Private Loan Valuations: Why the Lender's Valuer Often Comes In Lower

In short: A private loan valuation is done for the lender, by a valuer on its panel, asking what the property would realistically fetch if the lender had to sell it within months. That is a narrower question than what an agent thinks a patient seller might get, so the figure is often lower. You can supply evidence, ask for a review, try another lender or accept a lower LVR, but you cannot instruct the lender's valuer.

Key takeaways

The valuer works for the lender, and the report answers the lender's question: what would this property realistically sell for if things went wrong?
Agent appraisals, purchase prices and online estimates are not valuations, and lenders do not lend against them.
Private loans are short, so the valuer pays close attention to how readily the property would sell in the next few months.
A valuation $200,000 below your estimate, at a 65% LVR, cuts the loan by $130,000.
Specialised property, such as childcare centres, hotels, service stations, rural holdings and vacant land, is valued on the bricks and mortar, not the business inside.
Give the valuer evidence before the inspection: recent settled sales, leases, planning approvals and completed works.

Who does the lender's valuer work for?

The lender. It instructs the valuer, usually from its own panel, and the report is addressed to it, even though you normally pay for it. The valuer owes the lender a duty of care, because the lender is relying on the figure to decide how much to lend. You usually cannot choose the valuer, instruct them, or rely on the report yourself.

That independence is deliberate. APRA's prudential practice guide for banks, APG 223 on residential mortgage lending (current version dated 19 June 2025), says valuer selection would be conducted by the lender's risk management area rather than sales staff, and treats pressure on valuers to over-value as poor practice. APRA supervises banks and other ADIs, not private lenders, but private lenders follow the same commercial logic for a simpler reason: their own money is at stake, often with a thinner margin for error than a bank's.

What kinds of value are there, and which does the lender use?

Figure	Who produces it	What it answers	Used for lending?
Agent appraisal	A selling agent	A price range for a patient sale, often pitched to win the listing	No
Contract price	A buyer and a seller	What one buyer agreed to pay	As a reference; many lenders lend on the lower of price and valuation
Online estimate	An automated valuation model	A statistical estimate from sales data	Some banks, for low-risk residential loans; rarely private lenders
Market value	A registered or certified valuer	The price between a willing buyer and seller after proper marketing	Yes: the basis of the loan
Short-term sale commentary	The same valuer, if asked	What the property might fetch with a short marketing period	Informs the LVR offered
Statutory land value	The state Valuer General	Land value for land tax and rates	No

The last row confuses people. Revenue NSW explains that it uses unimproved land values provided by the NSW Valuer General to calculate land tax, and Queensland's Revenue Office assesses land tax on the taxable value of land you own. Those are statutory figures for tax, not the market value of your property. For how online estimates perform, see how accurate automated valuation models are.

Why does the private lender's figure come in lower?

The lender is thinking about a sale it might have to run. A valuation reports market value, but a private lender reads it with one question in mind: if this loan defaults, what will a mortgagee in possession realise, after costs, within a reasonable period? Many ask the valuer for marketing period and saleability commentary, and some ask for a short-term sale figure as well.
The horizon is short. A 6 to 12 month loan leaves no time to wait for a market to recover. Valuers do not build in growth, and in a soft market they lean on the most recent evidence.
Comparables are settled sales, not listings. Asking prices, sales still under contract and off-market whispers carry little weight. Sales are adjusted for differences in size, condition, location and tenancy, and older sales in a falling market are adjusted down.
Condition and unfinished work. The property is valued as it stands. A half-finished renovation can be worth less than before it started.
Potential is not value until a development approval exists. Development upside is generally valued only once it is granted, and even then on a cautious basis.
Valuers carry liability. A valuer who over-values and causes a lender's loss can be sued, so the incentives point towards caution.

Worked example: what a lower valuation does to the loan

For illustration, a business owner needs $1,300,000 secured on a commercial property an agent has appraised at $2,000,000. The private lender's maximum is an indicative 65% LVR, and its valuer reports $1,800,000.

	Owner's expectation	After the valuation
Value used	$2,000,000	$1,800,000
Maximum loan at 65%	$1,300,000	$1,170,000
Shortfall against $1,300,000	Nil	$130,000
LVR the full $1,300,000 would need	65.0%	72.2%

The options all cost something. A lender that allows 70% on the same $1,800,000 would lend $1,260,000, still $40,000 short. Adding an unencumbered second property worth $500,000 as extra security takes total security to $2,300,000, and 65% of that is $1,495,000, comfortably above the need, at the price of putting a second property at risk. Or the borrower restructures: a larger contribution, vendor finance on a purchase, or a smaller loan. Test the combinations with the commercial LVR and security calculator, and see LVR and equity calculations for the arithmetic.

