The availability and use of online valuation sites needs to be investigated, according to the Real Estate Institute of New South Wales (REINSW), who believe the online tools offer inaccurate and overly-complex information for borrowers.
The group's CEO, Tim McKibbin, has met with NSW Fair Trading commissioner, Rod Stowe, to discuss the problems online valuation sites are creating in the Australian property market.
“REINSW is calling for the practice of online ‘valuations’ to be investigated by the regulator to protect consumers who may not understand the complexities and therefore the significant differences between a valuation prepared by a licensed valuer and what is provided online,” says McKibbin.
“Correctly valuing a property is difficult and requires consideration of many factors…The skill and experience of the valuer are essential to getting it right. It’s not simply a number-crunching exercise that can be completed in a few seconds using an algorithm.”
REINSW president, Christian Payne, tells Australian Broker the problems are essentially two-fold.
“They use median prices and…median prices are subject to being skewed easily, particularly if there’s a small sample set.”
The other issue, he believes, is a practical one – with an online valuation, there’s no way for the property’s unique characteristics to be taken into account.
“Topography can make a huge difference to a value. If it’s just a block of land and it’s easy to build on, it will cost less to build, if it’s a very steep lot it will cost more. [If it’s a unit], no one’s saying that it’s on the dark south/western corner of the block, or the top floor north/east. That doesn’t get taken into account with an online valuation. So the smaller idiosyncrasies that make up value aren’t being considered.”
Furthermore, REINSW claims the data provided by the sites is highly complex and the fact that many online valuation tools are backed by well-known brands – including the major banks and commercial property data providers – means that consumers are putting their faith in them.
“Armed with these online valuations and without an understanding of the nuances of the valuation process, consumers are questioning the accuracy of asking prices being quoted by agents,” says McKibbin.
“REINSW believes that these online valuations can be very misleading. At the very least, they need to be the subject of a detailed information campaign so consumers understand what they are getting.”