By Ernest Cheong
- Why would the Bank still want to have a property I intend to buy valued by a panel valuer when the seller and I have already agreed on a purchase price?
Whilst the Bank accepts that the Borrower and the Seller have agreed on the Purchase Price, because it is the Bank’s money (or rather their Depositors’ money) that would be at risk if sometime into the future, the Borrower falls on hard times and the Housing Loan granted to him/her turns bad and the Bank has to sell the property by way of Public Auction Sale to recover the loan sum, the Bank would want to make sure that it is not lending more money than it should by having the Bank’s Panel Valuer advise the Bank on the Fair and Correct Market Value of the property at the time when the Housing Loan is granted.
- If indeed it is the bank’s policy to have the property I intend to buy valued, why must it be valued by a valuer on the bank’s panel?
When a Valuer submits his Valuation Report to the Bank, he is essentially saying to the Bank “Here is my Professional Opinion on the Open Market Value of the Property. Please trust my Professional Judgment”. Banks in Malaysia generally would want to work with Professional Advisers, including Lawyers and Valuers that they are comfortable with especially when the Banks are asked to lend and release Millions of the Banks’ money (or rather their Depositors’ money) on the Professional Advice of their Lawyers and Valuers.
The Panel Valuer System is created by the Banks to ensure that only Valuers that the Banks are comfortable with are appointed on the Banks’ Panel of Valuers and the Banks will generally only accept Valuation Reports prepared by their Panel Valuers. There are however exceptions to this General Rule. It would be up to individual Bank to exercise its discretion on when to make an exception.
- Is it fair for the banks to discriminate against other valuers that are equally qualified?
This is a fair question that needs to be answered by BVAEA and Bank Negara Malaysia. Many in the industry feel that this needs addressing.
- Shouldn’t I be allowed to appoint a valuer of my choice since I am paying for the fees?
Unfortunately, when your individual business is small and insignificant to the Bank, you will not be able to appoint a valuer of your choice. The sad truth is, if you and/or your company are a “Valued Customer” and your potential business for the bank is worth millions or billions, the bank will likely waive this general rule.
- After the bank’s panel valuer has completed his valuation report and I am not happy with the Value, do I have the right to appoint a valuer of my choice and get a second opinion?
As member of the public, you have the right to challenge any professional opinion. However, by challenging the opinion of the bank’s valuer you would also naturally jeopardise your chances of getting a loan from the bank, as the bank is likely to follow the opinion of its panellist. The bank would not argue with you, it will simply withdraw their loan offer as it is their prerogative to do so.
- How is it possible that when two or more Valuers are instructed to value the same property, they can produce variable results?
As I said earlier in this article, the purpose and objective of the valuation exercise and the type of value sought will influence the appropriate method of valuation chosen.
When two or three valuers are instructed at the same time to value the same detached house in Damansara Heights, Kuala Lumpur, they are not likely to defer much in their respective valuation of the property. They will likely adopt the same method.
However when these two or three valuers are instructed at the same time to value a 50-acre plot of vacant land in Kajang, it is likely they will produce different results based on vast differences in their respective opinions of value. This may range from 50% between the lowest value and the highest value (at the lower range) to even 400% between the lowest value and the highest value (at the higher range).
Can either of the valuers be wrong or can they both be wrong? It is a paradox. The two valuers may both be right! It depends on the basis and assumption of facts and the method of valuation that they each adopt.
Valuer A may assume that the 50-acre plot of vacant land in Kajang is suitable only for agriculture use with no potential for any form of development and therefore he adopts the Direct Comparison Method to value this property purely as a plot of agriculture land.
On the other hand, Valuer B assumes that the 50 acres plot of vacant land in Kajang has potential for residential development although it is currently vacant. He therefore adopts the Residual Method to value this property to reflect the property’s potential for residential development.
- For the valuation of an ordinary residential property in the Klang Valley, how much time would a valuer take to inspect the property, prepare and complete the valuation Report?
For a simple valuation of a residential property in Kuala Lumpur, Petaling Jaya, Subang Jaya and Shah Alam, the valuer, from the time he was instructed, should not take more than 14 days
to complete the inspection, making all necessary background investigations and prepare and submit his completed report.
For more complicated valuation of an industrial plant, it would take more time, up to two or three months, depending on the size and complexity of the property.