Shelley Horton On Why A Valuation Is An Opinion, Not A Price

There are a lot of myths around property valuations, like the belief that bank vows are always low or that a valuation is what a property is actually worth.

And in a rising market, when relying on settled properties for evidence will ensure valuers are pretty much always out by a long shot, this begs the question, are valuations, as they are currently done, actually worth anything? What does the future look like in this space?

Welcome to The Elephant in the Room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent, buyer's agent, co-host of Foxtel's Location Location Location Australia and author of Auction Ready. And I'm Chris Bates, mortgage broker.

Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional. Don't forget that you can access the transcript for this episode on the website as well as download our free full forecast report.

Which experts can you trust to get it right?

Today we're discussing the future direction of valuations with Shelley Horton, CoreLogic's General Manager of Valuation Solutions Australia. Shelley works with CoreLogic's valuation partners as they navigate an evolving landscape of digital disruption and business transformation.

Now, long-term listeners will recall that we interviewed Shelley way back in Episode 34. Shelley had... stepped out of the valuation industry for a number of years and set up her own buyers agency, which no doubt has added a rich consumer perspective to her experience.

And now that she's returned to the corporate arena, we've asked Shelley to help us understand more of the role valuations play in residential real estate and how things are changing. Thanks for joining us today, Shelley. Great to be here, Veronica. Now, I will say Chris is absent.

He moved to the boonies a while back, just before COVID actually. And And, you know, they've had a power outage. So this is what happens when you leave the metropolis. You go off the grid.

He's not that far. He's actually still in Sydney, believe it or not. Northern Beaches, that is, for those who haven't been listening. Now, Shelley, a booming market notwithstanding, what are some of the challenges facing the valuation profession at the moment?

Well, to be honest, there's quite a few of them at the moment. The rate of market growth we're currently seeing right across Australia, I think, has surprised everybody.

And more so than the valuation industry and also the many clients who rely on valuations, banking, finance, government clients and the like.

And for the valuation industry, it's been particularly tricky because we've seen a real shift in the last 12 months to platform activity. So through CoreLogic's banking and finance platform specifically, it's probably about 70% of all of our activity is refinance-based.

And if you read a number of our other sort of market indices and market reports that Tim Lawless and Eliza published, Owen put out, that probably would highlight as well that sale activity and transactions in the market has been at extraordinary low levels compared to historical sort of patterns.

And that presents challenges because any valuation, whether it's an automated assessment or there's a value involved in the process, relies on comparable sales evidence. And when that is hard to find and few and far between and there's some of those results can be quite erratic and volatile.

It makes it very hard for people to sort of work through that and establish, well, what is the actual value of a property?

It really does make it difficult because obviously as a buyer's agent, you know, For those of us who do go through the exercise of pricing property, we face the same challenges.

And it's quite funny how you might see a Royal Terraces, say, you know, where my office is in Balmain, you might see a Royal Terraces and you think, oh, it's going to be easy to find comparable data for a particular property.

But as you know, they have been renovated over the hundreds of years that they've been alive. They've been in existence and nothing else may have sold anything like it for the last five years.

And so, like you say, with reducing or diminishing transactions and obviously the scarcity of that top property anyway, that's making it difficult. But then you've got situations and I've been tracking, you know, the prices people are paying versus what we're pricing it. And we do factor in for market growth when we price.

I know that valuers don't do that. And even then, on average, property going to auction is 10% over what we've priced it at. How on earth... you know, can the institutions that have traditionally relied on valuations, how do they make sense of that?

And, you know, how is it still relevant, I guess?

Yeah, it's a good question. I think with the current market, again, even though the sales evidence might be scarce, it's still basically, I guess, the guide or the litmus test for what a property is worth. And so it's really important in this market for valuers to understand that

a bit more around, you know, the interest level in properties. Because even for properties being valued for refinance purposes, if, you know, if relying on sort of comparable sales evidence, it still needs to be the most recent to reflect what's happening in the current market.

And as you pointed out, Veronica, you know, auction activity at the moment, you know, can be quite volatile and properties might sort of go, you know, 10% above where you may have estimated as a buyer's agent. We're sort of seeing significant growth week on week and month on month at the moment.

And so one of the other challenges, I guess, for valuers is that they need to consider settled evidence. And if you use New South Wales as an example, the standard settlement period is six weeks. So They might be relying on evidence because they have to because that's sort of mandated to them.

That's already dated at the time of doing evaluation. So, there's other ways to solve for that. They can also consider exchanged. So, for instance, an auction result on the weekend because that's sold under auction conditions and it's effectively exchanged. Without a cooling off period, they can factor that in as well.

But then every market across Australia is also different. In Victoria, as an example, you could have a 30, a 60 or a 90-day settlement. So, again, following that same pattern, you might be looking at something that's three months out of date and the market's well and truly moved.

So, it's a real challenge for the industry. And I think one of the ways to potentially solve for that is to revisit some of those patterns.

long-held beliefs or long-held views around looking at only settled sales evidence and trying to make sure that the industry can leverage what's happening on the ground and the most recent evidence.

