May 12, 2020
What is property valuation.
In Malaysia, a property/home valuation can be defined as an exercise that is carried out to determine the current market value or selling price of your property. It is done by a valuer, who 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.
There are several situations where a property valuation is necessary:
You require extra cash and plan to refinance your property to capitalise on the increase in property value after a few years.
You want to purchase a sub-sale home and are looking to obtain financing from a bank.
There is a misconception that for the purchase of your first or second home, you could obtain a 90% financing based on the property selling price or the price agreed between you and the seller. In reality, banks will benchmark your 90% loan (mortgage) based on the report obtained from a registered valuer.
Banks may be financial providers but they do not have the authority to value your property. Instead, they will engage a valuer to do so. Let’s say you have entered into a sale and purchase agreement to buy a house for the sum of RM600,000. You have applied to Bank A for a home loan. Bank A then appoints one of its panel valuers to value your target property and prepare a written valuation report. Upon evaluation, the valuer values the home for the sum of RM550,000 only. Based on this valuation report, the purchaser can obtain a loan of up to 90% of RM550,000 and not 90% of RM600,000.
The valuation fees in Malaysia are as follows. It is usually borne by the buyer:
For first RM100,000.00 =0.25%
Next residue up to RM2 million = 0.2%
Next residue up to RM7 million = 0.167%
Next residue up to RM15 million = 0.125%
Next residue up to RM50 million = 0.10%
Next residue up to RM200 million = 0.067%
Next residue up to RM500 million = 0.05%
Next residue more than RM500 million = 0.04%
In Malaysia, valuers usually adopt the sales comparison method which takes into account recent transacted property prices from the Valuation and Property Services Department (JPPH). However, they will make the necessary adjustments based on the condition of the property and value-added from renovations (if any). Therefore, properties in the same area located next to each other will not necessarily share the same value. Apart from that, factors such as the property’s location and nearby amenities will be taken into account too. These will be elaborated below.
Of course, property sellers could also get a professional valuation to ascertain the minimum selling price that they should settle for when negotiating with a potential buyer.