Australia & New Zealand
Valuation and Property Standards

Loading

15.0 Client Focus

15.4 Residential Desktop Assessment - Advisory Note

Residential Desktop Assessment - Advisory Note 15.4 (PDF 50 KB) To Be Withdrawn 1 October 2016, and replaced with Residential Desktop Assessment – Memorandum for First Mortgage Purposes

Table of Contents

Section A: Introduction

Preamble

  • 1 The purpose of this Advisory Note is to provide a basis upon which Members of the Australian Property Institute (API) (Members) should prepare residential Desktop Assessments.
  • 2 The Advisory Note may also be used by Members' Clients to understand the procedures adopted in preparing Desktop Assessments and how they should be used.
  • 3 The API considers that Desktop Assessments are suitable only for use by Members or Members' Clients for mortgage security valuations of residential property. In addition Desktop Assessments should only be used in connection with transactions which represent a low to moderate lending risk and, then, only where the requirements of this Advisory Note have been otherwise met.
  • 4 The Valuer is providing an Indicative Assessment (with conditions) of the Subject Property, based on the information obtained, following the procedures set out in this Advisory Note and / or contractual agreement.
  • 5 The Indicative Assessment is not, and should not be construed to be, a representation as to the Market Value of the Subject Property, as defined in the Valuation and Property Standards Manual and the Practice Standards and Guidance Notes contained therein. A Desktop Assessment is merely and Indicative Assessment made without the benefit of an inspection of the subject property. If a formal valuation of the subject property is made based on an inspection it may vary significantly from the results of any Desktop Assessment.
    Clients should be aware that the Desktop Assessment methodology carries with it risks which entail a degree of likely variation greater than might be expected to be produced by a Valuation.
  • 6 The subject property is not inspected by the valuer.

Status and Scope

  • 7 Members undertaking Desktop Assessments should comply with this Advisory Note.
  • 8 Compliance with the Advisory Note means Members should:
    • 8.1 make their Clients aware of this Advisory Note;
    • 8.2 meet minimum qualifications criteria;
    • 8.3 ensure that sufficient Information is obtained; and
    • 8.4 follow all procedures required by this Advisory Note.

Terminology

  • 9 A Desktop Assessment is a report prepared:
    • 9.1 by Valuers relying on specified documents and information; and
    • 9.2 that does not involve an inspection of the Subject Property; and
    • 9.3 that produces an Indicative Assessment (with conditions) of value of the Subject Property.
  • 10 Other definitions which apply to the terminology used throughout the Advisory Note are contained in Annexure A. Defined terms are indicated by use of highlighting.

Section B: Preliminary Issues

Contractual arrangements

  • 11 Clients requesting Desktop Assessments should be made aware of the process being undertaken by the Valuer in preparing a Desktop Assessment (as distinct from any other Valuation Services provided by Members). The Valuer should provide a copy of this Advisory Note to Clients instructing the Valuer to prepare Desktop Assessments.
  • 12 If the Valuer is not able to comply with this Advisory Note in preparing the Desktop Assessment, the Valuer should:
    • 12.1 confirm that a Desktop Assessment cannot be completed;
    • 12.2 recommend an alternative Valuation Service or Restricted Valuation if appropriate; and
    • 12.3 not issue the Desktop Assessment (complete or incomplete) to the Client.

Understanding

  • 13 Valuers preparing Desktop Assessments should be familiar with this Advisory Note.
  • 14 API members using Systems to prepare Desktop Assessments should ensure that there is adequate training of the System prior to undertaking a Desktop Assessment using the System.

Valuer qualifications

  • 15 Desktop Assessments should only be prepared by Valuers who are:
    • 15.1 current members of the API (CPV or RPV); and
    • 15.2 registered Valuers (in accordance with the relevant State/Territory requirements); and
    • 15.3 continuously engaged in the provision of Valuation Services for at least 50% of their overall practising time; and
    • 15.4 continuously engaged in the provision of Valuation Services within the appropriate postcode. The valuer should have sufficient knowledge of the area within which the subject property is located for a period of not less than 6 months.
  • 16 Where a Valuer is not able to satisfy the requirements set out in paragraph 15, the instruction to prepare a Desktop Assessment should be declined. The Valuer may, however make recommendations and accept alternative instructions from the Client to provide Valuation Services and/or a Restricted Valuation.