So even if it means looking at a property that transacted last weekend or two weekends ago, there needs to be, you know, the end users of those reports so that the banking and finance industry or other sectors that rely on valuations need to be accepting the

of potentially being able to change a long-held view in that regard.

Because it is a challenge because for those people trying to get into the market, you know, where they're just scraped to save their deposit you know, they are much more reliant on that valuation coming in at what, you know, at what they're paid at least, aren't they?

I mean, if the value is using historic data, if the valuation comes in low because of that, they've paid market price, otherwise they're not going to be able to buy the property, then, you know, there's a huge risk for some particular segments of the market, I would imagine. What happens then?

Is there any sort of discussion around that behind the scenes?

So if a valuation comes in under what somebody's paid?

Well, yeah, and we know it happens, you know, and we know it happens for a very good reason in some areas. For instance, it's been well publicised in the, you know, the off the plan space.

But I'm talking about in a rising market where a first home buyer, in particular, someone who doesn't have equity in another property, they're not upgrading, they're not already in the market. And their finance is quite tightly tied to that valuation coming in. at the right level.

And the problem is, of course, trying to get valuation before you exchange contracts. In New South Wales, you have to exchange contracts, but elsewhere, you know, to commit to buying a property. So do you sort of get what I'm saying?

That there's a real risk of valuations coming in low purely because they have to use historic data in a rising market. And they're the most vulnerable segment of the market, I would imagine, to having the valuation coming in lower than what they paid. Right.

Yeah, it does happen. And at the moment, it's happening a lot. So, we're seeing, you know, there's a perceived – there's probably a perceived or perception of the valuation industry in general that they are more conservative and they always come in under an owner's estimate or the purchase price in this particular market.

Coming in under purchase price is certainly – becoming a little bit more prevalent. And that, again, is just due to the rate of growth at which properties are transacting and, you know, the volume of sales activity is not there to support it.

If it does come in under, though, there are different ways to deal with that. The valuation could potentially be challenged. But to do that, you need to have a really strong case as to why that is. So, pointing out potentially sales evidence that may have been missed.

So, a broker or a lender, for instance, if they want to challenge a valuation that would need to identify that, hang on a minute, there's two or three properties here that have transacted that they don't seem to have considered.

And I think one of the challenges just with – again, you touched on it earlier with going to auction. You can go to an auction – and you have 10 people registered to bid, you've usually got a bit of a spread.

You've got those people who register and don't even put up their hand. You've got a couple of people that then participate, and in the current market, you've probably got two or three who are going kind of above what could reasonably expected based on a property that transacted two weeks ago, as an example.

And so that's where it becomes really tricky for the valuation industry. But if you get back to what the definition of market value is, and this is sort of an industry-wide definition, in my view, it still holds the test of time. And that is a property that's advertised for sale.

It's given adequate exposure and marketing for everybody to know that it's going to sell at a particular point in time. And as long as either the buyer or seller is isn't particularly, you know, swayed one way or the other.

So, someone's not desperate to sell, someone's not desperate to buy, but that is a test of market value.

So, whilst on the surface it might, you know, you might shake your head when you see an auction result, you know, I've been to auctions and you can see that somebody might pay $2 million for a property, but if they didn't, somebody would have paid $10,000 less.

And if they didn't get it, then the third underbidder would have paid, you know, another $20,000 less. So,

That is actually the definition of market value. I think the challenge for the industry is you might have one sale in isolation and giving somebody a professional comfort that they can effectively sort of put their professional opinion out there to support something where maybe there's only one sale.

rather than having, you know, the comfort of, and like when you're purchasing a property, right, you might go to a couple of auctions or you might sort of follow a couple of properties and track them and that gives you comfort. The property value probably sits around a particular range.

And then based on that, you might be prepared to start putting in offers on a property. So, it's kind of similar to valuers in that they're doing exactly the same thing that property buyers are doing. But then they've got those nuances of having to look at largely settled sales.

They can look at exchange sales, but in the current market, there's not many of those. So, The market dynamic at the moment is particularly tricky. That said, it can be challenged. You know, there may be another valuation that gets done on a property. That is not a great customer experience.

So, if you think about it from a bank's point of view, the stress involved if somebody's, you know, potentially put 10% of, you know, $2 million on the line at auction on Saturday and they wait for the valuation and it comes back in and

You know, but for, say, maybe a small rounding issue or a small, you know, adjustment for the valuer, you know, they might think, you know, I've seen plenty of examples where property might sell of an odd amount.

And, you know, it can be just the psychology of trying to sort of bid someone out of the competition just going above $2 million, for instance, you know, $2 million and $11 million. And then for just rounding, a valuation might come in at $2 million. It's just that annoyance and the inconvenience there.

that can cause problems in the whole kind of home buying life cycle. Process.

Yeah. And it's never a nice feeling to have valuation come in less than you paid for it.

