Desktop Valuations: Bridging Finance Automation

Friday 31st May | 11 minute read

Desktop valuations, also known as remote valuations, are cost-effective, quickly completed property appraisals which provide sufficient accuracy for low-risk loans and straightforward appraisals to mortgage and bridging loan lenders. 

As part of a wider fintech adoption by lenders, they’re a significant advancement in property appraisal, enabling the assessment of property values remotely, without a physical site visit. This method, typically executed by certified professionals, be it in-house underwriters or those accredited by the Royal Institution of Chartered Surveyors (RICS), relies on digital tools and comprehensive databases—including Land Registry data, market trends, and historical property data—to estimate property values. 

This article takes a closer look at what desktop valuations are, how they came about, the benefits and potential drawbacks that come with automated valuations for lenders and borrowers.

Desktop Valuations: Automation & Accuracy

What is a Desktop Valuation?

A “Desktop Valuation”, also known as a "Desktop Survey" or "Desktop Appraisal", is a property valuation method performed remotely without physically inspecting the property. The term “Desktop Valuation” derives its meaning from the appraiser being remotely located at their desk’. It is typically performed by a certified or accredited individual, such as one belonging to the Royal Institution of Chartered Surveyors (RICS). A desktop valuation can typically be completed faster than a survey in which the appraiser must visit the property location. The person performing the desktop valuation on a property relies on online resources such as Land Registry data, market data, historical property information and  Automated Valuation Models (AVMs). to estimate a property's value. A desktop valuation is less comprehensive than a full in-person RICS valuation (red book valuation), but it can be useful in determining property value estimation. 

682,060 mortgages for dwellings were approved in the year to 30 April 2024 1. With an estimated 30-70% of mortgages being now underwritten by AVMs 2, it could equal between 204,618 and 477,441 mortgages approved by this method. Considering that not all AVMs will have produced mortgage offers or approval, the true figure of AVMs completed for the year to 30 April 2024 will likely be significantly higher.

Sources: 1. Trading Economics 2024. 2. Andrew Baum, Luke Graham and Qizhou Xiong, Oxford Future of Real Estate Initiative. October 2021.

What are the origins of Desktop Valuations?

Desktop valuations for underwriting property finance first appeared in the late 1990s in the US, when institutional investors primarily began using Automated Valuation Models (AVMs) to assess risk in collateralised mortgage loans. This technology gained popularity in the UK in the early 2000s with the launch of AVM services with brands such as UKValuation and Hometrack.

Stephen Clark, Founder of Finbri, comments, “Desktop Valuations really came to the fore in bridging loans during the early 2020s when COVID-19 caused property transactions to stall. Bridging Lenders began to seriously review their inefficiencies and adapt to survive. This involved embracing automation, including desktop valuations, and reaping the benefits. I think we’ve seen a step-change in the market in adopting fintech, and it’s only just getting going.”

What’s the difference between a Desktop Valuation and an AVM?

The difference between a Desktop Valuation and an AVM is that an AVM is only a constituent part of data that helps determine the property valuation by a person when completing a Desktop Valuation.  

Automated Valuation Models (AVM) Definition

“Automated Valuation Models” use one or more mathematical techniques to provide an estimate of the value of a specified property at a specified date, accompanied by a measure of confidence in the accuracy of the result, without human intervention post-initiation."
Source: 2008 RICS AVM Standards Working Group.

How do automated valuation models (AVMs) work for Desktop Valuations?

Automated valuation models (AVMs) are software-driven pricing models used to assess property values, an essential factor in desktop valuations. 

What are the different types of AVMs?

There are four main types of AVMs. The first operates without human intervention, while the second requires administrator review (ultimately, it’s no more than a common-sense check). The third involves an external surveyor's overview, and the fourth integrates in-house valuer assistance, falling under the desktop valuations category.

Types of AVM (UK models)

Also referred to as

Model 1: Wholly automated loan decisions

AVM

Model 2: AVM with an administrative sense check

AVM

Model 3: Outsourced ‘surveyor overview’ operated by a central valuer.

No local knowledge used. 

