Quick answer
For a quick property-backed business loan, the lender orders a valuation to confirm what the property is worth. Smaller loans on standard houses often use a desktop valuation from sales data, which can come back the same day. Larger loans, commercial property and unusual properties usually need a kerbside or full inspection. Valuers look at comparable sales, property type, condition, location and, for commercial property, leases and income.
Key points
- Desktop valuations are quickest and suit standard properties.
- Commercial and unusual properties usually need a full inspection.
- Lender valuations are often more conservative than agent appraisals.
- Recent comparable sales are the most useful thing you can provide.
In property-backed lending, the valuation is the number everything else hangs on. It decides how much equity you have, what share of the property’s value you can borrow against and, sometimes, whether the loan goes ahead at all. It’s also one of the main things that decides whether a quick loan stays quick. Understanding what valuers look for, and which type of valuation your loan will need, takes a lot of the uncertainty out of the process.
The three types of valuation
| Type | How it’s done | Typical turnaround | Usually used for |
|---|---|---|---|
| Desktop | From sales data, property records and sometimes photos, no visit | Same day | Smaller loans on standard houses and units |
| Kerbside | Valuer views the outside of the property and the street | One to three days | Mid-sized loans, some regional property |
| Full | Valuer inspects inside and out, takes measurements and photos | A few days to a week or more | Larger loans, commercial, rural or unusual property |
Which one a lender orders depends on the loan size, the property type, the loan-to-value ratio and the lender’s own policy. A lender may start with a desktop valuation and upgrade to a full one if the result is uncertain.
What every valuer looks at
Comparable sales. The single biggest factor. Valuers look for recent sales of similar properties nearby: same type, similar size, similar condition. The fewer good comparisons there are, the more cautious the valuation tends to be.
Property type and size. Land area, building size, bedrooms and bathrooms for houses; floor area and configuration for commercial.
Condition. Obvious repairs needed, the age of the kitchen and bathrooms, structural issues or unfinished work. Desktop valuations can’t see inside, so they may assume average condition.
Location. Street, suburb, proximity to services and transport, and anything that might put buyers off, such as a main road or a flood overlay.
Title and zoning. What the property can be used for, any easements, and whether it’s strata titled.
What commercial valuers add
Commercial property is valued partly on income. Our page on commercial property loans covers this in more detail, but the main additions are:
- The lease. Who the tenant is, how long the lease runs, the rent and any options to renew.
- Market rent. Whether the current rent is in line with what similar properties attract. Above-market rent may not be counted in full.
- Vacancy risk. How easily the property could be re-let if the tenant left.
- Capitalisation rates. The yield investors expect for that type of property in that market, which converts rent into a value.
Owner-occupied premises are often valued as if they were leased at market rent, plus a comparison with sales.
Agent appraisal versus lender valuation
Owners are often surprised when a lender’s valuation comes in below what an agent said the property was worth. That’s normal. An agent’s appraisal estimates what a buyer might pay in a well-run sales campaign, and agents have an incentive to be optimistic. A lender’s valuer estimates what the property could reliably sell for, sometimes on a shorter timeline, and is accountable to the lender if they get it wrong. A gap of five to ten percent isn’t unusual.
When you’re estimating your equity, using a conservative figure saves disappointment later. The property equity checker lets you try a few different values to see how sensitive your borrowing is to the valuation.
How to help the valuation along
- Give accurate details at the start. Land size, building size, number of rooms, recent renovations. A desktop valuer working from out-of-date records may miss improvements.
- Share recent comparable sales you know of, particularly if your property is unusual or the area has few sales.
- Mention renovations and their cost, with invoices if you have them.
- Make access easy if an inspection is needed: give the valuer a contact who’ll answer the phone and be available at short notice.
- Fix small, obvious problems if there’s time, such as broken windows or an overgrown yard. First impressions matter even to valuers.
- Provide lease documents for commercial property straight away.
Why valuations slow quick loans down
When a quick property loan stalls, the valuation is often involved. Common reasons:
- The lender wanted a desktop valuation but the property didn’t suit one, so it was upgraded to a full inspection.
- The valuer couldn’t reach anyone to arrange access.
- The result came in lower than expected and the loan had to be restructured.
- The property was unusual and the valuer needed more time to find comparisons.
Raising potential issues at the start, such as an unusual property, a recent renovation or a regional location, lets us pick a lender whose valuation approach suits it and set realistic expectations on timing.
An illustrative example
An Albury earthmoving business wants $160,000 against the owner’s home to buy a used excavator. The agent’s appraisal last year was $780,000, and the owner has $390,000 owing. A desktop valuation comes back at $720,000, lower because the records don’t show a recent extension. The owner sends the builder’s final invoice and photos, the lender orders a kerbside valuation, and it returns at $760,000 two days later. The loan proceeds at the requested amount. Illustrative only.
Strata, rural and specialised property
Units and townhouses are valued with an eye on the building as a whole: the strata levies, any special levies for major works, and the size of the unit. Very small units can be harder to lend against. Rural property is valued on land, improvements and productive use, and lenders often lend a smaller share of its value. Specialised property, such as a service station or a childcare centre, may be valued partly on the business it supports.
What a valuation costs
The cost depends on the type of valuation and the property. Desktop valuations are the cheapest; full commercial valuations cost the most. You’ll usually pay it whether or not the loan goes ahead, so ask what it will be before it’s ordered, and make sure the lender is a realistic fit first.
When the number comes in low
If the valuation is lower than you need, you have options:
- Borrow less and cover the rest another way.
- Add security, such as a second property.
- Ask for a review with better comparable sales, if you believe the valuer missed something.
- Try a different structure, such as an unsecured loan for part of the amount.
- Try another lender whose valuation approach or lending limits suit the property better.
Get the numbers right from the start
Tell us about the property, any recent work on it, what’s owed and what you need. We don’t run a credit check when you enquire, your file stays with one person instead of going to a list of lenders, and that person will call you to set realistic expectations about the valuation and timing. Accurate property details at the start are the best way to keep a quick loan quick. Start your enquiry.
Frequently asked questions
Why is the lender's valuation lower than the agent's appraisal?
Agents estimate what a property might sell for in a good campaign. Lender valuers estimate what it could reliably sell for, often in a shorter time, so they tend to be more conservative.
Can I use my own valuation?
Usually not for the loan itself. Lenders order valuations from their own panel so the report is addressed to them. Your own valuation can still be useful context.
Who pays for the valuation?
Usually the borrower, either up front or deducted at settlement. Ask about the cost before it's ordered.
What if the valuation comes in low?
You might borrow less, add another property as security, provide better comparable sales for review, or try a lender with a different valuation approach.