No, it's terrible. But it's also important to highlight there are extreme cases where, you know, people do also pay well above. Way over the odds. And that's important because that's what valuers are there for. If a lender is going to –

loan money to a borrower they want to make sure that you know if everything goes pear-shaped that at the end of the day they've got a security they can sell and that property is you know a good property that would be saleable and they want to know you know what they'll get for that again if they were if they were to go down that path I mean that's that's not the desired approach in the industry and sort of not an outcome that that people necessarily want but it's it is the reality of what people are kind of considering at the end of the day

So, valuers also have got in the back of their mind that potentially there might be consequences if they don't get that figure right.

Well, they can be sued, can't they? I mean, there's – look, given the costs in this industry have actually been driven very low, how – I mean, I always wonder how can a valuer possibly do a good job? Yeah, look, you're sounding like a valuer. Yeah.

Look, it is a common question, a common challenge for the industry. I think data and technology is really the answer to that. One of the ways, look, there are a large number of valuations

process, for instance, just through our platforms every year, in excess of a million valuations would get done just for mortgage purposes every year. And there are, you know, a number of firms that tend to concentrate in certain locations and markets and they have experts in those areas.

So, it becomes, in essence, a volume game. So, they might have somebody working in Paddington in Sydney or Paddington in Brisbane and that's their area. And so, they might be, you

They might be doing a desktop assessment on a property one day. They might be doing a physical inspection in the afternoon and several other valuations, sort of either side of that.

So that's why technology in the process and innovating becomes critically important because time is of the essence. Yeah. The nature of the work that most valuation companies are doing is for mortgage finance purposes and banking and finance sector want to take that borrower out of the market as quickly as possible. Yeah.

Speed is important. But there are a lot of efficiencies that can be gained through, you know, route optimization as an example. So working out who's best placed to value a property.

serving up all the information that a valuer needs and putting it at their fingertips. CoreLogic's desktop product, as an example, does exactly that. It basically provides imagery and data and as much information on a property as possible so that all the valuer really needs to do

being an expert in that area is approximate what they think that property is worth. And that assessment would be relied on by a lender and it would be appropriate in certain circumstances where a lender may

may be comfortable relying on a less comprehensive valuation assessment, but not necessarily a more conservative one.

I guess AI is going to be a big, big factor in this market as it progresses. And AI basically looks for patterns in data, right?

And we've got quite a, in some areas, we've got very homogenous stock, very, that would be a lot easier than say in older, more established areas where there's a

I guess, is that what you're talking about here? Is that you're utilising AI to deliver some of these tools to valuers?

That's one aspect. There are certainly some advances and some studies that have been done in the US that I'm aware of where they sort of model, AI is used to model tools

why properties are deemed to be comparable for a property in terms of what properties are assessed and used to, you know, determine value. So, you can kind of follow what are the patterns. Is it, you know, largely, you know, we talk in the valuation industry about comparing apples with apples.

So, you know, four bedroom, two bathroom home sales then to compare or To compare that with something else as a baseline, you're looking at a four-bedroom to a bathroom home. So, that's one way. It's sort of modelling, well, why is something more comparable than another?

And then looking at data around what side of the street to, you know, is something flood-affected or got some sort of impairment to the property and, therefore, what impact does that have on value? So, over time, as CoreLogic's database and property universe gets more comprehensive –

we're always looking at improving our depth and breadth of property coverage so that we know as much as we possibly can around every single property in Australia. But also from a data and technology point of view around sort of desktops as an example.

So that's where a value is involved, but they're not physically inspecting a property. So it's using whatever imagery might be available. So for instance, if a property has been listed for sale or listed for rent,

over the last couple of years or if a valuation company has valued that property previously and there's a history and knowledge of that property, they should be able to provide a fairly accurate assessment on that property without going through it.

So it's opening up all those data sources and working out how do we put people pretty much in the property without physically going through it.

And then with the on-site valuations, if you think about the process, much like a buyer's agent might go through when they're sort of researching properties, you know, the websites that you go on to look at what you can do with the property, town planning, implications, what else is sold, again –

If you're using, for instance, CoreLogic's probably research products, all that information is in the one spot.

So, the time efficiencies that can be gained, for instance, by going into one platform to basically fulfill all your property needs for research purposes can save a lot of time and shave off a lot of time off the process rather than going in and out of multiple platforms and systems to be able to get all the information you need.

to be able to assess the value of the property.

I want to talk about AVMs as we sort of move on a bit, but not quite yet. Because I see...

out there a lot of information that is is available for consumers and obviously that same information and more would be available for value as well and and you've actually written that the wide range of those home price research tools um is shifting the role of valuers away from the i think what you call it the traditional and skillful art of the valuation itself um

And that it's actually taken the valuer's role towards expectation management exercise. I know you wrote that some time ago, but I'm curious to know what you meant by that.

Well, I think there's a time and a place, I think, for different valuation service types. And I think it's important for everyone you know, the end users of those reports to understand that.

You know, you can get an approximate online assessment from many different sources online free today, you know, where, you know, and brokers and lenders might use that as a lead generation tool.

For instance, a homeowner customer comes to them thinking about buying a property in the area, they might sort of serve up a property profile report or, you know, an online estimate to someone saying, hey, this is what's sold in this area and, you know,

it's something that needs to be sort of treated with caution. Online estimates, you know, can be quite accurate in some cases, but in some circumstances, you know, they're not and there are a number of factors behind that.

