Property Purchase
Risks When Buying Property
6 min read- Risk Guide
- Updated 2026
Quick answer
Major buyer risk often starts above
80% LVR
Higher leverage leaves less room for valuation gaps and extra costs
- Hidden defects Can be costly
- Auction contracts No cooling off
- Low valuations Cash shortfall risk
- Flood and strata issues Must be checked early
1300 421 044
1300 421 044
Detailed explanation
Property risk is not limited to whether you can get a loan. A buyer can be exposed to legal, physical and financial risks before settlement and long after settlement. That can include paying more than market value, inheriting unapproved building work, taking on major strata repair costs, buying in a flood affected area, or finding that the home loan approval does not fully cover the agreed purchase price.
Key risk areas buyers should assess
Finance risk
Approval may be delayed, limited or declined if the borrower or property does not fit lender policy
Valuation risk
If the lender values the property below the contract price, the buyer may need extra cash
Building risk
Defects, pests, structural issues and poor renovations can create immediate repair costs
Location risk
Flooding, bushfire exposure, noise, oversupply or poor resale demand can affect value and insurability
Strata and compliance risk
Apartment buyers may inherit special levies, defect disputes, cladding concerns or by law restrictions
Holding cost risk
Rates, insurance, body corporate, repairs and interest rate changes can stretch the budget after purchase
How leverage increases
buyer risk
-
A lower deposit means less buffer if the bank valuation is short
-
Higher LVR usually means tighter lender scrutiny and possible LMI
-
Extra buying costs can reduce the real cash left for the deposit
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Less equity at the start can make resale or refinance harder if the market softens
-
Borrowers with small buffers are more exposed to rate rises and unexpected repairs
Where due diligence usually matters most
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Review the contract before signing, especially special conditions and settlement dates
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Check flood, planning and zoning information for the site
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Arrange building and pest inspections where the purchase method allows it
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Understand strata records, sinking fund position and any defect history for apartments
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Confirm the lender is comfortable with both the borrower and the property type
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Budget for costs after settlement, not only the purchase price and deposit
Risk zones by deposit position
-
Below 80% LVR More equity buffer if values move or costs rise
Lower risk -
80–90% LVR Less room for valuation gaps and added purchase costs
Moderate risk -
Above 90% LVR Very limited buffer if the deal changes or the bank values low
Higher risk
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How risk usually shows up in the buying process
Many property risks appear at specific points in the transaction rather than all at once:
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01. Before offer or auction, the buyer sets a budget but may underestimate total costs
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02. At contract stage, risky clauses, tight dates or no finance conditions can lock the buyer in
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03. During due diligence, inspections can reveal defects, pests or approval problems
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04. During lender assessment, a lower valuation can create a funding gap
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05. Before settlement, insurance, rates, strata fees and moving costs may be higher than expected
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06. After settlement, hidden maintenance and repair items can surface quickly
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07. In strata property, special levies or defect litigation can emerge after purchase
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08. If the market softens, a highly leveraged buyer can have less flexibility to refinance or sell
Common Problems
Property risk is manageable when it is identified early. Buyers run into trouble when they assume the contract, the building and the finance will all work out automatically.
Bank valuation comes in low
The lender may decide the property is worth less than the agreed contract price, leaving a cash shortfall.
Possible solutions include:
- Increase the deposit if funds are available
- Use equity from another property
- Renegotiate the purchase price where possible
- Choose a lender that better suits the security type
Building or strata surprises
Defects, combustible cladding, water ingress, by law restrictions or weak sinking funds can create large future costs.
Possible solutions include:
- Order building and pest reports where allowed
- Review strata records and recent meeting minutes
- Check for defect claims, rectification works and special levies
- Walk away if the risk profile is too heavy
Contract or environmental risk missed
Buyers can commit too early without fully checking auction rules, flood exposure, approvals or insurance issues.
Possible solutions include:
- Have the contract reviewed before signing or bidding
- Check council and flood mapping information
- Confirm insurability and likely premiums early
- Use conditions where the sale method permits them
Steps To Reduce Risk Before You Buy
Step
01
Set a realistic budget including stamp duty, legal costs, insurance and a cash buffer.
Step
02
Obtain a borrowing assessment or pre approval before offering or bidding.
Step
03
Review the contract and understand whether finance, building or pest conditions apply.
Step
04
Check inspections, flood data, planning overlays and approval history before going unconditional.
Step
05
For units, review strata records, sinking fund health and any defect or levy history.
Step
06
Keep a post settlement buffer for urgent repairs, rate rises and early ownership costs.
Speak With A Property Loan Specialist
Risk is easier to manage before contracts become unconditional and before settlement funds are locked in.
A specialist can help you understand how the lender is likely to view the borrower, the property and the structure before you commit.
Speak with a finance specialist about the risks in your property purchase.
Submit the short form below and a property finance specialist can help you assess the finance structure and major red flags before you proceed.
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