Understanding Property Valuations
Fan Yea Jye shares how property valuations work and the ways in which they can affect your investment potential.
What is the difference between a bank valuation and the market value of a property?
A bank valuation is the amount of ‘price’ that a bank is willing to lend to you against the particular asset, (property) upon consultation with a licensed valuer. Generally, the valuations from a bank will be lower that the market value as banks will want to protect their investment risk. Thus, this value will be the amount the bank thinks it can get for the property in the event the buyer defaults on the loan and the bank will have to sell the property to recover its losses.
Meanwhile, market value is as defined by International Valuation Standards is "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion."
Nevertheless, in Malaysia, the term commonly used by buyers and sellers is “market asking price” instead. In short, we can treat recent past transactions of such properties as the market value.
How do I go about getting my property valued by the bank? What are the steps involved?
Bankers do not have the necessary credentials to value a property, only a licenced valuer can perform the job. Hence, the bank will engage a licensed valuation firm to conduct the property valuation and prepare the report accordingly. The bankers will then provide a rough or general value of the property upon seeking advice from the valuer.
What are some of the details a valuer look out for when valuing a property?
Firstly, the valuer will thoroughly examine the official documents, including the property’s land title to ensure that the property meets the characteristics as expressed in the title.
A physical inspection will be then carried out on the subject property, where the valuer will look out for details, i.e merits such as fittings and fixtures as well as the demerits such as major defects in the building. The macro views of the subject property are also taking into consideration – this includes location, accessibility, amenities, facilities if there are any, and future approved developments within the area of the subject property.
What can I do to increase the value of my property?
There are a few easy ways:
- Renovation on fittings and fixtures;
- Extension of building with official approvals from the local authority;
- Higher rental income with stamped tenancy agreement as evidence;
- Change in usage of property, for example from residential to commercial, with official approval from the relevant authorities.