And one is, you know, the uniqueness of the property, could be the value of the property. And so, AVMs, you know, should be used carefully and only in the appropriate circumstances. And

If you think about the end user of that report, what a prospective property buyer wants to see and what a lender might want to rely on as an example if they're providing finance on their property are two very different things.

You know, again, the volatility, you know, there's volatility in every valuation service type. I can certainly assure you of that. You know, there might be a perception that online estimates are a little bit sort of broad, but in some cases they can be quite accurate.

And that's something I think over time with, again, AI and other sort of means revisiting and looking at what makes them valuable. a little bit less accurate and in some cases makes them, you know, pretty much spot on. It's understanding the why behind that.

But getting back to, I guess, the end use, I think that's important. So expectations are if a bank is going to rely on an AVM, it's highly unlikely that it will be in a particularly high loan-to-value situation.

And so that might be something that is deployed or used if they have a history on a property, for instance, or something

been valued previously and it's more an update as opposed to a brand new purchase where they don't have any knowledge on the borrower and they don't have any other prior knowledge on that particular property.

probably more a lower risk type situation, if that makes sense. So a low risk borrower, low risk property. And then if you go up to the next level, a desktop, again, because you're not physically going on site with inspecting the property.

You know, we found we do regular benchmarking on all our valuation products. And one of the things we found is that because people don't go through a property, there's probably an inherent bias in that and sort of a level of conservatism

And that needs to be accepted by the industry. It'd be like, you know, you going out and telling a client as a buyer's agent, you know, without going through a property and kind of putting your neck on the line over what you think it's going to sell for.

So, you know, you might tend to sort of, you know, build that into your approach and assessment is, you know, because you haven't physically been through it that you don't know exactly what that probably looks like. But based on what you do know, you know, you put a range on that.

And then, you know, curbside might be just driving past the property again. You know that it's physically there, but you haven't been through the inside. And again, hopefully you can kind of see that and people can understand that, you know, there is a place and a time for different assessment types.

As you get to, I guess, a scenario where maybe it's a particularly high loan-to-value situation, so maybe it's a first-time buyer, it might be a 90%, 95% lend as an example, or or the property might be fairly new, so it's under construction or off the plan.

Those kind of scenarios and situations are where a more detailed on-site inspection is absolutely valid and more often than not used.

I like that explanation that it aligns with risk because, you know, a few years back I was doing a refinance on one of my properties and my broker came back to me with this sort of list of percentage that the bank would loan me on the property based on how I elected to have it valued.

which is I thought was the first time I've seen it like that. And it was, yeah, it was definitely a lot higher if we had an on-site or an in-person physical inspection versus an AVM. I was like, well, that's the first time I've actually seen that risk really spelt out that way.

But obviously on the flip side of that, of course, is that, yeah, the bank sees themselves as taking more risk on them. Obviously they're going to want to have a more detailed valuation to mitigate that risk. But I think what's important

to understand, and this is something that my head struggles with to a degree, is that really a valuer comes in and puts a valuation on a property. It doesn't mean that's what the property is actually worth because two valuers might put two different values on it, right?

And then the value of the property can actually really depend on the actual purpose of the valuation in the first place. Can you tell us a bit more about that?

I certainly can. Volatility and ranges in valuation is very common and you're absolutely spot on. Quite often we would see examples of property being valued and then another property may be subsequently or same property was subsequently valued and comes at it a different opinion.

Sometimes, you know, may have seen that two or three times on the same property and it's just inherently built in that it's a professional opinion and

And three different people going out to the exact same property are likely to come up with a difference of opinion on what it's worth, as are three buyers that go to an auction on a Saturday. It's exactly the same sort of scenario.

So I think the industry and the end users of reports probably need to revisit

the approach to that. Typically, there's probably been a historical view that taking the most conservative position is the best approach, so the lowest of the valuation. Now, that doesn't necessarily work when somebody's trying to borrow a certain amount of money.

So, I think maybe an adjustment or a rethink of that is something that's quite topical in the industry at the

The fact too that there's a single figure assessment on a property as well makes it very hard and rigid. And I think there's a distinct difference between precision and accuracy. Precision for me implies exactness and valuation is not an exact science.

And, you know, getting back to the, you know, again, that example of people bidding at auction or, you know, putting in offers on properties, you do have variation and volatility on exactly the same property.

And valuers are effectively doing a similar thing, looking at other evidence in the market as a property buyer does to go out and say, well, I think in my professional opinion, this property is worth X.

And so I think a little bit of leeway, you know, might be a good way to potentially revisit that because as soon as you put a single figure there, you get to the point of, you

For instance, if I was to value a property and someone said to me, Shelley, you know, I think you're a little bit conservative on that $1 million assessment, makes it very hard for me as a valuer to then maybe say, actually, yeah, you might be right.

I probably, you know, it probably was worth 1.1 or 1.05 mil or whatever the case might be. So, because there's that rigid approach and that single figure assessment and I guess people more sort of thinking that valuations are precise when they really just intended to be accurate.

