Free online property valuations provide buyers with a guide to values but should not replace the need for a detailed valuation, RP Data has said.
RP Data was responding to calls by the Real Estate Institute of NSW (REINSW) and Australian Property Institute (API) for the practice of free online valuations to be investigated by regulators.
In a joint statement, the REINSW and API said the various state Fair Trading offices should investigate online valuations to “not only to protect the role of registered property valuers, but also to protect the public who may not understand the complexities involved in completing an independent, professional valuation.”
National president of API, Philip Western, said that it “was important for consumers to understand the ‘free valuations’ are based on quantitative information only.
“They do not involve an inspection of the property, do not take in to account the actual condition of the property, and should not, ultimately, be relied upon by consumers as a substitute for an independent valuation.”
REINSW CEO Tim McKibbin told Real Estate Business that “quick and fast” online valuations could create unnecessary confusion for prospective home buyers, particularly when the values were well above or below the amount a professional valuer would have assessed a property at.
This confusion could make the sale process that much harder for real estate agents, he said.
RP Data research analyst Cameron Kusher said his company’s free online valuations were not designed to replace a professional property valuation.
“We’re providing an indication of where the market is, based on our methodology of looking at comparable sales, and properties with similar attribute types,” he said.
“It’s not there to replace the valuation, it’s there to provide a guide, and allow people to be more informed when making a decision about purchasing a property.”
“Property is the biggest investment most people will ever make in their life, so if we can provide more information rather than less, it’s better for everyone.
“It gives [buyers] an indication straight off the bat if they can or can’t afford that house. For a real estate agent’s perspective, it means you’re not going to be wasting your time with people that don’t have the means to buy the property.”
“But what we’re doing certainly doesn’t replace a valuation, and people should still go and get a full valuation if they’re seriously looking at a property.”
Mr Western said that while Statistically Generated Assessment Models (SGAMs) have “a limited place in the lending institutional environment dealing with portfolio and mortgage situations…I have real concerns when such a product is made available to the consumer under the guise of a valuation.”
“It is important for the public to recognise that what they are getting is a SGAM and that a SGAM is not a valuation completed by an independent professional valuer.”
REINSW’s Valuers Chapter chair Colin Rooke said support of extra low cost online valuations by banks and lending institutions contributed to an incorrect perception that valuations could be done cheaply and also encouraged a lowering of professional standards.
“There is a reason that professional valuers undertake an initial course of study lasting many years and that is to qualify for registration as valuers under the Valuers Act 2003,” says Mr Rooke.
“Correctly valuing a property is difficult, requiring consideration of many factors.
“The skill and experience of the valuer are essential in getting it right. It is not simply a number crunching exercise that can be completed in a few seconds, using some algorithm.”
Mr Rooke said banks had also driven the price of valuations down so much that many experienced valuers were now reconsidering their future in the industry.
“Experienced and thorough valuers, who cannot compete on price, are carefully considering their future in the profession with some already voting with their feet and leaving the profession.
Ultimately, he said, consumers and the wider community would suffer from the use of low cost online ‘valuations’. “Lending decisions will increasingly be made on inaccurate data sourced from statistics and a computer program, which does not have regard to real market factors and does not take into account all the discretionary factors which actually affect the value of a property.”