A commercial property’s agreed price and its lender valuation can be different. If your finance plans rely on the purchase price, a lower valuation may leave you needing more cash.
A $70,000 difference
Imagine buying for $1 million and expecting a loan at 70% of that price:
- Expected loan: $700,000; your contribution: $300,000, plus purchase costs.
- Lender valuation: $900,000. At the same 70% ratio, the loan supported by that security is $630,000.
Your contribution would rise to $370,000, plus costs. The $70,000 gap could affect working capital or other plans. The 70% ratio is illustrative, not a promise of available finance.
What sits behind a valuation?
Commercial valuations generally involve a detailed assessment. The report may examine the building’s condition, maintenance needs, zoning and potential uses, alongside location, comparable sales and market conditions. Rental income, occupancy and the outlook for future income can also matter.
The lender uses the valuation to understand its security and assess the proposed loan against its credit policies, including the loan-to-value ratio (LVR), which expresses the loan amount as a percentage of the property's value.
As a rule, the lender instructs the valuer; however, it's typically the borrower who pays for the valuation. Commercial valuations are generally more expensive than residential valuations, with the cost depending on the complexity of the property and the work required. This cost is worth allowing for when planning the transaction. A detailed report helps explain how the property’s been assessed; it does not itself guarantee finance approval.
Questions to ask before committing
- What LVR might apply to this property?
- What if the valuation is lower than the agreed price?
- Could you fund a shortfall without disrupting your business or your life?
- Would another lender or a revised purchase plan be appropriate?
Explore these questions while you still have options. A lower valuation may mean revisiting the finance structure, your contribution or the purchase itself.
Read the original LinkedIn newsletter: When the Valuation Changes the Numbers — Leanne Watson, 13 October 2026.
Read Leanne's detailed guide: Understanding Commercial Property Valuations.
General information only. Consider your circumstances and seek appropriate advice before making a finance or property decision.
About the Author
Leanne Watson | Your Finance Angel, Mortgage Broker and Finance Strategist, helping property investors and business owners make lending decisions with their future plans in mind.
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