Part 1: How a Property Valuation Protects the Interest of Buyers, Sellers and Banks
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The country’s property market, like other industries, has taken a hit in the wake of Covid-19, resulting in falling demand and price fluctuations. However, for some property investors, it’s an opportunity to snag a great deal. For buyers, it’s typically a purchase below market value.
Simply put, “market value” is the estimated amount mutually agreed upon by buyer and seller that the property will transact for.
But it is crucial to note that this does not necessarily mean that the price agreed upon is at market value, particularly as it is sometimes difficult to find accurate, independent advice and information from real estate agents.
In some instances, market value may not necessarily be about comparing with a number of surrounding transactions. How then does the bank ascertain market value when you head there for financing?
In Malaysia, banks typically rely upon the opinion of a registered valuer to provide them with an assessment of a property’s market value.
Valuing a property is important as the bank will only loan a certain percentage of the amount requested based on the property’s valuation. Hence, the role of the valuer is vital in safeguarding not just the interests of the banks but also that of the purchaser and seller.
A registered valuer, is a professional registered with the Board of Valuers, Appraisers and Estate Agents & Property Managers (BOVAEP) Malaysia under the Seventh Schedule of the Valuers, Appraisers and Estate Agent Rules 1986.
The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Michael Kong said appraising the value of a property is a complex matter as many factors have to be considered.
“Valuation is an art and it requires years of experience and in-depth knowledge of the inner workings of the real estate industry.
“You also have to take into account market dynamics. It is not a simple statistical analysis of data, figures and information. There are many factors to consider in a valuation,” he told Property Advisor.
Kong said valuing a property is fundamentally a good idea as any home buyer should know the basic value of their property.
“This would also ensure that homebuyers do not overpay for their homes. They could also charge their houses to banks or financial institutions for loans, insure the houses against fire and use for other purposes such as estate distribution and such,” he said.
According to the 6th Edition of the Malaysian Valuation Standards (MVS) 2019, market valuations are generally based on information regarding comparable assets.
The valuation process requires a valuer to conduct adequate and relevant research, perform competent analyses, and draw informed and supportable judgements.
In this process, valuers do not accept data without question but should consider all pertinent market evidence, trends, comparable transactions, and other information.