There is no black or white answer. It is very much a professional opinion. And to solve for that, I think there needs to be an acceptance of end users of those reports that maybe there is, I guess, a level of volatility or range that could be sort of entertained in that space.

It's not to suggest that it's a free-for-all and you're trying to get the highest figure, but it's just a fact of the matter that Even a real estate agent, if they're going out and appraising a property to list it for sale, they don't know exactly what that property is going to sell for.

In their local market, they'll have a fairly good idea. But even a real estate agent, they're a little bit closer to what the circumstances are of that particular buyer, why they need to sell, what's their motivation to sell. Have they already got their eye on another property?

Therefore, they might be a bit more flexible in terms of the price they're prepared to accept. On the other flip side of that, you send a valuer out, you've got things like level of experience. You know, have they valued property before?

Is the property particularly unique and difficult that no matter what level of experience as a value you've got, that property is just going to be inherently hard to value because there's something quite bespoke and unique about the property. So, there's a whole range of things on either side that can impact that.

And for me, that was probably one of the biggest things that I learned from sort of, you know, moving into the real estate world prior to my current role was

And seeing things in terms of the market dynamics, I can probably hand on heart say I learnt more about the market in that period of my career than I ever did even as a valuer.

Yeah, because I guess what you were exposed to as a buyer's agent is the fact – and I refer to it as luck – that in any sale, there's the element of luck and it can go for the vendor or for the buyer.

When it goes for the vendor and I've been to auctions where the highest bidder saw it Thursday night before the auction, just missed out on something else and goes in there and just blows everybody else out of the water and you think, oh my God, where did that come from?

And if somebody had made an offer, In the week prior, that person would not have been in the fray and they could have bought it for less. But we only know this stuff in retrospect because there's no parallel universe.

And then, you know, and likewise for the buyer on the flip side, the luck lies in the buyer in the situation where, you know, that buyer might have been on the property the whole time, they're the hottest thing, and then suddenly they're off at an off market in the final week and they go off and buy that and they're no longer there, you know.

So... Or if the vendor circumstances suddenly change and they're the only buyer that can meet the conditions. And that's the thing, I guess, that's the alchemy of it all, isn't it? I mean, that's the thing that no one can predict. No one can actually factor in.

No, that's true. And, you know, getting back to that definition of market value and, you know, willing buyer, willing seller type concept, you know, that might sort of go to sort of answering that element of the definition. You know, was someone particularly anxious to purchase that property?

Therefore, they paid probably a little bit more than what, you know, what could be reasonably expected. Yeah. One way that the valuation industry sort of handles that really well is there's typically an industry standard report. The Australian Property Institute sort of mandate that their members should use.

And that has, I guess, market risk factors, property risk factors.

And in the current market, what you might see is a valuer basically calling out, look, there might be one sale, there's not a lot of sales evidence to support this purchase price, but they'll put it on there and then they adequately, I guess, manage for that risk or balance that risk by calling out that it is really at the upper end of what can reasonably be supported and

you know, the potential for that price to be achieved again is almost unknown at the moment. So, they can kind of say, well, look, yes, it did transact in the open market and on the face of it looks to be market value, but I don't have a lot of evidence to support that.

But, you know, that said, it still ticks that box of market value and they can sort of, you know, I guess deal with that market volatility in other ways by sort of risk profiling the property.

So that's sort of one thing that the industry does to sort of counter for those scenarios. And in, I guess, a falling market as well, luck plays it. You could be there right time, right place.

Everybody else falls out of the way and you become the Stephen Bradbury of property buyers who goes over the line and gets a property for a good price.

We use that analogy. We talk about Bradbury moments in my business actually. Oh, So it's usually when the client, you know, look, on the face of it, it should be within your budget, but the way the market is right now, probably not.

And you're going to have some faster, harder speeders, you know, speed skaters that are probably going to outrace you, but you never know, they might all fall out if you're lucky or if you're unlucky. You've got 10% chance of winning that property, so you've got to be in it to win it.

So that is actually the conversation we have with some.

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So how does the panel work? Because we hear about these panels of valuers. Can you give us a bit of an insight into the back end of it?

How does it go from when, at what point does the bank say, right, we need a valuer and then who is on the panel and how they get chosen and how does it all happen?

So based on my background experience, panels of lenders would typically go to tender or issue a request for a proposal or something along those lines.

calling for interest from valuation companies to provide valuation services for their business and they would go through a process of submitting a proposal, you know, for the valuation work that they can provide.

The lender might you know, carry out due diligence on those suppliers and narrow down and that could be, you know, they get to, I guess, a preferred panel or list of people they're prepared to do business with.

One of the things, you know, they might be looking at professional industry standards, experience in the industry, time in business. the breadth and coverage of, you know, suppliers.

If you think about some of the big banks, they need somebody pretty much in every corner of Australia to be able to cover, whether it be a regional town and so forth. So a whole bunch of things they look at.

They'd also then probably look at cost and turnaround times and, you know, so that customer experience. So, once they go through due diligence, they would narrow down to, I guess, a preferred list of suppliers and then based on that.

