Banks turn to virtual property inspections amid COVID-19

Necessity is pushing lenders toward technology that allows for contactless site visits

July 16, 2020

The coronavirus is presenting the opportunity for some industries to test long-held ideas.

Banks and other lenders have been relying on video calls to conduct property inspections as lockdowns and social-distancing rules prevent valuations being carried out in person.

In Australia, at least 5,000 residential and commercial properties have been valued using virtual inspections, including remote properties in the government’s defence portfolio, according to JLL.

The idea isn’t new, but the increasing activity has been born out of necessity.

“Lockdowns were rolling out and banks and other lenders immediately recognised that inspections would be a problem,” says Bart Mead, executive director, valuations and advisory, JLL. “Because if a bank can’t get a valuation, it can’t lend, and that would be a huge problem for global economies.”

Live-streaming inspections

Virtual inspections require property owners to connect with valuers through a secure live-streaming platform on their mobile device. They tour the property, discussing all the details they would in a face-to-face inspection. Per usual, the valuer then compiles a report, and submits it to the bank presiding over the loan.

In the past banks have been reluctant to accept anything other than an on-site valuation inspection to avoid the risk of inaccurate or incomplete information.

A turning point in Australia came during the pandemic when the Australian Property Institute  – an industry body for the property profession – issued a state of emergency protocol in March as lockdowns hit. It allowed for alternative inspection methods that would protect the health and safety of valuers and property owners, while allowing financial institutions to continue lending. 

“There are a lot of people assessing their financial situation, and accessing property equity to get themselves to the other side of this economic downturn,” says API Chief Executive Amelia Hodge. “Stakeholders, including banks and professional indemnity insurers, have been very helpful in formulating a framework that could work for virtual valuations, and support the economic recovery of our country.”

With similar protocols introduced in other countries, virtual valuations are now being accepted by banks across the world, including New Zealand, Spain and the U.S., with the potential to continue indefinitely, says Mead.

“To me the most important part of all of this is that the borrower has confidence in what they're doing and that they are making the right decision for their, or their business’s, own financial position and future,” he says.


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Data security

For banks, the protection of data remains a key consideration.

Despite the most reputable virtual-valuations platforms encrypting their live-streaming videos, which aren’t stored, companies remain wary about the sophistication of cybercrime.

Recent data breaches of property valuations and peoples’ personal information has heightened banks’ focus on data security.

Nevertheless, the valuations sector is moving towards a data revolution. There is a belief among 87 percent of people and organisations – including banks – that data and technology will increasingly influence the actual value of a property, according to a 2019 survey by LiquidREI, a UK-based organisation which helps real estate companies capitalise on digital transformation.

The survey also found strong appetite among purchasers of property valuations to consider new solutions, with 72 percent open to lower priced, technology-based alternatives.

Products such as automated valuation modelling for residential properties, and artificial intelligence desktop assessments for agricultural property, are already in the market and adoption is expected to accelerate, with COVID-19 impeding the movement of valuers, says Mead.

“Data and technology are now playing an increasingly important role in determining the value of a property,” Mead says. “Combined with human expertise we’ll find a consistency in valuations that has been difficult to achieve in the past. It’s satisfying to see how COVID is accelerating acceptance of these new methods.” 

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