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Guide to Property Valuations
Whether you’re a potential
home buyer or a greenhorn property investor, your impending venture
into the property market will very much revolve around valuations. You
might have heard the term being thrown about by experienced property
market players, but how much do you really know about valuations and
how the process would influence your purchases? Here’s what you need
to know.
What is a valuation?
Officially, “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. Valuation calculations take into account
recent transacted prices from the Government’s Valuations and Property
Services Department (JPPH). Additionally, launch prices of new and
upcoming projects in the area play a factor. Once a valuation is done,
a bank would usually extend a mortgage loan of 90% margin of finance
based on the figure.
How valuation affects you
Say you’ve got your eye on an apartment unit, and after negotiating
with the seller, the two of you agree on a price of RM500,000. A 90%
home loan means that you would need to fork out a down payment of
RM50,000, aside from other entry costs. Now here’s where the valuation
comes into play – for a housing loan, a report by a real estate
valuation firm recognised by the bank you’re dealing with is needed.
If a valuation firm only prices said property at RM450,000, you would
only be eligible for a loan of 90% of RM450,000. Basically, this means
that if you were to go ahead and purchase it, you would need to bear
the price difference and come up with RM95,000; not the RM50,000 you
were initially expecting.
Why the disparity?
If you were an observer of the Malaysian property market, you would
know that prices in in certain areas surge quite quickly. Herein lies
the issue, because it takes up to 6 months for JPPH to collect and
analyse transaction data, which valuation firms rely on in their
calculations. Basically, this means that valuations would be centred
on out-dated prices up to 6 months earlier, and would most likely be
lower than current prices. Although many firms take the trouble to
ensure an accurate and fair valuation by taking into account as many
relevant factors as possible, many others only do as much as they need
to, resulting in common cases of disparities between valuations and
negotiated prices.
What can you do?
Here’s the bit where you have control. If you want to secure a
property but are not sure if you can get the valuation that you want?
Make sure that there’s a clause in your booking receipt, which states
that you would be entitled to a refund of your holding deposit in the
event you aren’t able to get a loan.
It’s also a well-known fact among veteran property players that
different banks can provide different valuations on a single piece of
property. The more aggressive bank sales agents would push up their
valuations of your property, just so they can obtain more
transactions. Take advantage of this – go ‘shopping’ for valuation
rates, and remember to mention what the other banks are offering; you
might just end up with the valuation that you want.
Sources: http://loanstreet.com.my/ |
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