05.What's missing?
Limitations of e-Valuations
These websites use sophisticated statistical analysis, huge databases and contacts in the industry. But there are many things automated valuations and estimations, based purely on statistics, can’t do.
- There’s no substitute for physically examining a property. The stats don’t take into account renovations and improvements that’ve been made, or if the property’s fallen into disrepair. There’s no inherent reason why this information couldn’t be collected – it’s just not happening at present.
- Automated systems remove human subjectivity and bias – a possible advantage of automated valuations over physical valuations. However, as anyone in the property market knows, emotion and personal bias are often key determinants of a selling price.
- Computer-generated figures are slower to adjust for an under- or oversupply of properties in a particular suburb. These supply and demand factors also affect prices.
Industry criticism
As you’d expect, licensed valuers are often critical. The Australian Valuers’ Institute (AVI) says errors in value from automated reports are common and opposes their use of the term 'valuation'.
"In general, the people behind these websites and statistics aren’t qualified to give a valuation report based on statistics,” says the AVI. "A property valuer needs to look at much more than statistics to form a rationale and opinion to provide a valuation assessment. Unless you inspect a property internally and externally, analyse the market, the location and other prudent things that a qualified valuer would do, you can’t get a reliable valuation or figure."
Herron Todd White, a national valuation company, said automated reports can be useful for banks valuing their portfolios, as the overvaluing and undervaluing of individual properties should even out over a large sample of properties.
"But for an individual purchase or seller of an individual property, these automated calculations are next to useless, and in fact could do more harm than good in determining the true market value," the company says.
"If you’re spending hundreds of thousands of dollars on a property, spending an extra $400 for a trained and qualified valuer to value the property properly could save you thousands."