As a mortgage broker or real estate agent looking to secure the best deal for your clients, you are constantly juggling numerous moving components from multiple lenders. One of the elements of any successful deal is the valuation, which must support the contract of sale price or the customer’s estimate when refinancing.
Whilst most brokers and agents know what a valuation is, many may be unaware of the different types of valuation products available. The type of valuation required is often dependant upon a lender’s risk policies. Knowing the features of a valuation product can help you manage client expectations and engage more constructively with valuers.
There are four types of residential valuations most commonly used:
- Full valuations - often referred to as 'short forms'. A full valuation is the industry gold standard and requires an internal and external inspection of the subject property. A full valuation can usually support loans above an LVR of 90 per cent (LMI is often required above 80 per cent), takes between two and three days to complete if there are no access difficulties, offers lenders professional indemnity insurance (PII) for the valuation, and costs from $220 for a standard property.
- Desktop Valuations such as RP Data’s EVR product, the industry’s leading desktop valuation facility, values a property without an internal or external valuation. Qualified valuers are given subject property data, including attributes and photos, together with comparable sales which they can edit, to value a property at their ‘desktop’ with a clear audit trail. EVRs can support loans up to an LVR of 80 per cent, take under a day to complete, offer no PII and cost between $100 and $120.
- Kerbside Valuations - a kerbside requires a qualified valuer to externally sight the subject property from the street and provide a value range. Kerbsides generally have no audit trail (their biggest difference to an EVR), support loans up to an LVR of 80 per cent, are completed within a day, provide no PII to lenders and cost between $100 and $120.
- Automated Valuation Models, or AVMs - these computer-generated estimates don’t require a valuer’s input. A computer model accesses attribute data and recent comparable sales data to produce an estimate. These can include a report which provides an audit trail, are used differently depending upon a lender’s risk policy, are provided instantly with no PII and cost between $10 and $50 depending upon report features and channel volumes.
There are other valuation types, such as progress inspections and vacant land valuations, but we will leave these rarer products for another day (likewise, we will not discuss commercial valuations).
Another factor to remember is that many lenders have outsourced management of their valuations to a third party like RP Data and its ValEx platform. This means that brokers will often contact ValEx when querying a valuation’s status or outcome, not the lender. In all of these discussions, ValEx is a conduit – they do not perform the valuations themselves.
Michael Hooper, RP Data’s head of client operations, notes that “to assist brokers, RP Data developed an online status enquiry tool. This tool allows third parties without access to the ValEx platform, such as brokers, to view and track the status of their valuation request and/or lodge a query”.
The tool requires no login and can be used to provide additional information to assist with the valuation process. All that you need is the borrower’s surname and either the lender’s valuation reference number or the ValEx ID number. The online status enquiry tool can be accessed at valstatus.valex.com.au
In closing, when dealing with clients who know little about the valuation process, my best advise is to arm them with information to position yourselves as the property expert and manage their expectations regarding delays, the process and costs.
As can be seen from the above, full valuations continue to represent 50 per cent of the volume by type. AVM usage has grown dramatically over the last decade, and we expect kerbside volumes to steadily decline as desktop and AVM usage increases.