The current housing market is very much a property buyers’ market with buyers spoilt for choices such as developers offering attractive schemes at one end and owners and investors offering their units out at a more realistic prices at the other end. However, the aforesaid choices are severely affected by the restrictions placed by Bank Negara Malaysia to control spending and the tide of speculation in Malaysia. Statistics show that Malaysians are finding it increasingly harder to get housing loans and that the rate of loan applications rejected has increased since 2015.
How should investors and home owners in Malaysia alike sell residential properties in such challenging times? There are several advantages to a revaluation which are as follows:-
i. Revaluation helps to reflect the actual market price which property buyers are willing to pay up;
ii. Revaluation provides assurance to buyers of the availability of loans to finance the purchase of the Property; and
iii. Revaluation provides refinancing and restructuring of the loan options for home owners and investors alike to save or increase cash flow.
ACTUAL MARKET PRICE
As mentioned in my February article for iProperty.com, majority of investors and home buyers are under the misconception that they are eligible to obtain bank loans up to rate of 90% based on the sale and purchase price of the property. Banks are only entitled to grant loan up to 90% of the property value based on the valuation report.
As such, a revaluation of the property after three to four years may be in order. One way of finding out the actual market price without incurring any costs is to request a valuation report from your banker if the house was bought with the assistance of financing.
Normally most banks have their own panels of property valuers which they use for loan processing. Once the bank approve the loan, parties will sign the loan documentation. The loan documentations will also include the term/clause that the bank shall be entitled to appoint a valuer to value the property at such interval as the bank chooses at the costs to the house owner which will be included in the interest. You may be able to request the latest valuation report (if any) from the bank which will reflect the latest property market value if the bank has instructed the valuer to revalue your property.
Otherwise you may proceed to appoint your own valuer. The information obtained will allow investors and home owners to price the property attractively but also not too far below the market rate to get the best deal to attract house buyers. Investors and home owners can then take the second step to approach banks with the valuation report who are agreeable to finance the purchase and provide the same to the buyers to facilitate the purchase of the property.
ASSURANCE TO BUYERS
Most first time house buyers purchase their property with assistance from the bank. The added benefit given by the revaluation would be assurance that the value given by the valuer should be the reasonable amount that the bank would approve up to for the purchase of property. This would also allow buyers to manage their budget and expectations. This will also increase the chance of a loan application approval and conclude the sale and purchase of the property.
Home owners and investors may choose to hold on to their property for a longer term instead of putting the same out in the market. The revaluation of the property by a professional not within the bank panel may provide a better value of the property and if accepted by the bank, provides them with the option to restructure their loan with the existing bank or to refinance the property based on the higher value of the property. The lower interest rate on the refinancing results in lower payment which would also ease the burden of home owners and investors in the short run. Refinancing may also provide cash-out options to consolidate debts and pay for other investments.
THE COSTS OF A VALUATION REPORT
In Malaysia, the valuation fees are governed by the Board of Valuers, Appraisers and Estate Agents Malaysia under the Seventh Schedule of the Valuers, Appraisers and Estate Agent Rules 1986. The fee structure is as follow for residential property:-
House owners and investors should consider the advantages of revaluation and take action to revaluate the property pending the sale of the property. This one step may help increase the chance to sell or restructure/ refinance the house at a fairer price.
This article was first published in the iProperty.com Malaysia September 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!