By Gareth Vaughan
PropertyIQ, a joint venture between government owned Quotable Value and Australia's RP Data, is rolling out a residential property valuation service it says will reduce risk for both lenders and borrowers, reduce the opportunities for fraud, and reduce the opportunity for property values to be inflated.
Steve Langridge, general manager for sales and marketing at PropertyIQ, told interest.co.nz PropertyIQ had been working on a pilot of the service with one of the major banks since April, with a rollout expected across that bank in August, and plans to bring a second major bank on board next month.
He declined to name either bank, but said they were from among the country's big five, ANZ, ASB, BNZ, Westpac and Kiwibank, who between them hold about NZ$167.4 billion worth of residential mortgages
"With PropertyIQ setting up a service that’s available to all banks, we’d hope that we’d have at least three banks using the service inside the next 12 months," Langridge says.
The system was being developed with three key issues in mind:
*To strengthen the risk management process developed to support both mortgage lenders and applicants.
*To reduce the opportunity for interested parties to commit fraud by influencing the final report.
*To reduce the opportunity for the inflation of property values, which PropertyIQ says increases the risk for all participants involved in property transactions.
Langridge says the current process, where a customer/borrower has to arrange their own valuation, is inconvenient for customers, leads to delays and exposes the potential for third party influence in the process.
PropertyIQ's service enables bank staff to place an order for a full valuation on behalf of their borrower-customer to support residential and lifestyle property lending decisions. PropertyIQ is using a panel of valuation firms (about 20 so far) from across the country to do the valuations, with each valuer approved by both the bank and PropertyIQ.
Each valuation job is randomly allocated to the valuation firm by the system, ensuring no party to the transaction can direct the valuation to any specific valuer, says Langridge, maintaining greater independence between the valuer and third parties.
Addressing the Serious Fraud Office's concerns
Langridge suggests PropertyIQ's service could help address some of the concerns raised by the Serious Fraud Office (SFO) in its recent warning that people ought to be wary of potentially inflated valuations for residential and commercial property and businesses.
The SFO warning was made after it encountered inflated valuations in several of its investigations, one as high as 500% above market value, and as it considers laying criminal charges. The SFO says a "small number" of property valuers are undermining confidence in their profession.
"To be fair to the industry there aren’t that many valuers out there who have caused problems, but they do exist," says Langridge.
He says in the traditional valuation process a number of parties to a transaction can seek to influence the value and outcome.
"Where a member of the public is currently sent away to get a valuation, they’ll often ask for a referral. That can come from a real estate agent, a broker, a mobile (lending) manager, a solicitor, there are all number of parties who could provide a referral. Part of that chain is the individual bank employees as well."
"By enabling a service where no individual party selects which valuer and which firm does the work, it removes the opportunity for that to be managed by any individual, be they any of those related parties," he added, saying the PropertyIQ scheme would also "put more rigor inside the bank process."
"The bank doesn’t dictate which firm gets an individual job either. So part of our responsibility is to deliver a valuation panel in every urban area of the country that has multiple firms so that no party to the transaction, be it a banker or an agent, knows exactly who is going to be doing the valuation for that property."
The selection of valuation firms and job allocation is managed by PropertyIQ on behalf of the banks. For a firm to be accepted on to the panel, it need to be approved by both the bank and PropertyIQ. Before this can happen checks are undertaken to make sure the firm has professional indemnity and public liability cover, they'll check its insurance claim history, plus any past issues that have resulted in a bank not accepting valuations from that firm or valuer, and the firm must agree to a commercial contract with PropertyIQ. For a valuation firm to be accepted on to the panel, both the firm and its individual valuers must be approved by the banks(s) and PropertyIQ
The borrower will continue to pay for the valuation.
Owned by US group CoreLogic, RP Data touts itself as the number one provider of property information, analytics and risk management services in Australia and New Zealand. It has a database containing 150 million property records. Quotable Value is New Zealand’s largest valuation and property information company.
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