What is property valuation?
The valuation is done by a licensed valuation firm which is recognised by the bank you’re taking a loan from. Valuation firms are registered with the Malaysian Board of Valuers, Appraisers and Estate Agents (BOVAEA).
They are allowed to do valuations of properties based on ‘market evidence’. Some larger banks also have their own in-house valuation department.
It is important to understand that the bank will only give you a 90% loan of the amount based on the valuation, not the agreed price between seller and buyer. For instance, both seller and buyer agree on RM500,000 and the buyer makes an earnest deposit of 10% (RM50,000) to secure the property. Bank will loan you RM450,000.
Difference between a bank value and the market value of a property
Normally, market value will usually be higher than the bank value, because banks will want to protect their investment risk. What if the buyer was bankrupt, incapable of making repayment and more. Thus, bank value is the amount the bank thinks it can get for the property in the event the buyer defaults on the loan and in order to recover its losses, the bank will have to sell or ‘lelong’ the property.
Meanwhile, market value 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.
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.
Steps of property valuation
You can see here where a property valuation comes into the bank’s loan application process:
Bankers do not have the necessary credentials to value a property, only a licensed valuer can perform the job.
Step 1: The buyer applies for a property loan at their bank of choice (e.g. Maybank, CIMB Bank, Citibank, Ambank, RHB Bank, and more)
Step 2: The bank appoints their trusted valuation expert to conduct a valuation of the property
Step 3: The valuer checks recently transacted values of surrounding properties using information available at JPPH
Step 4: The valuer conducts a physical inspection of the property
Step 5: The valuer produces a valuation report for the bank, based on the information obtained in step 3 and 4
Step 6: The bank approves your loan for 90% of the value reported by the valuer, subject to your financial status
Factors can affect property valuations
Renovations or refurbishment: Major renovations like permitted extensions, new flooring, plaster ceilings, built-ins, grilles, and alarm or auto-gate systems can help to increase the value of the property.
Location: Location, location, location. Important things need to be mentioned 3 times. A lot of people buy property depending on a good location such as connectivity to major highways and public transport, and proximity to important facilities like schools, hospitals, shopping and dining, and recreation centres.
Safety: If the crime rate (e.g. robbery, kidnapping, gang violence, and more) in that area is high, the property value will be affected.
and more... READ THIS to know more!
How to increase the value of your property?
There are a few easy ways:
Renovation or refurbishment (e.g. extension of space)
Higher rental income with stamped tenancy agreement as evidence
Change in usage of property, for example from residential to commercial
Keep in mind that every bank would have their own trusted valuation experts and would most likely provide a varying degree of prices. If you wish to know more about property valuation or any property related information, feel free to chat with us!
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