Part 2: How a Property Valuation Protects the Interest of Buyers, Sellers and Banks
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Ian Scott International (M) Sdn Bhd (ISI) managing director Khaidzir Abdul Rasip emphasised that the basic criteria in determining the value of a property is its location.
“To most people, location, location, location is a mantra that dictates the most important factor when buying a property. It is repeated three times as a way to emphasise it beyond a doubt.
“Basically, it’s the reasonable amount the property would be transacted at between a willing seller and a willing buyer at arm’s length with no compulsion, with proper marketing and with a reasonable knowledge of the market,” he said.
Khaidzir said some claim there are other important factors that have come to the forefront in the property business.
“Others claim location is no longer a relevant factor due to current circumstances and logic. Yet, those other factors invariably stem from being in the right location at the right time.
“And guess what? Even when the location is no longer perceived as relevant, it is really a matter of looking at the location from a different perspective. In the end, it is still about location.”
He noted that valuing a property cannot be derived from marketing brochures and property articles or via property gurus and investment clubs. It’s about the factors what contribute towards the value of a property, not as a marketing mantra to sell properties.
“This knowledge is carried through for those who continue to become practitioners and professionals in the property line.
“For those who know about property valuation, it is the market that dictates the value,” said Khaidzair, adding that property values are derived from observing and analysing the current market conditions in the form of actual transactions that have taken place as well as market movements that are taking place.
“Location is always relative and can be a positive or negative factor.”
He said the most common method of valuing a property is by the “comparison method”.
“It can be done by analysing transaction evidence of comparable properties in the open market and adjusting to allow for differences to the subject property.
According to Khaidzir, some common mistakes when valuing property are using the wrong comparables, making the wrong adjustments on the comparables, not doing proper searches for title and planning among others, and not obtaining clear instructions from the client.
Is data important to value a property?
PEPS’ Kong said data is the starting point of analysis. “From there, we have to use our innate knowledge and experience to dissect the data and formulate an opinion.”
ISI’s Khaidzir concurs. Transaction data, market data and data on the subject property are all required to perform a valuation.
“It is important as valuation involves the analysis of facts and data, and not pure assumptions and hypotheses.
“Valuing a property will benefit a home buyer, in order to ensure the price paid is not more than what other buyers will pay and in the event a bank loan is required, not more than the bank’s valuation.
This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.