Valuation Risk at Settlement: What It Is and How to Plan Around It
Of all the risks in an off-the-plan purchase, valuation risk at settlement is the one buyers most often discover too late. It deserves its own discussion, because it is manageable, but only if you plan for it from day one.
What valuation risk is
When you buy off-the-plan, you agree on a price today and settle when the property is complete, often years later. Your lender does not value the property when you sign. It values the property close to settlement. If that valuation comes in below your contract price, the bank lends against the lower figure, and the difference comes from you.
A worked example of the mechanics
Suppose you contract at a given price intending to borrow 80 percent. If the settlement valuation lands 5 percent below your contract price, your loan is now 80 percent of the lower figure, and your required cash contribution grows by the gap. The purchase can still proceed, but only if you have the buffer to bridge it.
Why valuations can come in low
- Market movement. The broader market may have softened between exchange and completion.
- Local oversupply. A cluster of similar new stock settling at once can weigh on comparable sales.
- Valuer conservatism. Valuers rely on settled comparable sales, which can lag the prices being achieved in new releases.
- Paying above fair value at contract. The most controllable factor of all, and the reason independent price assessment before signing matters so much.
How experienced buyers plan around it
The strategies are not complicated, they are simply done early. Buy at a defensible price supported by comparable evidence. Hold a cash buffer beyond your minimum deposit. Keep your borrowing capacity stable through the build by avoiding new debts and major changes. Engage your broker well before settlement so a valuation shortfall is identified with time to respond, whether through a different lender, additional funds or other structures.
Valuations can also come in at or above contract price, particularly when a project was bought well early in its release and the market has strengthened. Valuation risk is two-sided. Planning simply means being ready for the unfavourable side.
Where Nobilis fits
Price assessment is central to our due diligence. We look at comparable sales and the supply pipeline before you sign, and we coordinate with your broker through the build so settlement arrives as a managed milestone rather than a surprise.
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Book a Free ConsultationThis article is general information only and is current as at May 2026. It does not take account of your personal circumstances and is not financial, legal, taxation or investment advice. Rules, thresholds and concessions change and may not apply to your situation. Please confirm your position with the State Revenue Office Victoria, a qualified conveyancer or solicitor, and your accountant or financial adviser before making any decision.