VMS and ValEx create single hub

While lenders are taking a closer interest in the use of automated valuation of properties, the suppliers of these services are reorganising in order to produce more sustainable business models. In short, some are combining their businesses, with the Brisbane-based RPData at the head of the present effort to wring efficiencies from this sector.

In May RP Data announced the realisation of a long-term ambition to purchase the ValEx Group and the VMS Division of Sandstone Technology, to control the Australian desktop property valuation sector.

RP Data will pay $26 million for ValEx and $20 million for VMS. This values the two businesses at five times the expected 2010 EBITDA of the business, RP Data said. The purchase will take RP Data to a 70 per cent share of a valuation services market.

"There are two distinct hubs in the industry, ValEx and the Sandstone VMS, and this [proposed merger] will create a single unified hub," said Bob Hall, chief executive officer at Sandstone.

"Because we couldn't add much more value for our customers, we thought that consolidation within the industry could deliver more value."

ValEx and VMS automate the workflow between financial institutions and valuation providers for AVMs, electronic desktop and full inspection valuations.

"With VMS, we didn't see much more in ongoing innovations we could bring to that space, or the valuations hub," Hall said. "We have a couple of the major banks and most of the regional banks using VMS, and there was a little bit of blue sky left, but we were reaching the point where we couldn't see adding further value to it.

"Where there is still some innovation is within the strategy lenders [use] to get the appropriate level of valuation. For example, they might use the hub to get two different types of automated valuation from two different providers, and if the valuations coincide with each other then they may not look further."

Hall adds the VMS sale proceeds will be used to invest in new technologies, primarily in the lending and internet banking areas, and not on developing any AVM-style software.

"AVM is a fairly crowded market in Australia, with quite a few providers chasing a limited number of financial institutions."

Hall does not currently see the need to develop a LIXI standard between an AVM to a valuation service provider.

"I think the desire is actually more to have a LIXI standard between the lender and the VMS hub, which is already in place in fact."

Hall identifies mortgage settlements as the biggest area of inefficiency at the moment.