With Sydney prices around 7% below their February peak (latest numbers here), one phone call I’m making more often this spring is: “The valuation came back under the contract price.”
It’s stressful, but it’s fixable more often than people expect. First, it helps to know exactly how the bank uses that number.
Why a low valuation changes your loan
Lenders work out your loan-to-value ratio (LVR) on the lower of the purchase price and their valuation. If the valuation is lower, the maximum they’ll lend drops, even though the price you agreed to pay hasn’t.
| Valuation matches price | Valuation $50k lower | |
|---|---|---|
| Purchase price | $1,000,000 | $1,000,000 |
| Bank valuation | $1,000,000 | $950,000 |
| Max loan at 80% LVR | $800,000 | $760,000 |
| Cash you need (before costs) | $200,000 | $240,000 |
That $40,000 gap is the shortfall. You either find it, or borrow it, which pushes the loan to about 84% of the valuation and usually brings lenders mortgage insurance (LMI) into play.
Five ways to handle it
- Challenge it with evidence. If the valuer missed comparable sales, renovations or features, a review can be requested, usually through your broker. Bring specific recent sales, not opinions. Reviews sometimes move the number; they don’t always.
- Try a different lender. Lenders use different valuation panels, and valuations can differ. A broker can see how another lender values the property. This isn’t about “shopping” for a figure; it’s about not relying on one opinion.
- Renegotiate the price. If your contract is subject to finance, a low valuation is real leverage. The vendor knows the next buyer’s bank will likely see the same thing.
- Cover the gap another way. Extra savings, a family guarantee, an LMI waiver if you’re an eligible professional, or the 5% deposit Home Guarantee Scheme can all change the maths.
- Walk away, if your contract allows it. A finance clause or a cooling-off period gives you an exit. In NSW, cooling-off on a private sale is five business days, and pulling out costs 0.25% of the price.
Buying at auction? Get the valuation first.
Auction contracts are unconditional, with no cooling-off and no finance clause. If the valuation comes in low after the hammer falls, the shortfall is yours. Where a lender allows it, get an upfront valuation on the property before auction day.
Refinancing? The valuation matters too
A lower valuation raises your LVR on a refinance. That can move you out of a lender’s best rate tier, or over 80% where LMI applies. Give the valuer a list of improvements you’ve made, and check likely values before you apply rather than after. When refinancing is worth it.
Common questions
What happens if the bank valuation is lower than the purchase price?
The lender calculates your loan on the lower valuation, so the maximum loan drops. You need to cover the difference with extra funds, borrow more (which may trigger LMI), renegotiate the price, or use a finance clause or cooling-off period if your contract has one.
Can I challenge a bank valuation?
You can ask for a review, usually through your broker, by supplying recent comparable sales or improvements the valuer may have missed. A review can change the figure, but there is no guarantee.
Is a bank valuation the same as market value?
Not quite. A bank valuation is a conservative estimate of what the property would sell for as security for the loan. In a falling market it can sit below what a buyer has just agreed to pay.
Can a broker get me a higher valuation?
No one can influence a valuer’s figure. What a broker can do is choose a lender whose valuation and policy fit, supply comparable sales for a review, and arrange an upfront valuation before you commit where the lender allows it.
Sources: lender credit policies; Conveyancing Act 1919 (NSW) cooling-off rules. Figures are illustrative. General information only, not financial or credit advice. Current at 24 September 2026.
