A couple with pre-approval for $720,000 sign a contract on a Brisbane townhouse at $800,000 with a 10 per cent deposit. The pre-approval was issued in August. The contract is exchanged in November, with finance due in fourteen days and settlement in thirty. The valuation ordered by the lender comes back at $775,000.
Cotality’s November Housing Chart Pack puts capital-city values 8.1 per cent below their peak of seven months ago, the fastest comparable fall in at least forty years. That is the one line of context the file needs; everything after it is assessment.
The scenario
The buyers have $80,000 in savings for the deposit, plus about $30,000 set aside for duty and costs. At $800,000 the loan is $720,000, which is 90 per cent of the price. Lenders mortgage insurance applies above 80 per cent, and the pre-approval allowed for it: roughly $17,000, capitalised onto the loan.
The lender lends against the lower of the price and the valuation. At a valuation of $775,000, a $720,000 loan is 92.9 per cent of value, not 90. Most lenders’ LMI pricing steps up sharply between 90 and 95 per cent, and several lenders will not lend above 90 per cent at all on a purchase. The pre-approval said yes to a 90 per cent loan; the file in front of the assessor is now a 93 per cent loan.
The outcome
Three things were open to the buyers, and the order matters.
The first was the contract itself. The sale was by private treaty with a finance clause, so the shortfall was a basis for going back to the agent. Vendors in a market where sales volumes are down 11 per cent on a year ago, by Cotality’s count, are more often prepared to talk than they were in March. The price was renegotiated to $785,000.
The second was the lender. At $785,000 the loan needed to hold the deposit at 10 per cent is $706,500, which is 91.2 per cent of the $775,000 valuation, still above the 90 per cent line. Another $10,000 of deposit, found from the buyers’ cost fund, brought the loan to $696,500, 89.9 per cent of value, back inside the pre-approval’s terms and inside the lender’s lower LMI band. The LMI premium came in close to the original estimate rather than about $8,000 higher.
The third, which they did not need, was a second valuation or a different lender. Valuers draw on recent comparable sales, and in a falling market the most recent sales are the lowest. A different lender’s valuer can read the same evidence differently, by a per cent or two, and sometimes that is enough. It is slower, and it is a last resort rather than a first move.
Settlement happened on the contract date with the loan at $696,500 on a property valued at $775,000 and bought for $785,000.
What mattered
The gap between contract and valuation was $25,000. What turned it from a problem into an adjustment was the deposit buffer. The renegotiation absorbed $15,000 of the gap; the other $10,000 came out of a cost fund that had been set up with room in it. A buyer at exactly 10 per cent with nothing in reserve would have had the same valuation and a different outcome.
The pre-approval’s date mattered too. Three months is long enough for a market to move 3 or 4 per cent, and a pre-approval is a lender’s view of the borrower, not of the property. Nothing in it anticipates the valuation.
And the finance clause mattered. At auction, with no finance condition, the same valuation leaves a buyer finding $25,000 or walking away from the deposit.
The same arithmetic on a refinance
An owner who bought in early 2026 at $900,000 with a 15 per cent deposit holds a loan of about $760,000. If the property is now valued 8 per cent lower, at $828,000, the loan is about 92 per cent of value. A refinance at that ratio means paying LMI again to a new lender, which in most cases removes the saving a lower rate would bring. The sensible move is a repricing request to the existing lender, which needs no valuation, rather than a refinance, which does. The refinance calculator shows where the break-even sits once LMI is in the figures, and the home equity calculator shows what a lower valuation does to usable equity.
Understanding
A valuation is the number the loan is sized against, and in a falling market it is the number most likely to differ from the price. What is open to a buyer when it does depends on things settled before the contract: the size of the deposit buffer, the age of the pre-approval, and whether there is a finance clause at all. Understanding that before signing is what makes a $25,000 shortfall an adjustment rather than a crisis.