When the Valuation Comes In Under the Price: What Happens and How to Protect Yourself
You've found the home, negotiated the price and signed the offer. Then the bank's valuation comes back lower than what you agreed to pay. In a rising market this is rare. In a cooling market like Perth's right now, it happens more often. Here's what it means and what you can do about it.
Why valuations matter so much
When you buy, the lender doesn't lend against the price you agreed. It lends against the lower of the purchase price or its own valuation. The valuation is the lender's estimate of what the home would sell for, based mainly on recent comparable sales.
When prices are rising, the comparable sales lag behind, but buyers are paying the going rate and valuations usually keep up. When prices are falling, valuers lean on the most recent sales, and an offer agreed a few weeks ago can look high against them.
What a shortfall does to your numbers
Two simple examples show how quickly a small gap turns into a cash problem.
Example 1: a 10% deposit
| What you planned | After a lower valuation |
Purchase price | $750,000 | $750,000 |
Lender's valuation | $750,000 | $720,000 |
Maximum loan at 90% | $675,000 | $648,000 |
Your deposit needed | $75,000 | $102,000 |
Extra cash required | None | $27,000 |
If you can't find the extra $27,000, the alternative is borrowing the original $675,000 against the lower valuation. That pushes your loan-to-value ratio (LVR) to about 94%, which usually means a higher lenders mortgage insurance (LMI) premium and may not fit the lender's policy at all.
Example 2: the 5% Deposit Scheme
| What you planned | After a lower valuation |
Purchase price | $800,000 | $800,000 |
Lender's valuation | $800,000 | $770,000 |
Maximum loan at 95% | $760,000 | $731,500 |
Extra cash required | None | $28,500 |
Under the 5% Deposit Scheme, the guarantee generally covers loans up to 95% of the property's value, so a lower valuation can't simply be absorbed by a bigger loan. The buyer either finds the difference or the deal has to change.
A $30,000 gap in valuation can mean $30,000 more cash on settlement day.
How to protect yourself before you sign
Do your own homework on value
Ask the agent for recent comparable sales, check sold prices in the street and nearby, and be wary of comparing against asking prices. In a falling market, the last three months of sales matter more than anything older.
Use your finance clause properly
In WA, the finance clause in your offer usually sets out the loan amount, the lender and the date by which you need approval. Make sure the loan amount reflects what you actually need, and allow enough time for the valuation and approval to come through. How the clause works if the lender approves a smaller loan depends on its wording, so have your settlement agent or lawyer check it before you sign.
Get the valuation done early
Where possible, your broker can order the lender's valuation as soon as your offer is accepted, so you find out about a shortfall while your finance clause is still running.
Keep some cash in reserve
If you can, don't commit every dollar of your savings to the deposit and costs. A buffer of even $10,000 to $20,000 gives you options if the valuation is a little short.
What to do if the valuation comes in low
Talk to your broker first. Different lenders use different valuers, and a second lender's valuation can come in higher. Ordering a new valuation through another lender is common.
Ask for a review. If you have recent comparable sales the valuer may have missed, your broker can ask the lender to review the valuation. It doesn't always work, but it's worth trying when the evidence is strong.
Renegotiate with the seller. A low valuation is useful evidence in a cooling market. A seller who has been on the market for a while may prefer to reduce the price rather than start again.
Cover the gap. If none of that works, you may need more cash, a family guarantee, or a different loan structure. Your broker can show you what each option costs.
Building or buying off the plan?
The same issue can arise when a new home is valued on completion. If values have eased since you signed, the completion valuation can come in below the contract price. Build a buffer into your plans from day one.
If you're using a low-deposit option, my guide to buying in Perth with a 5% deposit explains how those loans are structured.
Want your valuation sorted before it becomes a problem?
I'll check comparable sales with you, order the valuation early, and line up a back-up lender if the first valuation comes in short.
Sources: Cotality Home Value Index, September 2026; REIWA market updates, July and August 2026; Housing Australia, 5% Deposit Scheme guidelines; Worked examples calculated by Finance 365
This article is general information only and does not take into account your objectives, financial situation or needs. Scheme rules, lender policies and eligibility criteria change, so confirm the current position before acting. Lending criteria, fees and charges apply.
Ian Freeman, Finance 365. Credit Representative Number 439731 of Australian Credit Licence 384704.