DISRUPTIVE technology may be shaking up the property valuations space, but the incumbents have sounded a note of caution to the use of computer-generated valuations.
The Singapore Institute of Surveyors and Valuers (SISV) on Wednesday stated categorically that it does not recognise these valuations.
"Such computer-generated values are not considered valuations (in accordance with SISV Valuation Standards and Practice Guidelines) and are therefore not recognised by the Institute," it said in a statement.
In an interview with The Business Times, SISV first vice-president Tan Choi Heng said that the institute's decision to state its position now is in response to increased enquiries about the validity of computer-generated valuations offered by organisations and IT companies. While professional valuers use technology to enhance their productivity, the technology is "a means to an end" but not an end in itself, he said.
Though he said that the SISV statement was not targeted at any particular company, it came on the heels of the recent launch of a valuation service by SRX Property that is said to be able to churn out valuations at much faster speed and at an affordable price through a computer-assisted process. SRX Property is an online portal operated by StreetSine, which is part of Singapore Press Holdings.
While the institute supports the use of IT and computer modelling, "these are only tools to assist the valuer and cannot replace the rigorous process of inspection, data collation, validation, verification, and analysis undertaken by a professional valuer", SISV said. "The general public, relying solely on such computer-generated 'values' for their property transactions and decision-making, do so at their own risk," it added.
Stressing that every valuation process is a tedious one, SISV assistant honorary secretary Richard Tay pointed out that raw transactions data requires human judgment to sift out related-party transactions and other peculiarities that may not be picked up by the computer.
SISV members and member firms are also expected to adhere to valuation standards guidelines or face disciplinary action, said Mr Tay, who is also director of valuation (corporate services) at ECG.
SISV has close to 900 members under Valuation and General Practice, of whom some 650 valuers are licensed under the Appraisers Act.
Amid a proliferation of property portals that offer automated valuation model (AVM) which uses mathematical modelling combined with a database, SRX Property has upped the ante with its launch of a valuation service that is both computer-assisted and valuer-backed. But co-founder and chief technology officer Jeremy Lee told BT that the technology does not replace human judgment in the valuation process as it involves field inspections by valuers.
Through the technological tool known as V-8 engine, the head of valuations is able to monitor and review the valuation process, and everything is documented. Each valuation report is signed off by a licensed valuer.
The valuation team now consists of seven valuers of which four are licensed under the Appraisers Act while the other three are in the process of applying for the licence. Helming the valuations team is Andrew Chee, a practising valuer who later moved into property investment firms before joining SRX Property. He is a member of SISV and the Royal Institution of Chartered Surveyors (RICS).
A valuation report by SRX Property can be generated within a day for residential properties - compared with the traditional valuation process of a few days to a week. "What we are advocating here is that valuation should be done at an earlier part before price negotiations," Mr Lee said. Asked if banks here recognise the valuation reports generated by SRX Property, Mr Lee said that this was up to them.
Banks in Singapore that BT spoke to generally have their own panel of valuers.
Tan Keng Chiam, an SISV council member for valuation and general practice, said that valuation businesses in consultancies have not been affected yet by the insurgence of AVMs, given that corporate clients still require a rigorous valuation process for audit and legal purposes for which valuers have to show proof of due diligence. But there has been increased confusion in the market, he said. "Valuation is an investigation process whereby we pull out all the facts from reliable sources. If the computer can do that, it will save us a lot of time. But at the end of the day, you still need to have the (human) oversight."
Flagging his reservations about basing major decisions such as buying a property or issuing loans by banks on AVMs, Mr Tan added that there is also the issue of professional liability - who is responsible if the computer-generated valuation turns out to be flawed.
Moreover, a valuation report is a legal document that may become admissible evidence in court, said Mr Tan, who is also JLL head of valuation advisory services.
George Low, who runs his own chartered surveyor practice, felt that the valuation process was one that hinges on the valuer's experience and sensitivity to market conditions. "Whether it is a vendor or purchaser, he or she needs to be guided with the best available advice and given a value that is reflective of the market conditions so that he can make a well-grounded decision on whether to buy or sell a property. Technology cannot replace the experience of a valuer and the analytical skills of a valuer."
This article was first published on April 7, 2016.
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