By Roznah Abdul Jabbar
Malaysians were recently served with another debate between certain politicians, leading some to give a second thought to the matter of home valuation, asking, “Do we know the value of a house before buying it?”
The answer is yes, we should and would know the value of a property before securing a loan.
According to kclau.com, you have to do some research on the property you wish to buy. Get a list of recently transacted prices in the past year to get a better idea of the market price. This can be done via various property portals available.
Buyers can get the bank of their choice to do a valuation and assessment, which is obligatory for loans.
“Don’t be fooled – if three independent banks give you the same valuation, and only the agent’s ‘friend’ is willing to go much higher, this means that someone along the way is taking a kickback,” it highlighted.
The bank will send a representative from its selected firm of property valuers to take photographs of your apartment and prepare a valuation report.
Buyers should ensure that the price in the sale and purchase agreement is based on the bank’s valuation report.
According to imoney.com, property valuation is vital because an accurate estimation of a property’s value is important to both parties, especially for the buyers, to enable them to make a reasonable and justifiable counter offer and to determine if the upfront cost is affordable.
Often, the 90 per cent (or lower) margin of finance provided by a bank is based on the valuation, not the purchase price. A lower valuation means a lower loan amount, and since a seller is unlikely to be willing to sell below the market value, the buyer will have to come up with more money to cover the upfront cost.
Based on Table 1, a lower valuation will result in a RM45,000 increase in upfront cost, which may be beyond what the buyer can afford. If the buyer has already paid the booking fee before obtaining the valuation, it will unfortunately be forfeited if the buyer decides to withdraw.
Alternatively, buyers can request for the booking receipt issued by the seller or the agent to include a clause that states that the buyer is entitled to a refund of the deposit in the event of unsuccessful loan application.
A better way is for buyers to apply for loans from more than one bank to get the best valuation price and loan offer.
Property valuation affects the eligibility of loans as much as credit reports. If the property is valued around the amount negotiated between the buyer and seller, the buyer will most likely be covered by a loan-to-value ratio of up to 90 per cent.
However, the valuated price can differ from market value due to a few reasons.
Property valuers rely on recent transacted prices from the Valuation and Property Services (JPPH), where the data on recent transactions are compiled over the most recent three to six months.
So, if prices hike up more rapidly, by the time the valuation report is issued, the valuation price may be outdated, especially in a bullish property market. This does not translate well for buyers as the purchase price is higher than the valuation figure.
Former JPPH director general, Datuk Mani Usilappan backed the response saying that he had a client who was willing to pay RM75,000 for a house that was in a good location when there had been 10 other transactions going at RM60,000.
Another reason is that developers do not always rely on the findings of the reports as they are required by banks to appoint property valuers to come up with independent market research reports to ensure the pricing of their properties are within market norms.
However, due to stiff competition among banks, bankers will in turn shop for the highest values, which creates competition among valuers to give banks the highest possible valuation in order to keep the banker’s business.
Chartered surveyor and valuer, Dr Ernest Cheong said that some Malaysian bankers have requested valuers to value properties above the market values for loan purposes while some have requested for an undervaluation of foreclosed properties to be sold by public auction to benefit certain parties.