How To Challenge The Valuation | Is It Worth The Time And Effort?

When working out how much the bank will lend you, lenders hire a certified practising valuer (CPV) to determine the market value.

Unfortunately, each valuer takes a slightly different approach so a property valuation can come in lower than the vendor’s asking price. Is it possible to challenge the valuation?

What are the chances of successfully disputing the valuation?

Did you know that challenging a valuation has less than a 5% success rate? That’s according to Valuation Exchange (ValEx), one of Australia’s leading property valuers.

In most cases, it’s best to order a valuation from another lender:

  • We’re able to get free upfront valuations with over 11 lenders and with other lenders on a case-by-case basis.
  • We’ll then choose the lender that comes back with the highest valuation.
  • In this way, you’re not adding unnecessary credit enquiries to your credit file by applying for multiple loans, trying to shop around for a more favourable property valuation.

Call us on 1300 889 743 or enquire online and one of our mortgage brokers can request a valuation from a different lender.

How do I challenge the valuation?

Is it possible that the valuer may have missed something that will increase the property value?

Several banks have their own process for challenging a valuation. Others don’t.

No matter what, your chance at success comes down to the additional information and documents that you can provide and how you present your case to the bank.

Check out our handy ‘How to value a property’ guide and get some insight into thought processes of a property valuer.

Check the valuation report

Find out why the valuation was low!

The main reason valuations come back low is due to the valuer not finding enough (or any comparable sales to support the vendor’s asking price.

Valuers are only human so there might also be errors in the final report.

Common mistakes include incorrect land size, miscounting the number of bedrooms, or not taking into account improvements, all of which can lower the valuation.

The common reason for these discrepancies is due to desktop valuations or kerbside valuations, which is where the valuer simply drives by to confirm that there is in fact a property on the block of land.

They don’t physically enter the property!

The valuers’ personal opinion can also affect how they value a property.

Using our own data, we found that the average difference between the valuations of two different banks is approximately 9%.

For a $600,000 property, that’s about a $50,000 difference between valuer 1 and valuer 2!

In some cases that we’ve seen, the difference can be upwards of $200,000!

Gather reports and data from other sources

We can provide you with a free suburb report from CoreLogic (formerly RPData) which will give you a high-level insight into the local market.

If the valuer has been significantly unreasonable in their final valuation, we can help you use this as evidence in the property valuation dispute.

Local real estate agents can be a good source of information too as they know the local area better than anyone.

Be careful! Real estate agents are salesman and will base the asking price on their own “property appraisal”.

A property appraisal isn’t the same as a property valuation

Real estate agents are not CPV-certified valuers and not members of the Australian Property Institute (API).

Their property appraisals are estimates only and some agent may even be deceptive in the way that the property is marketed in order bump up the price.

For example, the advertised price may be based on the property having four bedrooms when, in fact, the property has 3 bedrooms and an entertainment or theatre room.

The theatre room may not have all of the functionality and the right dimensions to be used as a bedroom.

The key is to question this and use recent comparable sales to show that the asking price is too high.

Find comparable sales

Collect the last 3-6 months sales of comparable properties from surrounding suburbs if you found that the valuer wasn’t thorough enough for the location you’re looking to purchase in.

The golden rule is to provide at least three comparable sales.

It may be clear at that stage that, based on comparable sales, that the valuer was too conservative.

Collate all the documents and present a case to the bank

After all the documents have been arranged and collated, submit all of it in one go to the bank, or the valuer.

As your mortgage broker, we can help you dispute a valuation if we think it’s reasonable to do so.

Avoid the headache and call us on 1300 889 843 or fill in our online enquiry form to discover how we can help you challenge the valuation.

The benefits of challenging a bank valuation

If there’s less than a 5% chance of successfully challenging the valuation, why bother to challenge it at all?

  • You’ll be more sure of how much the bank is willing to lend.
  • The valuer may come back with a higher valuation once they study all the documents and evidence that you have shared with them.
  • If the challenge isn’t accepted, you can always try to re-negotiate with the seller.

Don’t challenge the valuation alone! We can work with the bank or the valuer on your behalf.

The drawbacks of trying to challenging a valuation

It takes time and effort that could be better spent on speaking with a mortgage broker who can help you choose a lender that will come back with a better property valuation.

Are you better off trying to negotiate with the vendor?

If the valuation comes in short, explain this to the vendor (the seller of the property) and use the opportunity to renegotiate on the price.

If they know you’re a serious buyer and it was just the valuation that stopped you from getting approved, they’re likely to work with you if there’s only a slight difference in their asking price.

Challenging a valuation when building a home

Having purchased land in Bosley Park a month ago, Bill and Jill were excited to finally start building their family home.

They went to their bank and applied for a construction loan which required their lender to order another land valuation.

Initially, their land was valued at $410,000 but this latest valuation put the price at $395,000, meaning that the couple would have to come up with extra funds to qualify for the construction loan.

The couple simply didn’t have the extra funds so they spoke with one of our mortgage brokers who found that two different companies had done the valuation. The broker was adamant that there was no way the price had fallen that much in just a month’s time.

The broker checked recent comparable sales for the area and found the suburb’s property market was growing so he felt he had a good case to challenge the bank’s latest valuation.

He collated the comparable sales report of that particular suburb, previous and new valuation reports, and even involved the bank’s relationship manager. The strong ties with the relationship manager made all of the difference.

The valuer checked all of the documents and agreed that the price of the land was no less than $410,000 based on the strong evidence provided.

Bill and Jill were approved for their construction loan and did not have to come up with extra funds.

Is it worth paying more for a property with potential?

The risk in challenging the valuation or trying to work with the vendor is that you may end up getting gazumped by other buyers waiting in the wings who has the funds to buy at the asking price.

Yes, that’s right, the real estate agent might have actually been telling the truth when they were pressuring you to buy!

If you really want the property, whether it’s your dream home or you see the investment potential, you have to weigh this up.

If you’re unable to come up with a larger deposit, you may want to ask your parents if they can gift you the deposit or whether they can act as guarantors on your home loan.

Not happy with the property valuation?

We have strong relationships with the almost 40 lenders on our panel.

We may be able to order you a free upfront valuation with one of them or at least help you make an informed decision on what to do next.

Call us on 1300 889 743 or fill in our free online assessment form to speak with one of our experienced mortgage brokers today.

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