Section C: Desktop Procurement and Risk

General

  • 17 Desktop Assessments require the Valuer to be specifically instructed not to perform certain aspects of the processes involved in preparing Valuations including, but not limited to the inspection of the Subject Property. The aspects of the usual valuation that are not completed in preparing a Desktop Assessment include, inter alia, the following:
    • 17.1 An internal or external inspection;
    • 17.2 Land Topography and Aspect;
    • 17.3 Roads and Access;
    • 17.4 Site Defects;
    • 17.5 Impact of adjoining development;
    • 17.6 Environmental Risks;
    • 17.7 Encumbrances;
    • 17.8 Permissible Land Uses and Land Use Conformity;
    • 17.9 Improvements; and
    • 17.10 Leases and Tenancies.
  • 18 Due to these aspects of the usual valuation process not being completed there are risks that the outcome of a Desktop Assessment may be inaccurate. These include:
    • 18.1 the risk of inaccuracy of information contained in the Desktop Assessment as compared to Valuations is increased;
    • 18.2 the fact that the Valuer cannot verify the accuracy of information contained in a Desktop Assessment as would be provided in a Valuation; and
    • 18.3 the fact that Desktop Assessments will have significant limitations when compared to Valuations, including a greater degree of variation in the resulting Indicative Assessment.

Allocation of risk

Acceptance of Commercial Risks of a Desktop Assessment.

  • 19 The API considers that there are inherent risks to a Lender / Client who relies on a Desktop Assessment but acknowledges that the Lender/Client has expressed a commercial need for such an assessment to be carried out by Valuers.
  • 20 The Lender / Client expressly acknowledges and confirms that:
    • 20.1 in producing the assessment contained in the Desktop Assessment, the Valuer has not carried out the usual range of enquiries that a Valuer is required to make by professional practice standards (as determined by the API and at law) in carrying out a Valuation of property and that this is at the specific request of the Lender / Client; and
    • 20.2 the Lender / Client fully understands and accepts the risks inherent in such circumstances.
  • 21 Accordingly, but subject to compliance by the Valuer with the requirements of the Desktop Assessment, this Advisory Note and the stated instructions of the Lender/Client, the Lender/Client agrees that it will have no cause of action
    against the Valuer whether in contract tort or otherwise by reason only that the Lender / Client suffered loss or damage by relying upon a Desktop Assessment.
  • 22 Furthermore the Lender / Client acknowledges that it accepts that a Desktop Assessment is not and will not be construed to be a valuation in the same meaning as a valuation conducted in accordance with the General Concepts, Principles and Definitions as detailed in the standards promulgated by the API, which is based on an inspection of the subject property.
  • 23 The Lender / Client further agrees that it will indemnify the Valuer against any claim for loss or damage by a third party invited or permitted by the Lender / Client to rely upon a Desktop Assessment, whether arising in contract tort or otherwise andarising out of or in conjunction with reliance by that third party on a Desktop Assessment.
  • 24 The Indemnity to be provided by the Lender/Client will not apply where the valuer has been fraudulent or dishonest.
  • 25 Valuers shall not assign, readdress or re issue Desktop Assessments. Risk management
  • 26 In an effort to reduce the risks associated with the use of Desktop Assessments (as described in this Section C), the Valuer should adopt a procedure whereby:
    • 26.1 the instruction from the Client is checked to ensure that the Subject Property is not of a type considered unacceptable by the API (Annexure B);
    • 26.2 sufficient Information is obtained before a Desktop Assessment can be completed or issued.
  • 27 It is the responsibility of Lenders / Clients to prepare appropriate and prudent risk management protocols to ensure that Desktop Assessments are used only in low to moderate risk categories.

