How valuers protect the interests of buyers, sellers, banks | Malaysian Institute of Estate Agents

How valuers protect the interests of buyers, sellers, banks


The country’s property market, like other industries, has taken a hit in the wake of Covid-19, resulting in falling demand and price fluctuations.

However, for some property investors, it’s an opportunity to snag a great deal. For buyers, it’s typically a purchase below market value.

Simply put, “market value” is the estimated amount mutually agreed upon by buyer and seller that the property will transact for.

But it is crucial to note that this does not necessarily mean that the price agreed upon is at market value, particularly as it is sometimes difficult to find accurate, independent advice and information from real estate agents.

In some instances, market value may not necessarily be about comparing with a number of surrounding transactions. How then does the bank ascertain market value when you head there for financing?

In Malaysia, banks typically rely upon the opinion of a registered valuer to provide them with an assessment of a property’s market value.

Valuing a property is important as the bank will only loan a certain percentage of the amount requested based on the property’s valuation. Hence, the role of the valuer is vital in safeguarding not just the interests of the banks but also that of the purchaser and seller.

A registered valuer, 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.

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Michael Kong said appraising the value of a property is a complex matter as many factors have to be considered.

“Valuation is an art and it requires years of experience and in-depth knowledge of the inner workings of the real estate industry.

“You also have to take into account market dynamics. It is not a simple statistical analysis of data, figures and information. There are many factors to consider in a valuation,” he told Property Advisor.

Kong said valuing a property is fundamentally a good idea as any home buyer should know the basic value of their property.

“This would also ensure that homebuyers do not overpay for their homes. They could also charge their houses to banks or financial institutions for loans, insure the houses against fire and use for other purposes such as estate distribution and such,” he said.

According to the 6th Edition of the Malaysian Valuation Standards (MVS) 2019, market valuations are generally based on information regarding comparable assets.

The valuation process requires a valuer to conduct adequate and relevant research, perform competent analyses, and draw informed and supportable judgements.

In this process, valuers do not accept data without question but should consider all pertinent market evidence, trends, comparable transactions, and other information.

Location is everything when it comes to valuing a property.

Ian Scott International (M) Sdn Bhd (ISI) managing director Khaidzir Abdul Rasip emphasised that the basic criteria in determining the value of a property is its location.

“To most people, location, location, location is a mantra that dictates the most important factor when buying a property. It is repeated three times as a way to emphasise it beyond a doubt.

“Basically, it’s the reasonable amount the property would be transacted at between a willing seller and a willing buyer at arm’s length with no compulsion, with proper marketing and with a reasonable knowledge of the market,” he said.

Khaidzir said some claim there are other important factors that have come to the forefront in the property business.

“Others claim location is no longer a relevant factor due to current circumstances and logic. Yet, those other factors invariably stem from being in the right location at the right time.

“And guess what? Even when the location is no longer perceived as relevant, it is really a matter of looking at the location from a different perspective. In the end, it is still about location.”

He noted that valuing a property cannot be derived from marketing brochures and property articles or via property gurus and investment clubs. It’s about the factors what contribute towards the value of a property, not as a marketing mantra to sell properties.

“This knowledge is carried through for those who continue to become practitioners and professionals in the property line.

“For those who know about property valuation, it is the market that dictates the value,” said Khaidzair, adding that property values are derived from observing and analysing the current market conditions in the form of actual transactions that have taken place as well as market movements that are taking place.

“Location is always relative and can be a positive or negative factor.”

He said the most common method of valuing a property is by the “comparison method”.

“It can be done by analysing transaction evidence of comparable properties in the open market and adjusting to allow for differences to the subject property.

According to Khaidzir, some common mistakes when valuing property are using the wrong comparables, making the wrong adjustments on the comparables, not doing proper searches for title and planning among others, and not obtaining clear instructions from the client.

Is data important to value a property?

PEPS’ Kong said data is the starting point of analysis. “From there, we have to use our innate knowledge and experience to dissect the data and formulate an opinion.”

ISI’s Khaidzir concurs. Transaction data, market data and data on the subject property are all required to perform a valuation.

“It is important as valuation involves the analysis of facts and data, and not pure assumptions and hypotheses.

“Valuing a property will benefit a home buyer, in order to ensure the price paid is not more than what other buyers will pay and in the event a bank loan is required, not more than the bank’s valuation.