You’ve agreed on a price with the seller and sent in your KPR application (Kredit Pemilikan Rumah, an Indonesian bank mortgage). Then the bank comes back with its valuation of the house, and the number is lower than the price you agreed.
This happens often, especially with resale houses. The catch is that the bank sets your loan ceiling from its own valuation, not from the price in your agreement. The gap has to be covered some other way.
This guide is for buyers in the middle of a mortgage application, and for sellers whose buyer has just received the same news.
How the bank values a house
Before approving a KPR, the bank values the house that will secure the loan. The valuation is done by the bank’s in-house appraiser or by a KJPP (Kantor Jasa Penilai Publik, a licensed public appraisal firm) appointed by the bank.
The appraiser visits, measures, takes photos and checks the house against its documents. They look at:
- Land and building, including size, plot shape, age and condition.
- Location and access, such as road width, whether a car can get in, and any history of flooding.
- Comparable sales, meaning what similar houses nearby have actually sold for.
- Documents, such as the land certificate, the PBG (Persetujuan Bangunan Gedung, the building approval that replaced the old IMB permit) and proof that PBB, the annual land and building tax, is paid.
The appraised value is not the same as the NJOP (Nilai Jual Objek Pajak, the tax valuation) printed on the PBB bill. NJOP is the basis for tax, while the appraisal estimates what the house is worth as collateral at the time it is valued.
The bank then sets the loan ceiling as a percentage of the appraised value. The percentage follows the bank’s own policy and Bank Indonesia’s loan-to-value (LTV) rules.
Worked example (illustrative numbers only): the price is Rp 500 million and the bank lends 80 percent. If the appraisal matches the price, the ceiling is Rp 400 million. If the appraisal comes in at Rp 450 million, the ceiling drops to Rp 360 million, and you have a Rp 40 million gap to cover yourself.
Why the value can come in below the price
The bank’s appraiser looks at the house as collateral: roughly what it would fetch if it ever had to be sold. That makes the figure cautious. Common reasons for a gap:
- The price starts from the seller’s hopes, not from sales that actually happened nearby.
- Expensive renovations that add less value than they cost, like premium tiles and a custom kitchen in an area where houses sell at ordinary prices.
- Physical condition, such as cracks, a leaking roof, old flood marks or a floor below road level.
- Limited access, for example a narrow lane a car can’t use.
- Documents that don’t match the house, such as an extension missing from the PBG or the old IMB drawings, or a land area on the certificate that differs from the ground.
- Few comparables, common on the edges of town or for unusual houses.
Some of these can be fixed and some can’t. Knowing which one applies helps you pick the next step.
Your options
Ask the bank to state the appraised value and the approved ceiling in writing. Some banks only give the final figure, others will explain the main reasons. From there you have several routes.
Put in a bigger down payment
The simplest route is to cover the gap with your own money. Before choosing it, recalculate everything, including closing costs, taxes and notary fees that still have to be paid. Don’t drain your emergency fund to do it. You can rework the instalment and down payment in the KPR calculator.
Renegotiate the price
The appraisal is fair evidence in a negotiation because it comes from a third party. Put it to the seller politely: the bank valued the house at this figure, and you can only cover part of the gap. The seller may lower the price, split the difference or offer something else. How to frame the offer is covered in tips for negotiating a house price.
Ask for a review
If the appraiser missed something, ask the bank for a review. Maybe the land area was recorded wrongly, a major renovation wasn’t counted, or there are closer comparable sales. Bring proof: a copy of the certificate, the PBG, renovation receipts or sale price data. Review policies differ between banks, and the figure may not change.
Try another bank
Another bank uses its own appraiser and policy, so the figure may differ, or it may not. Count the cost of a new appraisal and the extra time. Check the deadline in your agreement with the seller too, since a new application can run past it.
Walk away
If the gap is too big, walking away can be the sound decision. A low valuation sometimes tells you something about the house. Check what your agreement says about the booking deposit (tanda jadi): do you get it back if the loan isn’t approved in full?
A well-drafted agreement settles this from the start. For example, the deposit comes back in full if the bank approves less than a set amount, or the price is adjusted to the appraised value.
Inflating the price on paper is fraud
Sometimes someone offers a shortcut. The documents show a higher price than the real one, or a receipt is written for a down payment that was never paid, so the bank lends more. People call it a price mark-up.
It is fraud against the bank. You are giving false information to obtain a loan, and everyone who signs the documents can be pulled into legal trouble. You also end up owing more than the house is worth.
If anyone in the deal suggests this, treat it as a warning sign about the whole transaction. Use one of the legitimate routes above.
For sellers: set a price you can back up
Many buyers use a KPR. If your price is far above recent sales nearby, you may get offers quickly, but the deal stalls at the appraisal. You lose time waiting, then start again with a new buyer.
What helps:
- Price from comparable sales, not from listing prices or what you personally need to raise. The method is in how to set a fair asking price.
- Have documents that match the house, including a PBG for any extension and proof that PBB is paid up.
- Keep receipts for major renovations, since they help the appraiser understand the house.
- Leave reasonable room to negotiate, especially if your buyer is using a mortgage.
What to do next
If your appraisal has just come in below the price, work through this in order:
- Get the appraised value and approved ceiling in writing.
- Work out the gap, then check how much cash you really have after the other costs.
- Talk to the seller before the deadline in your agreement passes.
- Decide: a bigger down payment, a new price, a review, another bank, or walking away.
If you’re still looking at resale houses, read how a mortgage works for a resale house first, so this possibility is covered in your agreement from the start.
If you’d like a second opinion on the price of a house you’re considering, the Vorneo team is on WhatsApp.