Why is specialised property valued so conservatively?

Some properties are worth what they are worth because of the business inside them: childcare centres, hotels and pubs, service stations, medical centres, function venues, farms. If that business fails, the property has to be sold to a narrower group of buyers, often with the business already damaged. Valuers and lenders therefore separate the bricks and mortar from the going concern.

A business is valued on things a property valuer does not count. business.gov.au's guide to how to value a business describes approaches based on return on investment, asset values including goodwill, and future profit. A lender secured on the property alone can only sell the property, so goodwill rarely appears in its figure. Expect lower LVR caps as well (indicative, and varying widely by lender), and expect some private lenders not to lend on certain property types at all.

Thin markets have the same effect: vacant land, large rural holdings, regional commercial property, units in small strata schemes and mixed-use buildings can all take longer to sell, which a short-term lender prices into the figure it relies on.

How do banks, non-banks and private lenders differ on valuations?

Lender type	Typical approach (indicative)	Effect on you
Banks	Panel valuations; for low-risk residential loans sometimes desktop, kerbside or automated assessments, which APG 223 accepts in the right context	Less valuation risk on standard homes; stricter on specialised property
Non-bank lenders	Panel valuations, usually full inspections	Similar figures to banks, with policies that may accept more property types
Private lenders	Full valuations with saleability commentary; lower LVR caps; "as is" values only	Lower usable value, but a decision based mainly on the property and the exit

The figure and the LVR work together. A lender with a cautious valuer and a 70% cap may lend more than one with a generous valuer and a 60% cap, so compare the loan amount offered, not the valuation alone. For the wider cost trade-off, see what private lending actually costs.

What can you do when the valuation comes in low?

Prepare before the inspection. Give the lender a pack for the valuer: recent settled sales you think are comparable, leases and rent, development or building approvals, a list of works completed with costs, and strata or zoning information.
Arrange access and be there. Point out what is not obvious, such as new services, recent repairs or a lease renewal.
Ask for a review only on evidence. A factual error or a missed settled sale is a reason; disagreeing with the number is not.
Try another lender. Panels and LVR policies differ, but each valuation costs money and time, and if two valuers land in the same range, that range is probably the market.
Accept a lower LVR and reduce the loan, or add security from another property.
Restructure the deal, for example with a larger contribution or vendor finance.

Common mistakes

Building the plan on an agent's appraisal.
Paying for valuations with several lenders at once before knowing their LVR policies.
Expecting development potential to count before a development approval is granted.
Arguing with the valuer instead of supplying evidence.

When you know the realistic value and the loan you need, post one private loan request on ADS with the property details and evidence, and 200+ verified lenders and brokers can ask about it.

Frequently asked questions

Why is my private loan valuation lower than the agent's appraisal?

An agent's appraisal estimates what a patient seller might achieve and is often pitched to win the listing. The lender's valuer reports market value from settled comparable sales, as the property stands, for a lender that may need to sell within months. Different questions produce different numbers, and only the valuation is used to set the loan.

Can I use my own valuation for a private loan?

Usually not for the lending decision. The lender needs a valuation addressed to it, from a valuer on its panel, so that the valuer owes it a duty of care. Your own valuation can still help as evidence: give it to the lender and ask that its valuer consider the comparable sales it relies on.

Can I challenge a low valuation?

You can ask the lender for a review if there is a factual error or relevant settled sales the valuer missed. Put the evidence in writing. A review is unlikely to succeed on opinion alone, and the lender decides whether to ask the valuer to reconsider. If the lender will not move, another lender with a different panel or LVR policy is the alternative.

What is the difference between market value and forced-sale value?

Market value assumes a willing buyer and seller and proper marketing. A forced-sale or short-term sale figure assumes the property must be sold within a short period, often by a lender after default, and is usually lower. Some private lenders ask valuers for both and set their LVR with the lower figure in mind.

Do private lenders use desktop valuations?

Some do for small or low-risk loans, but private lenders more often want a full inspection, because they rely more on the property and less on your income. APRA's guidance for banks accepts desktop and kerbside assessments and automated valuations in the right context, while describing a full on-site valuation as good practice.

Will another lender value my property higher?

Possibly. Panels, instructions and LVR policies differ, so a second lender may reach a different figure or lend a higher percentage of a similar one. But each valuation costs money and time, so ask about LVR policy and valuation basis before paying for another report.

Sources

APG 223 Residential Mortgage Lending (prudential practice guide) — Australian Prudential Regulation Authority
How land tax is calculated — Revenue NSW
Land tax — Queensland Revenue Office
Value your business — business.gov.au

Information current as at 24 October 2026.

General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.

Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.