In this blog/video, we discuss what happens when the bank’s valuation came back short — now the deal’s at risk. What happens next? This scenario is more common than you think....

It is one of the most common (and confusing) curveballs in Queensland property. And if it’s not handled correctly, it can cost the buyer their deposit…or worse.

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Hi everybody - George Sourris, Empire Legal.

Today's topic: The lender’s valuation is short — now what?

The lender's valuation came back short, what do we do now? The contract's signed, the champagne's almost on ice, but then the buyer's broker calls with a curve ball. The valuation has come in short. It is a sentence that's derailed property deals, and it often happens after everyone thought the finance was sorted.

So what actually happens when the valuation comes in under the contract price? And more importantly, can the deal be saved? Let's break it down.

What is a short valuation?

A short or low valuation happens when a bank's independent valuer estimates the property is worth less than the agreed purchase price.

Let's say the buyer agrees to purchase a property for $750,000. The lender's valuer comes back with a valuation at $700,000. The bank is now only willing to lend based on $700,000, not $750,000. For a buyer seeking 80% Loan to Value Ratio (LVR), that means they'd expect a $600,000 loan, 80% of $750,000. The bank is now only going to offer $560,000, 80% of $700,000. That leaves $40,000 as a gap to be paid in cash. If the buyer doesn't have an extra $40,000, well the deal's at risk.

But they were pre-approved, George! Yes. And that's part of the confusion. Many buyers don't understand that pre-approval is not a guarantee of unconditional finance. It's more like a "maybe", subject to valuation, verification, and assessment of the specific property being purchased.

Banks can and do change their position based on property type. For example, small units, unusual layouts, properties in declining suburbs, low comparable sales in the area, recent changes to the buyer's employment or credit profile, or internal lending policies. We've seen this happen to first time buyers, seasoned investors, and everyone in between.

For those in Brisbane, they may recall about five years ago, somewhere around 2020, postcodes like Kangaroo Point, West End and Brisbane City had blackout restrictions for unit purchases, because there were too many units. Crazy saying that today in 2025 where there's nothing for sale anywhere and it's at crazy prices, but I digress, let's continue.

Can the buyer terminate the contract?

Only if the finance clause is still alive and properly used. Here's what the buyer needs to know. If they're still within the protection of a finance clause and they genuinely cannot secure finance due to the valuation or otherwise, and they notify the seller in writing before the deadline, then yes, they may be able to terminate validly, get their deposit monies back and go find another property that they can afford, or that stacks up better with a valuation.

But here's the trap - buyers will try to "wait it out" and risk missing the deadline. Others assume the broker will "sort it out" after the deadline and roll the dice on going unconditional. Some get advice from their broker or the selling agent instead of the solicitor representing them. Some buyers panic and make verbal agreements without formal notices.

If a buyer fails to notify the seller within the finance period, or if the clause was incorrectly completed, they may lose the right to terminate, lose their deposit, and be at risk of being sued for any losses that are suffered by the vendor.

What happens if the buyer can't settle?

If finance falls through and there's no valid termination, the buyer could be sued for breach of contract, forced to pay damages if the property resells for less, at risk of losing their entire deposit, which can be up to 10% of the purchase price.

So for the average property in Brisbane, we're talking $1,000,000, that's $100,000, sued by the seller for any losses suffered i.e. if the property is sold for less to the next buyer, the difference in price, and stuck in a legal mess that drags on for months and months and months.

And trust me, litigation is expensive. You don't want to do that. Not to mention all the stress involved.

Okay, so what options does the buyer have?

Here's what buyers may be able to do, depending on their circumstances and timing.

Terminate under finance. So this option is only possible if the clause is still within time and correctly used - the finance clause of course. Keep in mind, obviously the deal will be terminated and the matter will be at an end, and any deposit monies will be refunded.

Top up the cash gap. So if the buyer can raise those extra funds through savings, family support, or a loan, they can still proceed. Try a different lender or valuer.

A different lender equals a different valuer. No guarantees, but sometimes the property is valued higher elsewhere. Also, a different loan type. For example, a "low doc" loan for self-employed people, meaning higher rate of interest charge by the lender, but could be a good way around still allowing you to buy.

Negotiated price reduction. Not always easy, but some sellers will meet the buyer in the middle or thereabouts to avoid losing the deal entirely or request a finance extension. So if the buyer needs more time, they can request a written extension, but this must be agreed by the seller and documented properly.

Red flags to watch out for.

At Empire Legal, we've worked on thousands of contracts, literally, and we know when something feels off. There's common warning signs for finance issues. When the buyer suddenly stops responding to the agent or the lawyer, when the broker sounds vague about approval, timing, or paperwork issues, when multiple valuation appointments get rescheduled, or any mention of the bank is just being "cautious", usually a red flag in disguise.

Empire Legal's take - we've seen short valuations handled well, and we've seen them destroy deals, because of late notice, bad advice and assumptions made too early. Our job? To protect the buyer and the deal, with calm, fast, legally sound advice. If you're dealing with a valuation shortfall right now, don't panic, don't make assumptions, and definitely don't wait. Timing is everything. Need urgent advice on a finance clause or a short valuation issue?

Empire Legal is Queensland's trusted conveyancing brand for a reason. We know the rules, the traps, and how to keep deals alive. Get in touch. We can help. Guys, I hope this clears up the issue of valuations for you and that you know a bit more about them now. Some tricks you get around them, common pitfalls, et cetera.

Please share this with someone that may want to know, ideally, green buyers. If it's your first home or even your second, you may not really understand the intricacies of valuation. Learn about it. Take you a few minutes. It's free. Please share this with a friend, and thanks again. We'll see you next week.

That's it for this week, guys. Hope you learned something. Please share it with a friend. It's all free content. Empire Legal. Here to help. Over 12,000 deals successfully transacted, over 2,700 Google reviews, five star, average, most trusted name in Queensland conveyancing. Thank you all. See you next week.

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Thanks guys. We'll see you next week!

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Ladies and gentlemen, please keep in mind that all advice is general in nature and does not constitute legal advice. This is authorised by George Sourris, Empire Legal, Brisbane, Queensland, Australia.

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Note: all information is general in nature and as each matter is unique please contact our office for tailored advices: the above does not constitute legal advice.