Can upgrade to higher level valuation if required. 

Desktop Valuation

Model 4: In-house valuer assisted AVM (VA AVM) 

Operated by valuers with local knowledge. 

For cases marginally outside AVM valuation policy constraints. 

Can upgrade to higher level valuation if required.

Desktop Valuation

Source: RICS Research Paper 2009.

What is a Central Valuer?

[A central valuer] is the valuer appointed.
Nigel Sellars FRICS, Professional Practice, RICS

What data is used in a Desktop Valuation?

In a desktop valuation, various data sources estimate a property's value without needing an on-site visit. 

AVMs are used in desktop valuations. Using complex algorithms, AVMs analyse large datasets, including recent sales, property characteristics, and market trends, to generate quick and consistent property value estimates. 

These include recent sales of similar properties in the area, the size and condition of the property, location and local market trends. For example, desktop valuations use recent Land Registry data and property tax assessments. By analysing all this information, desktop valuations provide a relatively accurate picture of a property's worth.


Can Desktop Valuations replace physical appraisals?

Desktop valuations can replace physical appraisals in specific situations. They serve as an alternative to physical appraisals in certain situations, mainly where the valuation is conducted for a standard residential property when speed and cost efficiency are priorities. However, they may not completely replace physical appraisals due to limitations such as the lack of a physical inspection, which can identify issues not visible in photographs or described in reports. Therefore, physical appraisals are often necessary for comprehensive and detailed property assessments, especially in complex cases or when high accuracy is critical.


What are the alternatives to Desktop Valuations, and how do they compare?

Other than Desktop Valuations, there are two commonly used alternative methods for determining a property's value. These are RICS-accredited surveyors and Estate Agent Estimates - each is used differently.

Valuation reports completed by RICS

A Royal Institution of Chartered Surveyors (RICS) registered surveyor must prepare a report to determine the property's market value. The valuation may be commissioned by one party or jointly by both parties through a Chartered Surveyor. Property Valuation Reports by RICS-accredited Chartered Surveyors are used for various purposes, including property sales, purchasing, financing, taxation, and legal disputes. The reports include an in-depth property analysis, market trends, and comparisons with similar properties, offering an accurate assessment of the property's value at a specific time.

There are 3 levels of RICS Surveys. 

RICS Survey Level

What’s included?

RICS Level 1 Home Survey

Previously named 'Condition Report', the survey outlines a property's condition, risks, and urgent defects. It is ideal for conventional or newer homes.

RICS Level 2 Home Survey

Formerly, the 'Home Buyer Report' offered more details and is suitable for properties in reasonable condition. The level 2 survey has two options, such as survey only or survey and valuation

RICS Level 3 Home Survey

Previously known as the 'Building Survey,' it is the most comprehensive and recommended for larger, older, or unique properties. It provides in-depth analysis and advice on repairs and maintenance.

Market appraisal (Estate Agents)

A market appraisal by an estate agent is often called a "property valuation" or, more informally, a "market valuation." It is an assessment conducted by a real estate professional to determine the estimated market value of a property based on current market conditions, comparable sales, and the property’s condition and features. This appraisal typically sets a sale price when a property is listed for sale. Unlike formal valuations performed by licensed valuers, market appraisals by estate agents are usually conducted as part of the listing process and are not legally binding.

Are Desktop Valuations cheaper than traditional property appraisals?

Key takeaway

Desktop valuations are cheaper by at least £100 compared to the cheapest RICS survey.

Traditional property appraisals often involve a RICS-accredited surveyor physically visiting the property site to conduct a comprehensive inspection, which incurs additional costs such as travel expenses and the appraiser's time. 

Typical costs of an RICS survey based on the property value are listed below.

Property Value Range

RICS Survey Level 1 Cost

RICS Survey Level 2 Cost

RICS Survey Level 3 Cost

£100,000 – £249,000

£300 – £500

£400 – £600

£630 – £800

£250,000 – £349,000

£500 – £600

£600 – £700

£800 – £900

£350,000 – £499,000

£600 – £700

£700 – £800

£900 – £1,100

£500,000 – £1,000,000

£700 – £900

£800 – £1,000

£1,000 – £1,500

The desktop valuation costs range between £65 to £200, although prices vary from lender to lender. Some lenders may include the cost of the desktop valuation in their loan application fees, while others may charge it separately.

