What if my off-the-plan property values below the price?

You still have to pay the full contract price. A low valuation only changes how much your lender will lend, so the gap has to come from your own money, a different lender or a deal with the developer. If you can't settle, you can lose your deposit and be sued for the developer's losses.

Why do off-the-plan properties value low?

You agree the price when you sign, often years before the building is finished. Your lender values the property close to settlement, using recent sales of comparable completed properties. If the market has softened, many similar apartments are for sale at the same time, or the price included extras such as rebates or furniture packages, the valuation can come in below what you agreed to pay. Victorian law recognises the risk: every off-the-plan contract must carry a notice warning that the value of the lot may change between signing and becoming the registered owner.

Do I still have to pay the full price?

Yes. The price is fixed by the contract. The valuation is between you and your lender, not you and the developer. What changes is the loan. If you planned to borrow 80% of a $700,000 price and the property values at $640,000, 80% of the valuation is $48,000 less than you expected to borrow. That money has to be found before settlement.

What are my options?

• Question the valuation. Ask your lender or broker whether a review or second valuation is possible, and give them sales evidence that supports the price.
• Try another lender. Lenders use different valuers and policies. A broker can compare them, but leave time for a new approval.
• Borrow a higher percentage. Some lenders will lend more with lenders mortgage insurance, at a cost.
• Add your own money, or, if a family member is willing, their guarantee. They should get independent legal advice before they sign.
• Talk to the developer. A developer with several buyers in the same position may agree to a later settlement date, a price adjustment or a rebate. Any change should be put in writing and checked, because it can affect your loan and your stamp duty.
• Sell before settlement. Some contracts allow nomination or resale before settlement. See how to sell an off-the-plan property before settlement.

What happens if I can't settle?

If you don't settle on the due date, the developer can serve a default notice giving you time to fix it. If you still don't settle, the developer can end the contract. In Victoria, a vendor who rescinds an off-the-plan contract because of the buyer's default is immediately entitled to the deposit. The developer can then resell and claim its losses from you, such as a lower resale price, holding costs and legal fees, as well as interest the contract charges on late payment.

Deposits are capped in some states. In Victoria, an off-the-plan deposit can't be more than 10% of the price. In Queensland, an off-the-plan contract can let the seller keep a deposit of up to 20% of the price if the buyer's breach ends the contract.

What if I used a deposit bond?

A deposit bond is a promise by an issuer, usually an insurer, to pay the deposit if you don't. It lets you buy without tying up cash, but it doesn't reduce what you owe. If you default, the issuer pays the developer and then recovers that amount from you. Bonds also expire, so check that yours runs past the likely settlement date.

How to avoid a surprise

Check your borrowing position when you sign, not months later, and keep a buffer if you can. When the developer says completion is near, ask your lender to order the valuation straight away, and tell us if it's low. We can check what your contract says about extensions and nomination, deal with the developer's lawyers, and make sure you don't miss a deadline that makes things worse. For how lending works on these purchases, see how bank loans work for off-the-plan property, and for the steps to settlement, our settlement guide.