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Sunday, April 6, 2008

Getting proper property valuation

If you were getting your house sold, you’d most probably be getting it valued. Or perhaps you need to get a loan from the bank. Or maybe the authorities are buying up the land on which your house sits, and you’re not satisfied with the amount awarded as compensation.“Property valuation is done for various purposes, most commonly for loan financing. Besides that, properties being auctioned by banks need to be valued too, to establish the reserve price,” says Low Khee Wah, valuation assistant manager of Henry Butcher Malaysia Sdn Bhd.What is property valuation? According to C Y Lim, general manager of City Valuers & Consultants Sdn Bhd, it is “the art and science of estimating the value for a specific purpose of a particular interest in the property at a particular moment in time, taking into consideration all the underlying economic factors of the market, including the range of alternative investments”.Henry Butcher’s Low elaborates: “It is an art because valuers need to understand the market, they need to have a “feel” for it, and which is acquired the longer the valuer is in the industry. It is also a science, because formulas are needed to do cash flows.” In short, property valuation is to estimate the value of the property for a specific purpose.There are five methods used to value property: comparison method, investment method, residual method, profit method, and cost method, and each method has its specific use. According to Low, the investment method is usually applied for the valuation of office towers, shopping complexes and plantations, while development lands are usually valued with the residual method. Profit methods are used for hotel valuations, and detached factories would be valued with the cost method.“Different valuations are done with different methods for different types of properties, the most common being the comparison method, which is used for the valuation of residential properties,” says Low. This approach compares a property with similar properties that were either transacted recently, or listed for sale within the vicinity or other comparable locations.“The valuation process takes about 10 working days for a residential property. Nowadays, it is quite fast with the help of technology, since everything is computerised,” says Low. If there are hiccups within the process, such as not being able to contact a client, it might take longer. For a corporate office, the process could take three weeks and for big corporate exercises, it could take about a year.
(The Sun 30-3-2008)