So, if they were a customer of CoreLogic, they would update us on who that is and then we have a technology platform that basically –

provides a client to be able to order a valuation, instruct the valuation, allocate that to the panel and then distribute that work and manage the workflow of the valuation.

So if you think about it, valuation's ordered, has an appointment been made, has the property been inspected, where's the valuation reports back and everything that happens basically in between there. So, quite a lot. And as I was saying, we manage in excess of a million valuations every year. So, quite a lot.

And that could be everything from ABMs to desktops to drive-by assessments to on-site physical inspections, residential property, commercial property and rural properties, you know, in every state and territory right across Australia. So, yeah. So, it's quite a large job and an important job that we do and we take very seriously.

But it's, you know, it has a lot of challenges that come up with local market dynamics. You know, valuations not coming in at what people thought they were going to come in at, you know, challenging and querying that valuation.

And in the current market, there are cases where, you know, valuation suppliers, established valuation suppliers are really struggling to meet demand.

universally across the board just because of the volume of particularly refinance activity over the last 12 months with COVID and obviously finance rates are particularly low, lowest they've been, you know, in memory. And what that is doing is driving a flight to refinance and, you know, and that doesn't,

that doesn't sort of distinguish in terms of where you're located. So if that means looking at a property in regional Victoria or South Australia or, you know, or a metro location, that needs to be done.

And so the industry at the moment is probably struggling with keeping up with the workload and, you know, getting back to data and technology. You know, we're trying to help the industry and constantly looking at ways to help the industry solve for that. You know, you can't just find –

20% more valuers, for instance, to service the work. We've kind of got a finite resource and the market demand may dissipate at some point in time. So, we're always looking at ways of, you know, are there other ways or better ways of doing things to sort of help speed up that process?

But it's a real challenge at the moment.

getting to the to the quantum of that but hopefully that explains you know the orchestration process every lender again might have a different panel um so then there's other complications involved with you know or not complications but you know what i mean it's not just one panel fits all many complexities um some people might you know um only have regional requirements um and so the nature and the construct of a panel might look very different to you know a major lender as an example

Now, call me a bit cynical, but the proliferation of brokers that we have, and I'm a supporter of brokers, you know, people dealing with brokers versus dealing directly with banks for lots of reasons.

But I do know, anecdotally, talking to a lot of brokers throughout the lockdown period, you know, a year ago, that they basically were like, right, well, no one's going to be borrowing to buy home right now because there's all this fear in the market. So let's really massive push.

Let's keep ourselves busy working on refinancing because then they can... make sure they continue to get paid.

And they're providing value, obviously, for their clients as well. But that's sort of been interesting and quite a unique moment in time, would you think, to drive that refinancing piece? Is that sort of where a lot of that volume has come from? Because you say that

sales transactions are down, but that doesn't mean, so therefore the actual valuations being done on properties that have exchange or post-purchase would be down, but the volume required, or the amount of valuations going up, is that Is that purely due to COVID, do you think?

There's a couple of things we've seen that are probably two standouts, I think, in the last 12 months. A flight to regional areas across Australia. So even though nationally transaction volumes are some of the lowest we've seen in regional areas, there's been quite heightened activity. So that's one thing. The government's...

stimulus supporting first home buyers and construction. We've also seen a number of valuations increase associated with first home buyers and also new builds. Just again, given the stimulus that's been pumped into the economy. So we've seen a real increase in construction.

well above sort of, again, kind of recent historical norms for us. And then the balance is refinance activity. So about 70% of all of our platform activity is just for refinancing. And I don't know when the date will come, but you'd have to think at some point.

Everyone's refinanced, rates are low, you know.

But still record volumes we're seeing even into the beginning of this year, you know, We, last year, first half of last year in particular, until probably about June, I think, you know, the market sort of adjusted. Nobody really knew what was happening.

But, you know, slowly kind of middle of last year, but particularly in the last quarter of last year, we saw activity, you know, through our platforms and the needs for valuation requirements increase exponentially significantly. And I think it is just a unique period in time.

You know, if refinance activity dissipates, some of the sale results we've seen recently might see, you know, people think about listing their property for sale. If they think, wow, okay, if my neighbour got that for their property, maybe I might put my property on the market and see.

But it's not sort of, you know, it's not eventuated to any material extent at this point in time. Although, you know, we do keep an eye on,

CMA activity and pre-listing indicators that demonstrate that somebody might be about to list and kind of looking for those lead indicators to suggest that things might be shifting. So probably too early to tell at this stage.

But it does feel a little bit unique for the time, I would suggest, given the extraordinary low rate

low interest rates that we've seen.

My ears pricked up when you said that CoreLogic basically is involved in a million evaluations per annum. So that would give some amazing data that you would be able to pick through?

I mean, can you just give us some, I mean, you've alluded to some there, but are there some sort of aspects or some data points that come out of that that will, I don't know, are interesting to you that you're actually working on or that CoreLogic's working on that provides different insight into the property market?

Yeah.

Yeah, we have an early market indicators report that people can subscribe to, and that really covers that whole property lifecycle, if you think, from agents sort of getting on our platforms and going out and doing appraisals, so that pre-listing activity.

