In-person home valuations close to becoming a thing of the past with AI revolutionising industry

The days of a valuer coming to your home to take measurements and set a potential sale price are becoming a thing of the past as technology takes over.

In-person home valuations are closer to becoming a thing of the past, as more banks get comfortable using machine learning and artificial intelligence models that use image recognition to value properties.

Physical inspections — where a valuer visits the home, meets the owners, takes notes and makes measurements inside — once played an important role in real estate appraisals. But the industry is leaving all that behind in favour of automated valuation models and so-called desktop valuations, which now account for almost half (49 per cent) of all valuations, according to CoreLogic.

That is up from 36.8 per cent in 2019, before the pandemic accelerated the trend.

“Covid-19 restrictions placed on people accessing properties was a natural drive towards forcing these remote inspections and using models more effectively,” CoreLogic analytics executive, Tim Jenner, said.

Since then, their wider use has improved the models and valuers, banks and insurers, have embraced the cheaper and faster technology, with some banks already only requiring two or three in every 10 properties to be valued physically.

“The model creates the number using multiple data points and it learns from all these data sets to create the automated valuation figure that is then used for the underwriting of the loans,” Mr Jenner said.

Valuation algorithms, which spit out a number using hundreds of thousands of data points including images based on satellite photos from Google’s Street View and the Australian equivalent, Nearmap, are now used for more than a quarter (28 per cent) of property valuations.

“There is a move towards using as much imagery as possible – from the historical valuations, from Google, from Nearmap, from anywhere we can get it from – to feed it up to the valuers in a way that they’ve now got comfort to provide PI insurance around these remote locations, which is a game changer,” he said.

Automated valuation models and so-called desktop valuations now account for almost half of all property valuations, according to CoreLogic. Picture: iStock.

The data variables also include comparable homes, previous valuations, proximity to points of interest such as schools or cafes, and local property listings, among others.

“With the improvements in machine learning and image recognition (the model is) able to now extract information from photos around the condition of the property, the type of property, how many levels it is, and the construction of the property,” Mr Jenner said.

Not only do automated valuations lower costs – they cut up to 88 per cent from the typical $200 to $250 price of on-site valuations – but they also create operational efficiencies.

Desktop valuations, which take human input but don’t require physical inspections, also use data and imaging to come up with an accurate valuation. They have more than doubled in the past year to account for 21 per cent today, according to CoreLogic.

“Measuring the property after walking around, looking at comparable sales, coming back to run a report and distributing back to the phone, is naturally quite a costly, cumbersome process,” Mr Jenner said.

They can take up to four days, compared to an instant valuation through an algorithm or a few hours doing a desktop valuation.

A super fast valuation then shortens the time banks take to approve mortgages at a time they are racing to make their loan operations leaner and quicker, and provide more loans digitally.

AMP Bank’s head of lending operations, Melissa Christy said: “It speeds up the time that we can get back to our customer and a broker on a valuation, which means we can approve a loan much faster.”

She said the bank now only does a third of valuations physically, down from about two thirds before the pandemic.

“Desktop valuations are becoming a lot quicker, turnaround times can be from a day to four hours or more recently, they’re doing them in under an hour, which helps us speed up,” she said.

One of the historical obstacles to digital valuations was the fact that valuers and their insurers didn’t accept liability for the outcome of desktop valuations and automated valuations, so the banks had to bear the risk of the outcomes.

That is now changing. The increased adoption of these models in recent years has improved their accuracy. That in turn has given valuers and their insurers the confidence to take responsibility for the accuracy of the results.

For example, CoreLogic and property valuer Opteon have, since June, offered indemnity insurance on valuations done through their SMARTval software. It is already being used by banks like AMP, NAB and others and CoreLogic says it has the potential to replace more than half of the valuations that are still done through full inspections, which currently account for 37 per cent of the work.

NAB was the first major lender to use SMARTval earlier this year, and according to the bank’s executive of home ownership, Andy Kerr, it has “helped slash timelines for valuations while meeting all the stringent conditions required to achieve settlement”.