Are Desktop Valuations as accurate as in-person appraisals?

Desktop valuations are not recognised to be as accurate as a RICS valuation. While they offer efficiency and cost savings, they rely heavily on data from AVMs and lack the detailed, on-site inspection that in-person appraisals provide.


When are AVM and Desktop Valuations preferred?

AVMs and Desktop Valuations are especially preferred by mortgage lenders due to their efficiency and cost-effectiveness for valuations of standard housing stock where high volumes of sales data exist with similar properties. These houses can, therefore, be easily compared to recent sales, which results in more accurate valuations.  

What is a mortgage valuation, and why is it carried out?

A “mortgage valuation” determines the property's value and whether it's suitable security for a mortgage. Before agreeing to use a property as collateral for a mortgage loan, the lender will arrange a desktop valuation to ensure the property aligns with the offer. A property isn’t typically physically inspected for the mortgage valuation; instead, the valuation focuses on appraising whether the property type, location, and value meet the lending criteria.

What is a mortgage pre-approval?

Mortgage pre-approval is a stage in the mortgage process where a lender issues a document (Agreement in Principle (AIP) or Decision in Principle (DIP)) confirming they will lend you money, pending the required evidence upon full application. A mortgage company will provide you with an informal AIP or DIP, indicating that you can borrow money from them, subject to their criteria.

A property valuation is not required to obtain pre-approval for a mortgage. Pre-approval is usually based on financial information, including income, credit history, debts, and assets. 

Does a valuation report mean that the mortgage is approved?

No, a satisfactory valuation report doesn’t mean a mortgage is approved. A valuation report aims to identify a property’s market value. By showing the market value of a property, discrepancies between the appraised value and the buyer’s offer price will be highlighted. Where the report’s valuation is lower than the offer made, the buyer would have to typically find the additional sum from other means to make up the difference.

The mortgage lender will only lend up to the maximum loan-to-value (LTV) of the property value defined in the valuation report. Mortgages are only approved after the entire lender’s eligibility criteria are met. This includes evaluating affordability (income and expenditure), credit score, age, dependencies,  borrower anti-money laundering checks and identity verification.  

What if the value after valuation is too low?

When a valuation report determines a property's value to be lower than expected (down valuation), there are four typical options. The options to consider are price renegotiation, increasing the down payment to cover the difference, challenging the appraisal, or seeking alternative financing. 


How are Desktop Valuations used?  

Desktop valuations are used to estimate the value of a property. But in what circumstances are they used?

  1. Property Assessments. Property owners, buyers, and sellers use desktop valuations to estimate a property's value. They provide a convenient way to gauge a property's market worth without needing a physical inspection.
  2. Mortgage Applications. Lenders often use desktop valuations as part of the mortgage application process to assess the value of the property used as collateral for the loan. These valuations help lenders make informed decisions about loan amounts, interest rates, and terms.
  3. Portfolio Management. Property investors and managers may use desktop valuations to evaluate the value of multiple properties in their portfolios. This information can help them decide whether to buy, sell, or refinance properties.
  4. Property Tax Assessment. Government agencies responsible for property tax assessment may use desktop valuations to determine the assessed value of properties for tax purposes. While desktop valuations may not be the sole basis for tax assessments, they can provide useful supplementary information.

How do lenders use Desktop Valuations in the mortgage loan process?

Lenders rely on desktop valuations and AVMs for low-value and high-value property mortgage loans. For example, Lloyds uses an AVM or a ‘remote valuation’ for properties up to £10 million, but this varies from lender to lender. Physical inspections completed by RICS surveyors are typically required for unique properties, newly built properties, older or renovated homes, and properties in unstable markets to ensure accurate valuations. 

How are Desktop Valuations used in the bridging loan process?

