Quick answer
A property valuation is a qualified valuer's independent opinion of what a property would sell for on a given date, prepared for a specific purpose. In business lending, the lender orders the valuation from its own panel and relies on it to decide how much it will lend against the property. The figure sets the loan-to-value ratio, so a lower valuation directly reduces how much you can borrow.
Key points
- An independent valuer's opinion of market value on a set date
- Ordered by the lender from its panel, not by the borrower
- Usually more cautious than a real estate agent's appraisal
- Different from a council or Valuer General land value
Every property-secured business loan comes down to one number that neither you nor the lender chooses: the value in the valuer’s report. Your own estimate, the agent’s appraisal and the price paid five years ago are all background. The lender lends against the valuation.
Who does a property valuation, and for whom?
A lending valuation is prepared by a professional valuer, usually a Certified Practising Valuer accredited by the Australian Property Institute. The API notes that no national law requires its certification, though some states do require valuers to be registered. In practice, lenders only accept reports from valuers on their own approved panel, carrying professional indemnity insurance.
The lender orders the report, and it’s addressed to the lender. That detail matters: the lender relies on the valuer’s opinion, and the valuer is answerable to the lender if it proves careless. It’s why a report you commissioned privately rarely substitutes for the lender’s own, even if it’s recent.
The types you’ll come across
| Type | How it’s done | Typically used for |
|---|---|---|
| Full valuation | Inspection inside and out, measured, with comparable sales | Larger loans, unusual or commercial property |
| Kerbside valuation | Viewed from the street plus data | Standard homes, moderate loans |
| Desktop valuation | Data and sales records, no visit | Fast, lower-risk lending |
Commercial property adds another layer. Valuers look at the lease, the tenant’s strength, the years left on the lease and the income the building produces, not just recent sales of similar buildings. A vacant shop and the same shop leased to a national tenant for ten years can value very differently. Our guide to how lenders value commercial property explains the method.
Not the same as a land value or an agent’s appraisal
Three figures get mixed up all the time:
- Agent’s appraisal: a sales estimate, often optimistic, to win a listing.
- Valuer General land value: in NSW, for example, the land only, excluding buildings, set as at 1 July for council rates and land tax.
- Lending valuation: an independent market value of land and buildings, for the lender’s use.
Only the third decides your borrowing.
Example: a Perth shop-top property
A Perth florist owns a mixed-use building in Victoria Park: shop downstairs, a flat upstairs. A local agent suggests it would sell for around $1.1m. The owner wants $180k to refit the shop and clear a supplier debt, and already owes $520k.
The lender’s panel valuer inspects and reports $960k, citing few recent mixed-use sales nearby and the flat’s dated kitchen. The lender’s limit is 70% of value for this property type, so total lending can reach $672k. With $520k already owing, that leaves $152k, not the $250k the owner assumed from the agent’s figure. The owner trims the refit to fit the room available, while a lender with a higher limit for mixed-use security could have covered the full $180k. You can test scenarios like this in our LVR calculator.
Not sure what your property might support? Share a few details with us and we’ll suggest where to start.
Getting a fair valuation
Have the property clean and accessible, and give the valuer a short list of improvements with dates and costs, plus any lease documents for commercial property. If you know of recent nearby sales that support your view, provide them upfront rather than after the report comes in. More on this in how to prepare for a valuation, and see valuation fee for the costs.
Holding property and need to fund the business?
When your bank values the property generously and offers the loan, that’s often the cheapest money you’ll find. If the figure or the answer disappoints, other lenders work with different valuer panels and different lending limits for each property type. Our form asks about the property and the amount you’re after, and it’s done in about a minute. Your credit file is left alone, and the enquiry never gets broadcast to a crowd of funders. A specialist goes through it personally and phones you. Give us the honest value range and loan balance so the lender we suggest can stand behind its offer once the valuer has been.
Frequently asked questions
Can I use a valuation I already paid for?
Usually not. Lenders need a report addressed to them, from a valuer on their panel, so they can rely on it legally. A report you commissioned yourself can still be useful as background, and some lenders will ask the valuer to readdress it.
Why did my valuation come in lower than the agent's appraisal?
An agent's appraisal estimates what a buyer might pay in a good campaign. A lending valuation is an independent opinion built on comparable sales, and the valuer carries professional liability if the figure is too high. Lower figures are common, especially for unusual properties.
Who pays for a property valuation?
The borrower usually does, either upfront or out of the loan, even though the lender orders it. Costs vary with the property type and type of report; commercial reports generally cost more than residential ones.
Can I challenge a low valuation?
You can ask the lender to have the valuer review it, supplying recent comparable sales or details of improvements the valuer may have missed. Outcomes vary, and some lenders will order a second opinion while others won't.
Is the council's land value the same as a property valuation?
No. State Valuer General land values cover the land only, ignore buildings and are set at a fixed date for rates and land tax. Lenders don't use them to decide how much to lend.