Picture this: you’ve found the perfect home, fallen in love with every corner, and eagerly set your sights on making it yours. But then, the unexpected happens – the property valuation comes back lower than anticipated, throwing a wrench into your home buying plans. Facing a low valuation can indeed be disheartening, but there are steps you can take to navigate this hurdle and stay on track with your home purchase.

Understanding Property Valuations

Before diving into solutions, it’s essential to comprehend what a property valuation report entails. This report is commissioned by a bank to verify that the property’s worth aligns with the agreed purchase price. Valuations can be of three types: full valuations involving an inspector visiting the property, kerbside valuations confirming the property’s presence and condition from outside, and desktop reports using statistical models.

Impact of a Low Valuation

A low valuation directly affects the maximum loan amount a bank is willing to lend, primarily driven by the Loan-to-Value Ratio (LVR). If the valuation falls short of the agreed purchase price, you might need to contribute more funds as your deposit, impacting your financial plans significantly.

Managing the Risks

Preventing a low valuation or dealing with one involves a mix of foresight and strategic action.

• Prevention is Key: Start by having your loan scenario evaluated by an experienced broker for an accurate understanding of your borrowing capacity. Obtain pre-approval from a bank to confirm the loan amount.
• Stick to Your Budget: While hunting for a home, remain disciplined within your property budget. Emotional attachments and exceeding financial limits can increase the risk of a low valuation impacting your purchase.

Dealing with a Low Valuation

If faced with a low valuation, consider these strategies:

• Seek Multiple Valuations: Ordering valuations from various lenders offers multiple opinions on your property’s worth. Different valuers might arrive at diverse conclusions, providing options for a potentially higher valuation.
• Challenge the Valuation: Challenge the report with evidence. Research comparable properties sold in the last six months, presenting arguments backed by data to justify a higher valuation. However, challenging a valuation is an uphill task and may not always yield a revision to the contract price. 
• At the end of the day Property Valuers are humans and they hate to be told they were wrong. This is why it is very important that you have a great team helping you acquire the property like your broker or property strategist.

Final Thoughts

Dealing with a low property valuation is undoubtedly challenging, but it’s not the end of the road. These strategies offer potential ways to mitigate the impact and close the valuation gap, allowing you to proceed with your home purchase more confidently.

Remember, preparation, sticking to your budget, and being informed about your options are key when encountering a low valuation. By approaching the situation strategically and seeking expert advice, you can navigate through this obstacle and move closer to securing your dream home.

Working with a property professional like Pina Brandi can help you make this whole process much easier.

Book a call now.