Risk categories

  • 28 The API considers that the following transaction types are unacceptable for Desktop Assessment:
    • 28.1 all non-residential mortgage lending;
    • 28.2 all lending on security other than a first registered mortgage;
    • 28.3 all lending transactions connected with nonarms length sales; and
    • 28.4 transactions where the security consists of, or includes, more than one security property located within a single development.
  • This list is not intended to be exhaustive.
  • 29 The API considers certain categories of property to be unacceptable for Desktop Assessment. Annexure B to the Advisory Note is a nonexhaustive list of these unacceptable properties.
  • 30 It is expected that the Client/Lender should implement procedures to monitor:
    • 30.1 the compliance of their internal procurement practices with this Advisory Note and / or specific contractual arrangements;
    • 30.2 the compliance of Valuers and/or Valuation Firms retained by the Client/Lender to provide Desktop Assessments with this Advisory Note and / or specific contractual arrangements.

Section D: Desktop Process

Information

Essential

  • 31 It is essential for a Lender / Client instructing a valuer to prepare a Desktop Assessment to provide to the valuer, at the time of first issuing instructions, all information required in this section.
  • The essential Information to be provided by the Lender / Client to enable a Valuer to complete a Desktop Assessment is:
    • 31.1 The Subject Property data, namely:
      • 31.1.1 full property address;
      • 31.1.2 legal description1;
      • 31.1.3 purchase price (if applicable);
      • 31.1.4 land area or plan with measurements;
      • 31.1.5 property type (vacant land, residential dwelling, townhouse, unit);
      • 31.1.6 external improvements (eg, swimming pool);
      • 31.1.7 main building type;
        • a) approximate build date;
        • b) details of significant renovations including date;
      • 31.1.8 main walls and roof;
      • 31.1.9 number bedrooms, bathrooms;
      • 31.1.10 car accommodation (eg, garage, car port or car space); and
      • 31.1.11 services;
      • 31.1.12 a full copy of the contract (where Desktop Assessment sought in connection with a purchase or proposed purchase) and any other contractual arrangement affecting price. (Collectively referred to as Subject Property Data); and
    • 31.2 At least two visual identifiers of the Subject Property from the following categories:
      • 31.2.1 Location map;
      • 31.2.2 property frontage photograph; or
      • 31.2.3 aerial/cadastral photograph.
  • 32 The Valuer should obtain all Subject Property Data from the Client and/or the Customer (or Third Party) collectively. In the event that not all Subject Property Data can be obtained from the Client and/or Customer (or Third Party) collectively, the instruction to prepare a Desktop Assessment should be declined. The Valuer may, however make recommendations and accept alternative instructions from the Client to provide Valuation Services or a Restricted Valuation.

Sales Evidence

  • 33 Sales Evidence is to be collected for 4 comparable properties each of which should:
    • 33.1 have transacted within the last six months; and
    • 33.2 be known to the Valuer based upon a prior inspection by the Valuer or by a qualified valuer within the Valuer s firm.

Indicative Assessment

  • 34 The Valuer is providing an indication of the value of the Subject Property, based on the information obtained, following the procedures set out in this Advisory Note (Indicative Assessment).
  • 35 The Indicative Assessment (with or without conditions) is not a representation as to the Market Value of the Subject Property, as defined in the Valuation and Property Standards Manual and the Practice Standards and Guidance Notes contained therein. Clients should be aware that the Desktop Assessment methodology carries with it risks which entail a degree of likely variation greater than might be expected to be produced by a Valuation.

Reporting requirements

  • 36 All notes, revised instructions and changes made to documents provided and collated as part of the Desktop Assessment process are to be maintained on the Valuer s file (hard copy or electronic).
  • 37 Systems used to prepare Desktop Assessments may provide an audit trail of any changes made to System during the Desktop Assessment process. All changes should be logged by reference to the user, time and date of change. The Valuer should have access to this log trail at all times.

Security

  • 38 Valuers using a System to prepare Desktop Assessments should ensure that:
    • 38.1 details necessary to access the System are kept secure and not misused; and
    • 38.2 any electronic signature generated as part of the System is used only by the Valuer.