So we look at that, and then we look at does that then eventuate and move into –

um you know actual listings so then we look at listings activity both rental and sale activity and that gives an indication of you know um those early signs does it eventuate into actually somebody doing something about either selling or renting their property um we look at you know vacancy rates in terms of the rental space we look at sale prices and auction clearance rates um and sort of measure and monitor you know are they are they going up are they going down and um

at all levels, right? So, right across Australia, regional, metro locations and so forth. And then we look at through our valuation platform. So, those properties that then sell, do they get valued and then how do they get valued?

What's the type of valuation that is deployed and the price points of properties that are being valued and sold, et cetera, et cetera. And You know, is it refinance or is it purchase activity behind that?

And is it a new build, for instance, or an established property? So there's a whole raft of things that I guess that we look at that kind of cover that whole life cycle of a property. And it's quite interesting the insights you can get out of that, you know, our research team.

puts a lot of information and does a lot of reports. It puts a lot of information out in the market, does a lot of reports on market activity and, you know, emerging trends that might be eventuating in certain markets. As an example, you know, the Perth market,

um has sort of lagged for quite some time and and in the last six months you know that there's you know signs that it's finally sort of reached a bottom and and maybe you know after a considerable period of time is starting to turn around so you know and just doing that analysis across you know house price movements historically in particular states and regions and

kind of, you know, who's leading the way. So it's quite, you're right, it is quite rich.

You know, even getting down to the, you know, one of the initiatives that we have internally, we refer to as our core seven, which is making sure that, you know, core attributes of a property such as bedrooms, bathrooms, car accommodation, land size, living area and so forth.

Age of a building as an example that, you know, we're sort of working away at making sure we've got the most comprehensive database of property in Australia. So making sure that the percentage of that core seven is attributes that we have on a property.

Um, you know, we're always looking to work out how we can get more information into our universe so that, um, whether it be property buyers, whether it be buyers agents, whether it be real estate agents, property valuers, brokers, um, whoever is interested in the property market.

And let's face it, it's pretty much a national sport, isn't it? Talking about the property market, um, that, you know, that they're armed with all the information they need to either do their job or, um,

to sit back and review the market in terms of what industry you're in and how that might impact you in your space. And if for nothing else, it's just keeping an eye on, you know, what the neighbours properly sold for relative to yours, you know, and that sort of thing.

So very much a national sport and we like to be at the front.

center and the forefront of that um to make sure yeah it's why you have an open house and the first open house for any property is full of you know it's half full of neighbors um it's interesting you talk about the core seven so that's sort of seven attributes of a property that you of each property you're trying to build I'm gathering sort of reading into what you said there that you're saying if you had a database of every single property in Australia and you had those seven attributes in your database that your you know your ability to

to do a whole bunch of, you know, predictions or whatever it is or make assumptions around that would be better. Is that sort of the background of that? Yeah, yeah, yeah.

Yeah, absolutely. And, you know, obviously what we might want to do but also just, you know, those core attributes that help, is that anyone involved in that, whether it be professionals who are operating in the real estate market or the banking and finance sector,

or it just be homeowners and consumers who are thinking about renting a property or selling a property or anything like that. The more information I think that property owners or potential property buyers have to educate themselves on the market, is a good outcome for everybody.

Totally on board with that, which is precisely why we do this podcast. Now, Shelley, do you have a property dumbo for us this week?

Well, I think we sort of touched on sort of an example a little bit earlier on around the differences in valuations. There's an example I saw recently where somebody done a desktop valuation on a property and the

you know, a week earlier and all the information was available online and it was clear for everyone to sell and they pulled it back by about $300,000 and it then triggered off this

wonderful process of getting another valuation done, stressing out the property buyer, adding to the cost and the time. And look, two weeks later, I think they got the result that they needed and it was the right result that the property was worth what they paid.

But that was probably my best example of a recent dumbo.

I think I might have heard either that story or a similar story from somebody else. And there was a missing data that in the actual sole property? Is that what contributed to that? Like they had the land size wrong or something like that?

No, in this particular case here, I think it was probably just a little bit of laziness on the part of the person that was looking at the property.

The property had been valued previously by the same valuation company and same office and it was just a case, I think, of probably wanting to go out.

Value is sometimes remunerated based on fees that they write and so going out to the property might have meant getting a little bit of extra in the pay packet.

So that was just, yeah, I think just professional laziness and, you know, cutting corners rather than doing what should have been the right thing to start with.

Dear, I know that, you know, it's rare that it happens sort of in my world, but it has happened where the valuation does come in significantly less than what we anticipated. And we do our research very thoroughly.

So, you know, when they come back with comps that are completely not valuable. You know, it's just like they're not even relevant. But then you've got to go through that whole process of challenging. It's not an easy process and there's a hell of a lot of defensiveness that comes back at you.

Is it often successful, a challenge?

It's hard to sort of put numbers on it. It can be. I wouldn't say often. More often than not, probably defers to the expert that's gone out to the property and for the reason I was sort of mentioning before about why they're reluctant to change their figure. It can be quite problematic.