In the bridging loan process, desktop valuations are an initial assessment of a property's value, determining its suitability as collateral. Lenders quickly estimate a property's worth without a physical inspection using desktop valuations. Bridging loans often require quick turnarounds, where desktop valuations prove helpful. However, while desktop valuations provide an initial assessment, lenders may require a further appraisal for higher-value or unique properties. Available for Residential only, not mixed-use or commercial. Usually acceptable by lenders up to £1m. Some lenders may specify location availability.


How quickly can a Desktop Valuation be completed?

A desktop valuation can be completed almost instantaneously, depending on available information. Where additional research or data verification is required, it may take longer to finalise the valuation. Ultimately, the speed of completion for a desktop valuation will vary based on individual circumstances and the specific requirements of the valuation process.

How long are Desktop Valuations valid?

Desktop valuations typically remain valid for 90 days, whereas full valuations may be valid for 3 to 6 months.


What are the 4 main benefits of using a Desktop Valuation?

A desktop valuation method offers four main benefits, ranging from cost-effectiveness to efficiency, making it an attractive option for property valuation.

  1. Cost-effectiveness. Unlike traditional valuation methods, which often require the physical presence of a surveyor at the property site, desktop valuations eliminate this need, reducing associated costs. 
  2. Trusted by Lenders. Lenders now recognise and trust the reliability of desktop valuation methods, especially for properties with lower associated risks. AVMs used in desktop valuations leverage extensive property information databases and market trends to generate accurate estimates of property values. This accuracy, combined with the convenience and efficiency of desktop valuations, makes them a preferred choice for various lending scenarios.
  3. Speed. The quick turnaround time of desktop valuations is particularly useful when speed is required, such as for refinancing or obtaining a bridging loan. Getting a quick valuation can help expedite financial decisions and transactions.
  4. Efficiency. With technological advancements and data analytics, desktop valuations can be generated rapidly, sometimes within minutes. This quick turnaround is particularly useful when speed is required, such as refinancing or getting a bridging loan. 

What are the limitations of Desktop Valuations?

While desktop valuations offer convenience, they do have their limitations. One significant limitation is their heavy reliance on assumptions, given that they're conducted without physically inspecting the property. This reliance on secondhand data introduces the risk of inaccuracies, as the information available may not fully reflect the property's actual condition or features. Desktop valuations can overlook factors significantly impacting a property's value, such as structural integrity and potential electrical or plumbing issues. Consequently, relying solely on a desktop or automated valuation may leave buyers unaware of potential drawbacks, highlighting the importance of an on-site inspection.


Can Desktop Valuations be used for all types of properties?

Desktop valuations can be used for the following property types. residential, semi-commercial and commercial.  

How reliable are AVMs in volatile markets?

AVMs generate valuations based on historical data, and they may not fully account for sudden shifts or unforeseen events that can impact property values in volatile markets.

Economic instability, interest rate changes, or supply and demand shifts can unpredictably influence property values. 


Can the results of a Desktop Valuation be challenged?

The results of a desktop valuation can be challenged if there are concerns about inaccuracies or if additional information may impact the property's value. Evidence such as recent comparable sales data, property improvements or renovations, or features not considered in the initial valuation would be required to challenge a desktop valuation.


Where do I get an AVM?

Automated Valuation Models (AVMs) can be accessed through many channels, including. 

  • Online real estate platforms 
  • Lenders and financial institutions
  • Property data providers 

Are AVMs the future of valuations?

35% of house purchase transactions fell through in 2023, and those that did complete took between 8 and 14 weeks. AVMs are used as a precautionary measure before the property is later surveyed by an RICS-accredited surveyor or provide an instant valuation for loans with a lower value. As technology advances, the convenience and efficiency offered by AVMs are expected to drive their continued use in property transactions. This suggests that AVMs are expected to become integral to the valuation process in the future.


Final thoughts

Desktop valuations and Automated Valuation Models (AVMs) have revolutionised (and look set to continue to revolutionise) property valuations, particularly in the bridging market, by offering fast, cost-effective, and efficient assessments that are becoming increasingly used by lenders. Desktop valuations are expected to play a bigger role in future property transactions due to technological advancements.

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