Understanding bank valuations
By Ali Hasani, Founder and Principal Mortgage Broker at Buyvest, MFAA accredited. Last updated July 2026. Valuation types, costs and turnaround vary between lenders and change.
This guide covers what a bank valuation is, the four types, what happens when one comes in low, and whether a valuation can be challenged. The wider process is in our property purchase and valuation guide.
The short version: A lender advances against the lower of the purchase price or the valuation, so a shortfall becomes cash you find at settlement. Valuations run from free automated models to full inspections at $300 to $600, and most lenders waive the fee on an initial application. A finance clause gives you an exit if the valuation is low. At auction it does not, because the contract is unconditional.
What is a bank valuation?
A bank valuation is an independent assessment of a property's value, prepared for the lender to establish what the property is worth as security. A bank valuation is ordered by the lender, not the buyer, and is separate from a real estate agent's appraisal.
The valuation exists to answer one question for the lender: what is this property worth as security. It is prepared by a qualified valuer working to Australian Property Institute standards, and it is a formal report rather than an estimate. A real estate agent's appraisal is a different thing entirely, free, not certified, and produced to help sell.
The figure it returns drives the rest of the loan. It sets the maximum the lender will advance, it decides your deposit requirement, and it determines whether lenders mortgage insurance applies.
Why is a bank valuation different from the price you pay?
A bank valuation and a purchase price answer different questions. The purchase price is what a buyer agreed to pay. A bank valuation is a valuer's independent assessment prepared to Australian Property Institute standards, and the two figures do not always match.
A purchase price is the result of a negotiation or an auction. It reflects what one buyer was willing to pay on one day, competition included. A valuation is an independent assessment built from settled comparable sales, and it takes a deliberately cautious view.
Most of the time the two land close together. They separate when a market is moving quickly, when a property is unusual enough that comparable sales are thin, or when bidding at auction runs past what recent sales in the street support. The gap is not a judgement on the property, and it does not mean the price was wrong.
What are the main types of bank valuation?
Bank valuations come in four forms: an automated model, a desktop assessment, a kerbside inspection from the street, and a full internal inspection. The lender chooses which one applies, and the choice generally reflects how much risk the loan carries.
| Type | What the valuer does | Cost | Turnaround |
|---|---|---|---|
| Automated model | No valuer. An algorithm runs over sales history and property attributes | Free | Almost immediate |
| Desktop | Qualified valuer, no inspection. Works from listings, photos, floor plans and comparable sales | Free to $200 | About a day |
| Kerbside | External inspection from the street, plus comparable sales. No interior access | $200 to $350 | About a day |
| Full | Internal and external inspection. The valuer sees condition, finishes and improvements | $300 to $600 | Up to seven working days |
Costs and turnaround vary by lender, property and location.
Reliability rises down the table, because each step adds something the one above it cannot see. An automated model has no view of condition or renovations. A desktop valuation depends on how current the photos are. Kerbside picks up the streetscape and external condition but stops at the front door.
Most lenders waive the fee on an initial home loan application, and several major lenders order valuations at no cost. Turnaround on a full inspection can stretch toward seven working days where access to the property is slow to arrange.
What happens if the bank valuation is lower than the purchase price?
When a bank valuation is lower than the purchase price, the lender lends against the lower figure. The difference becomes a funding gap the buyer covers, and a lower valuation can also push the LVR above 80% and trigger lenders mortgage insurance.
The mechanics are simple and unforgiving. A lender advances against the lower of the price or the valuation, so a $750,000 contract valued at $720,000 leaves $30,000 to find on top of the deposit. That gap is cash, and it is due at settlement.
The second effect is on LVR. A buyer with a 20% deposit against the contract price can find themselves above 80% against the valuation, which brings LMI into a purchase that was structured to avoid it.
What happens next depends almost entirely on the contract. A private treaty purchase with a finance clause has an exit, because finance has effectively been declined at the amount required. A purchase at auction is unconditional on the fall of the hammer, with no cooling off period, so the shortfall has to be solved rather than avoided. The options are covering it from savings, renegotiating with the seller, accepting LMI at the higher LVR, or applying to another lender.
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How does a valuation affect your LVR and loan terms?
LVR is calculated on the lower of the purchase price or the bank valuation. A lower valuation raises the LVR, which can move a loan across the 80% threshold into lenders mortgage insurance territory and into a higher interest rate band.
The calculation is the loan amount divided by the lower of the price or the valuation. A $500,000 purchase with a $100,000 deposit needs a $400,000 loan. Valued at $500,000 that is an 80% LVR. Valued at $480,000 it becomes 83.3%, which is the difference between no LMI and an LMI premium.
