How property valuations work.
A valuation is an independent assessment of a property’s market value, usually conducted by a certified valuer on behalf of a lender. Even if you’ve agreed on a purchase price with the seller, the lender needs to confirm the property is worth what you’re paying — or enough to support the loan you’re applying for.
Valuations play a major role in determining how much you can borrow, your loan structure, and whether lenders require additional conditions. At Lumo, we guide clients through valuation outcomes and help navigate next steps if the numbers don’t land where expected.
Why lenders order valuations
Although you might have pre-approval, lenders must complete a final assessment before formal approval is granted. Valuations help lenders:
Confirm the property provides sufficient security
Ensure the loan aligns with policy and risk requirements
Assess the loan-to-value ratio (LVR)
Identify any major structural or market concerns
The lender is effectively protecting both themselves and you from overpaying or borrowing beyond safe limits.
How valuers determine market value
Valuers follow strict industry standards and use several data points to form their assessment, including:
1. Comparable sales (“comps”)
Recent sales of similar properties in the same area.
Factors considered include:
Land size
Building size and layout
Condition and age
Location characteristics
Renovation quality
2. Current market conditions
Valuers analyse demand, supply, broader economic indicators, and local market trends.
3. Property condition
A walkthrough inspection evaluates:
Structural integrity
General maintenance
Renovation level
External issues (e.g., drainage, roof condition)
4. Risk rating
Valuers assign risk scores based on:
Property location
Market stability
Unique features
Environmental or zoning risks
This rating signals to the lender whether additional caution is needed.
Types of valuations
Different scenarios call for different methods. Common types include:
Full physical inspection
A valuer visits the property to complete a thorough assessment.
Most common for purchases.
Desktop valuation
Completed using recent sales data and online tools.
Used when the lender believes risk is low — often for refinances.
Kerbside valuation
The valuer drives past the property without inspecting the interior.
Used in low-risk situations or when time is limited.
Automated valuation model (AVM)
Entirely data-driven with no human involvement.
Used for low-value loans or properties with strong comparable sales.
At Lumo, we understand which lenders use which valuation types depending on policy and risk appetite.
What happens if the valuation is lower than expected
A short valuation can feel stressful, but several options exist:
1. Renegotiate the purchase price
Many sellers adjust their expectations when independent valuations don’t match the contract price.
2. Increase your deposit contribution
This may bridge the gap between the contract price and valuation figure.
3. Consider a different lender
Some lenders value properties differently due to varying data sources and risk interpretations.
4. Request a valuation review
If you believe the assessment is unfair, you may provide additional comparable sales for reconsideration (not always accepted).
5. Reassess your strategy
In some cases, it may be wiser not to proceed at the agreed price.
We support clients through all of these scenarios to ensure they’re protected and well-informed.
What happens if the valuation is higher
Great news — although it doesn’t change the contract price, it may:
Improve your LVR
Unlock better pricing options
Strengthen your long-term equity position
Higher-than-expected valuations are always a positive sign of strong market performance.
Let’s chat.
Need help ordering a valuation? Or interpreting a valuation result and navigating next steps if it comes in low? At Lumo, we guide clients through valuation outcomes every day. Let’s chat.
This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.