Paving the way for instant offers

They said it would never happen but Rightmove is poised to introduce an automated valuation system that could herald instant mortgage offers next year, says Frank Eve

As promised, this week I have an update on the provision of automated valuations. While many people thought automated valuations would never happen, I can now announce that Rightmove has an advanced automated valuation model due for release in the first quarter 2006. The AVM will give a fully automated and indemnified residential property valuation without the need for a physical inspection of the property. An internal team of developers has been working on the product since the beginning of 2005 and the model will be capable of valuing residential property across the UK.

The Rightmove AVM will use the largest privately-owned property database in the UK. Three types of data will be used. These are surveyors’ property data with four million records, Land Registry data with six million records and Rightmove (estate agency) data with five million records. About 300,000 new records are received into these databases every month.

The data will be extensively cleansed and then merged to create a best view of every property. It has detailed information on seven million properties, which may include sold price, surveyed price and asking price. The data will also include property attributes, such as the number of bedrooms, bathrooms, condition and floor area. It will even include one or more photographsThe AVM has been designed to take maximum advantage of Land Registry records, released in February 2005, as sold prices generally provide the best indicator of market value. The system uses a specially developed, proprietary indexation algorithm instead of regional indices from third parties.

It has also been designed to accept details from home condition reports, which will become more prevalent after the introduction of Home Information Packs. Confidence levels are calculated and tracked throughout the automated valuation process meaning the statistical distribution of the final valuation is accurately known.

The AVM will be able to operate in three modes – quick, interactive and batch. The quick mode is where users enter their property address and attribute details to generate a summary report including price and confidence level. The interactive mode is the same as quick mode, except more detail is returned to the user, such as details of the comparable properties used by the model. The user may tailor the model by choosing to exclude some comparables. The batch mode allows users to submit a file containing a list of properties to be valued. Standard functionality will include full audit capability.

This AVM has the potential to not only revolutionise the home purchase market but also the remortgage market. All the major lenders have online decision tools that give an offer subject to valuation. It would seem that with valuations now being available instantly, an instant offer will be with us in 2006.

As one of the owners of Rightmove is HBOS, it will be interesting to see where this model will be used first and what it will do to the current valuation processes.

Watch this space for more updates later this year.