Thresholds at 80%, 85% and 90% each change pricing and policy. Above 80% LMI generally applies, unless the purchase runs through the Australian Government 5% Deposit Scheme, formerly the Home Guarantee Scheme, which allows a 5% deposit with no LMI because Housing Australia guarantees part of the loan, subject to its price caps. Help to Buy works differently again: the government takes an equity share of up to 40% on a new home or 30% on an existing one, so the loan covers a much smaller share of the value than the 2% deposit suggests. Our property deposit calculator models how a lower valuation moves the deposit requirement.
Can you challenge a bank valuation?
A bank valuation can be challenged, though success is uncommon. A challenge generally requires recently settled comparable sales the valuer did not use, submitted through the broker or lender. Most disputes fail, and moving to a different lender is often the faster route.
Challenges are possible and they mostly fail. A dispute needs recently settled comparable sales the valuer did not use, ideally superior properties, submitted through the broker or lender rather than to the valuer directly. Pointing out improvements the valuer missed can work where there is documentation behind it, such as permits or before and after records.
The alternative is often quicker. A valuation is one valuer's opinion at one point in time, and different lenders use different panels, so the same property can return different figures. Applying to another lender produces a fresh valuation rather than an appeal against the first one. That path carries its own cost in time and in credit enquiries, which is the trade-off to weigh.
How do valuations differ by property type?
Valuation difficulty varies with how much comparable evidence exists. Strata apartments and townhouses have the most comparable sales. Rural properties, unusual homes and new developments have the least, and off the plan purchases are valued near settlement rather than at contract.
Comparable evidence is the variable. Strata apartments and townhouses sit in buildings and streets full of similar sales, so valuations are usually straightforward. Freestanding houses on large blocks, rural properties and architecturally unusual homes have fewer comparables, which pushes them toward full inspections and longer turnarounds.
Off the plan is its own case. The valuation happens near settlement rather than at contract, which can be a year or more later, so the market that existed when the contract was signed may not be the market that gets valued. New developments also lack comparable sales, and a developer's price is not evidence of value. For vacant land and construction, valuations happen in stages across the build. Renovated homes are assessed on the value the work added rather than what it cost.
Frequently asked questions
Why is a bank valuation lower than the price I am paying?
A purchase price reflects what one buyer agreed to pay, including any competitive bidding. A bank valuation is an independent assessment of the property as security, drawn from settled comparable sales. In fast-moving markets the two figures can separate, and auction results are the most common example.
What happens if the valuation comes in below the purchase price?
The lender lends against the lower figure, leaving a funding gap. Options include covering it from savings, renegotiating with the seller, paying LMI if the higher LVR is acceptable, moving to a different lender, or exiting under a finance clause where the contract has one.
Can you challenge a bank valuation?
A challenge is possible but rarely succeeds. It generally requires recently settled comparable sales the valuer did not use, submitted through the broker or lender rather than directly to the valuer. Applying to a different lender, which orders its own valuation, is often faster.
How much does a bank valuation cost and who pays?
Automated and desktop valuations range from free to about $200, kerbside from $200 to $350, and full inspections from $300 to $600. Most lenders waive the fee on an initial home loan application, and several major lenders order them at no cost.
How long does a bank valuation take?
A desktop or kerbside valuation is often turned around in a day or so. A full inspection can take up to seven working days, depending on the lender, valuer availability, and how quickly the seller or agent provides access to the property.
Can I choose which valuer assesses my property?
No. Lenders use panels of approved valuation firms and assign work through automated systems, which keeps the process independent of the borrower. A broker cannot select the valuer, but does know which lenders and panels tend to be stronger in particular areas.
Do different lenders value the same property differently?
Yes. Lenders use different panels, methods and risk settings, so the same property can return different figures. A valuation is one valuer's opinion at one point in time, which is why a shortfall at one lender does not always repeat at another.
How long is a bank valuation valid?
Validity varies by lender and market conditions, and volatile markets tend to attract shorter periods. Where settlement falls outside the validity window, the lender generally orders a fresh valuation before funds are released.
Take the next step
A valuation lands late in the process, but the exposure to it is set early, by the contract and by the buffer behind the deposit. Our pre-approval guide covers borrowing capacity, the LVR thresholds are covered separately, and our genuine savings guide covers what lenders want held before settlement. Model the numbers with our property deposit calculator, home equity calculator and mortgage repayment calculator.
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Related resources for first home buyers
Loan to Value Ratio | LMI explained | Purchase and valuation | Pre-approval | Choosing the right finance | Location, condition and vibes | Buying the right property
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This article is general information only and does not take your personal circumstances into account. Valuation types, fees, turnaround times, panel arrangements and lender policies vary between lenders and change over time. Figures were verified in July 2026 against published 2026 valuation cost data, lender guidance on valuation types and turnaround, and the Australian Government 5% Deposit Scheme property price caps published on firsthomebuyers.gov.au. Confirm your position with a licensed broker or lender before relying on it. Ali Hasani is an Authorised Credit Representative (CRN 567392) of Connective Credit Services Pty Ltd (Australian Credit Licence 389328).
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