change the figure, and no outcome can be assured.

Will another lender give a higher valuation?

Possibly. Another lender will order its own valuation, which may come in higher, the same or lower. A new application also takes time, so the length of the finance clause matters.

Why are rooming houses valued differently?

A rooming house is usually treated as an income producing asset. The valuer works from the income it generates and a capitalisation rate, not mainly from sales of ordinary houses nearby. If the rents are below the market, the assessed value is lower too.

The takeaway

A short valuation does not end a purchase by itself. It changes the funding, and it starts a clock. The buyers who come through it are the ones with a buffer, a long enough finance clause and a lender suited to the asset.

If you want the valuation risk tested before you sign, Book a Call. Fifteen minutes with the team will tell you whether the structure can absorb a gap.

This article is general information only. It does not take your individual circumstances into account and is not credit, tax, legal or financial product advice. All lending is subject to individual assessment and lender criteria. Speak with your own advisers before acting. Figures in the table are illustrative. Contract rights, including any finance clause, are a matter for your solicitor.