What might happen instead is another valuation might be done and then you've got the issue of, well, you know, he said, she said. Two different opinions which trigger off another thing. I think it's important.

One thing I do want to highlight and stress is the valuation industry is a very important sector of the economy. It supports a number of industries, whether it be banking, finance, government. you know, the private sector and so forth. And for the most part, you know, they do get it right.

It is just a matter of, in their professional opinion, which might be different to someone else's opinion. And so trying to sort of mesh that common ground I think is sort of an important thing to be mindful of.

But like in any industry and, you know, just the inherent nature of people is, you know, you might have somebody who is more conservative in their demeanour and their personality and they might be more conservative when they value properties as opposed to somebody who, you know,

you know, might be deemed to be a bit more commercial. So, you know, it's the same, as I said before, it's the same as property buyers.

You have people who really stick their neck out because they really want a property or they just feel a bit more confident in their persona and then others that are a little bit sort of shy and sort of err on that conservative side and it's no different.

with the valuation industry, probably much like real estate agents as well, right? So you've probably got people in terms of listings might err on the conservative side. You've got the ones that buy the listing and effectively blow it out of the water and they get the listing and you've got that range.

So, you know, the valuation industry is not dissimilar to a number of others in that, you know, that there is –

There is a range and you've got different personalities and a whole bunch of things, you know, market dynamics, a play that all feed into that sort of ultimate assessment and why it might come out at a particular figure.

And it's the elephant. So the elephant being our biases, our individual behavioural biases. And it's back to that concept of luck.

you know, that in property you just want to hope that the elephant, you know, rampaging in other people's minds that might impact on your ability to buy that property at the right price. The luck is that it's in your favour, not against you.

Shelley, that's been a very interesting chat and I really do appreciate you coming along. You know, congratulations on your role. I mean, it's been nearly a year now, I guess, since you've been at CoreLogic.

But it's, you know, it sounds like a very interesting role, very much at a very dynamic time in terms of what's happening with technology and digitalization of so much of our lives and certainly the data that you have shared.

access to to make valuers lives easier as well so um thank you for your time great chatting to you again veronica we want to make you a better elephant rider and this week's elephant rider training is

Given that the market is hot, you're out there, you're pretty well facing the fact that you're going to have to pay a premium if you're going to buy a property.

And you're also realizing that there's a good chance your valuation might come in lower than what you paid, which is not going to make you feel very good.

But also, if you're sailing a bit close to the wind in terms of the amount that you're borrowing, your LVR, loan-to-value ratio, then obviously the valuation is far more critical for you as a buyer than it is for somebody else who has loads of equity.

And it might be that they're upgrading or might be that they've just got lots of money. So... If the valuation for you is really critical, you are in a bad spot or in a tough spot, should I say, when you're trying to buy property in a rising market.

Because if you go super conservative, you're not going to buy anything because you're going to keep missing out. Or you're going to buy something that is easy to buy. And in this market, if it's easy to buy, it's usually because it's really poor quality property.

Because even the sort of B minus property is getting competitive now, even C grade.

So if you're looking at a D grade that's super easy to buy, then be super careful because, you know, you might have a short-term pain that you're solving in that you can buy now without having to worry too much about the valuation being coming under what you're paying, but your long-term gain pain is going to be in that you've bought yourself a dud asset.

may well go back in value, may not grow in value over time. So that's a very short-term solution. So what do you do? I mean, what do you do, obviously, if you are in that situation where you're sailing very close to the wind?

Well, the first thing I do is go to my mortgage broker and I'll be saying, right,

how far can I push myself if I have to pay lender's mortgage insurance or LMI? And that might be that you might have a 20% deposit now, but clearly as market prices go up, that's eroding.

You're either going to have to look at something less expensive, not exactly what you need, and it might not last you the distance.

We might have to look in a different suburb or you might need to actually go back to the bank and borrow more as a proportion of the value of the property that you're looking at. But I guess what this bootcamp is all around is understanding the risks that you face there.

Get advice from your broker definitely about your risk at different price points and don't muck around. Don't go buy a Dego property because it's easy, but don't muck around taking the long way to work this stuff out because time is money in a rising market.

Please join us for our next episode. We're getting an on-the-ground insight into the Byron Bay property market. You know, Australia's most popular sea change slash tree change destination now on the global stage. What is happening in Byron Bay? What are the pros and cons?

What are the things the locals know that the newcomers don't know? And is there long-term sustainable growth on the cards for this area? Or what are the warnings in, say, five or ten years? So join us when we interview Michael Murray, who's Principal of Byron Property Search.

Been around for 20 years, so he can give plenty of local insights. If you're looking to buy your dream home or an investment property in Sydney's inner west, eastern suburbs or North Shore, my team and I can help you buy without regrets. Reach out via my website, gooddeeds.com.au.

If you're looking to buy your first home, thinking of upgrading into a new one or purchasing an investment property anywhere in Australia, my team would love to carefully guide you on this journey. And most importantly, get the finance right. Reach out via our website, wealthful.com.au. Thanks for joining us.

We'd love to see you again. And remember, don't be a dumbo.