Planning to sell your home or considering buying a second-hand home? To get the most bang for your buck, check out a home appraisal first.
This article was translated from What is property valuation & the 4 factors which influence a home’s value? by Sueki Khaw.
In Malaysia, real estate/home valuation can be defined as an activity to determine the current market value or selling price of a property. This process is done by a valuer, who must be a professional registered from The Board of Valuers, Appraisers, and Estate Agents Malaysia (BOVEAP) following the agency’s 1986 Chapter VII of the Regulations (Seventh Schedule).
What is a property/home valuation?
There are several situations in which a property appraisal is required:
- You need extra cash and plan to refinance your property so that in a few years the property will appreciate and recapitalize.
- You want to buy a used home and want to get financing from a bank.
There is a misconception that by buying your first or second home, you can get 90% financing based on the sale price of the property or the price you negotiated with the seller. The bank will benchmark 90% of your loan (mortgage loan) against the report of a registered valuer.
Banks can be financial service providers, but they do not have the authority to value your property. Instead, they will hire a professional valuer to do so. Suppose you have signed a sale and purchase agreement to purchase a house with a total amount of RM 600,000. You have applied for a home loan from Bank A. Next, Bank A will commission its approved appraiser to evaluate your target property and prepare a written appraisal report. After the appraisal, the appraiser only appraised the house at RM550,000. According to this report, buyers can only get loans from 90% of RM550,000 instead of 90% of RM600,000.
As a preliminary survey, buyers can use bricks. I to measure and calculate the current market value of the community/property project they are interested in. Brickz. It is a property transaction information website that provides the latest transaction prices for properties across Malaysia.
The valuation fees in Malaysia are as follows. Generally, it is the buyer’s responsibility:
First RM100,000.00 = 0.25%
Next amount up to RM2 million = 0.2%
Next amount up to RM7 million = 0.167%
Next amount up to RM15 million = 0.125%
Next amount up to RM50 million = 0.10%
Next amount up to RM 200 million = 0.067%
Next amount up to RM 500 million = 0.05%
Above RM 500 million = 0.04%
In Malaysia, valuers generally use the sales comparison method to compare recent property transaction price records from the Department of Valuation and Property Services (JPPH). In any case, they will make the necessary adjustments based on the condition of the home and the value-add of the renovation, if any. Therefore, properties located in the same area or adjacent may not necessarily be of equal value. In addition to this, factors such as the location of the property and nearby facilities will also be taken into account. These will be detailed below.
Of course, sellers can also have a professional appraiser calculate the minimum price for their property so that they can negotiate with potential buyers
What factors can affect the value of your industry?
Valuation is a key factor in the process of buying and selling a property, and one that is often overlooked by many. Having a clear understanding of what makes your property more valuable (or less valuable) can help you maintain your home value over the long term or assist with your shopping/investing decisions.
Here are the top 4 factors that will affect the valuation of your property:-
LocationThis is the first rule of thumb to buy and maybe the main factor in determining the value of your property. For example, in the Klang Valley, the closer you are to the city center, the higher your property value will be. This is why property prices in Kuala Lumpur’s China business district have soared over the past decade.
However, some locations are also affected by other factors. If your home is in an unwelcome location – such as a cemetery, power station, or waste disposal area – this can adversely affect the value of the property.
Generally, appraisers believe that the value of properties facing the west is generally low because the sun in the afternoon is almost parallel. This can cause electricity bills to double. Moreover, the value of the property facing the T-junction is also lower, because there will be more risks of traffic accidents and the possibility of vehicles crashing into the door.
Well-connected and well-equipped
Assuming your property is close to a major newly opened highway, it may help increase the value of the property. Today, a good transport network and public transport such as LRT and MRT can give the industry extra points. Many aspiring buyers who live in urban areas often base their purchase decisions on how much time it takes them to get to work!
Proximity to basic amenities such as clinics and private hospitals, educational institutions, banks and shopping malls, international or private schools may add value to the home. These “hot spots” make your home and neighborhood more livable.
# 3 Maintenance and Refurbishment
It’s about the age and quality of the home. As a house age, it may face problems and require renovations – from the plumbing to the roof, to name a few. However, with quality building materials, it can take a long time before problems or repairs occur.
You still need regular maintenance. Just like you regularly inspect and service your car, a house needs constant inspection and refurbishment. A well-maintained home is worth more in the long run than a completely neglected home.
When valuing: The appraiser will factor renovations into the calculation, especially to improve the comfort and aesthetic value of the home, such as:
a) Floor replacement
b) Approved area expansion
c) Built-in kitchen cabinets and wardrobes
d) Gypsum ceiling
e) Iron flower
f) Alarm system
g) Automatic door system
- Construction quality
© Kin Meng Kok /123rf
The quality of the house or craftsmanship built is another key factor in preserving value. Not to mention, the quality of building materials – a building made of high-quality materials can take a long time to experience problems.
We often hear about homes that were built decades ago but can still command premium prices years later due to the quality of construction materials, workmanship, and structural design. Taman Tun Dr. Ismail (TTDI) and the decades-old terrace estates in Bangsar are a good example – these units maybe just be ordinary residential communities, but they are now asking for at least RM1.5 million per unit.
On the other hand, many have complained that even the expensive units sold by top-tier developers are of standard construction quality due to the use of sub-standard building materials to keep costs down. Therefore, buyers need to scrutinize carefully and not be swayed by the developer’s marketing tricks such as fancy brochures and freebies.