 

Annexure A: Definitions

Certified Practising Valuer (CPV) or Valuer
A Valuer meeting the requirements for Certified Practising Valuers as defined by the API.
Client
The party instructing the Valuer to prepare the Desktop Assessment. The Client may be the Supplier, Lender or a financial intermediary.
Continuously engaged
A Valuer is continuously engaged in the relevant postcode where the Valuer has undertaken multiple valuations of that type over the whole (and note merely some part) of the period specified.
Customer
A person who seeks to grant a mortgage over the Subject Property to the Lender in support of a proposed Loan.
Desktop Assessment
A report prepared:
  1. by Valuers relying on specified documents and information; and
  2. that involves no inspection of the Subject Property; and
  3. that produces an Indicative Assessment of value of the Subject Property.
Indicative Assessment
An indication of the value with any limiting conditions of the Subject Property, based on the information obtained, following the procedures set out in this Advisory Note.
Lender
The financial institution issuing instructions (or on whose behalf instructions are issued) to the Valuer. The Lender may have the same meaning as the Client.
Essential Information
Essential information, specified in the Advisory Note, that the Valuer requires in order to conclude the Desktop Assessment.
Non-Essential Information
Information that may be of assistance to the Valuer in preparing the Desktop Assessment but is not Essential information.
One-Off Services
Desktop Assessments requested by a Client where the instructed Valuer is not part of a panel of approved Valuers who provide Valuation Services to that Client.
Advisory Note
This Desktop Assessment Advisory Note produced by the API (including any API revisions, updates or additions from time to time).
PropertyPRO
Valuations prepared in accordance with the API PropertyPROTM Residential Valuation and Security Assessment Supporting Memorandum.
Restricted Valuation
A valuation prepared in accordance with the API Restricted Valuation Supporting Memorandum.
Sales Evidence
Sales data that relates to properties that have characteristics comparableto the Subject Property.
Subject Property Supplier
The property for which the Client instructs the Valuer to prepare a Desktop Assessment report.
A party that acts as an intermediary between Lenders and Valuers in connection with the procurement by the Lender of Valuation / Desktop Assessment services.
The Supplier typically:
  • • issues instructions to Valuers to prepare Valuations and/or Desktop Assessments for Lenders.
  • • owns the System.
System
Any computer system, portal, database, application service, program or any other technology utilised:
  • • in preparing Desktop Assessments; and/or
  • • to track, deliver, produce and coordinate Desktop Assessments.
Valuation
A valuation carried out in accordance with the General Concepts, Principles and Definitions of the Valuation and Property Standards Manual, excluding Desktop Assessments and Restricted Valuations.
Valuation Services
Preparing market valuations based on inspecting the subject property (including sales analysis and property inspections and other ancillary work) required for the preparation of Valuations.

 

Annexure B: Annexure B: Unacceptable Property Types Listed by API

  • 1) Any property under construction or a new house and land package.
  • 2) Any security property known or disclosed to be greater than 2.2 hectares in land size.
  • 3) Any property known or disclosed to be zoned for other than residential purposes.
  • 4) An income-producing rural property.
  • 5) Part of a development which has been converted from another usage.
  • 6) Serviced apartments.
  • 7) Properties designed, zoned or used for commercial purposes (excluding residential usage units in a commercially zoned development).
  • 8) Properties that are unique, or have restricted usage.
  • 9) Properties to be constructed by an owner--builder (in whole or part).
  • 10) Leasehold properties other than Crown lands in the ACT.
  • 11) Purple title (WA) or Moiety title (SA).
  • 12) Under a 'timeshare' arrangement.
  • 13) Land subject to licence to occupy.
  • 14) Limited title (any defects).
  • 15) Mobile or temporary homes.
  • 16) Boarding houses/homes supporting residential services.
  • 17) Land/improvements contaminated.
  • 18) Properties 'leased for life' covenants on title.
  • 19) A strata unit of less than 40 square metres.
  • 20) Crown land (excluding the ACT).
  • 21) Properties under the Western Lands Act.
  • 22) Properties purchased off-the-plan.
  • 23) Properties within a known flood height level higher than the lowest floor level.
  • 24) A multiple occupancy security that is a single property comprising of more than one unit of living accommodation.
  • 25) A property located on an island without sealed road connection to the mainland (excluding Tasmania).
  • 26) A studio apartment or bed-sitter (no separate bedroom).