All You Need To Know About Property Valuation And Its Importance

We cover everything 'Property Valuation' in this guide: From the methods available and the factors which will harm your property's value, to how you can set the "right" property asking price and what can affect your asking amount.
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In the A-to-Zs of property, we figured it’s time we talked about the big V and all that it stands for – "Valuation". Well, property valuation, to be exact!

As a happy homeowner, you’d most likely stay put in your home until the time comes for you to explore bigger, pricier options.

You might consider selling your property to upgrade, or even downgrade to something simpler. To get you and your property ready to be sold, here’s when property valuation comes into place.

 

1) What Is Property Valuation All About?

When the property (or economy, as a whole) market hits a boom, buyers will start to purchase property ⁠– which means it’s a great opportunity to sell at a good price, right?

Well, the opposite scenario also holds true, whereby if the country's economy were to suddenly take a huge hit, you can bet that your property's value will also plunge overnight!

As such, it's very important to get the current rate a property is going for, so that if you're a buyer, you know you won't be overpaying, and if you're a seller, you'd be able to maximise your profits.

Also known as 'real estate appraisal', the actual process is where a professional will calculate the estimation of how much money the property is likely to be worth.

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The value of your property is affected by key factors such as location, the current state of the property market, and whether it has a freehold or leasehold title. Amenities play a big factor in determining value as well.

But did you know that one's cultural beliefs can also impact the value of your property?

Yup, small things like the property facing a junction in the road, or located near to a cemetery can actually make or break your home's worth!

 

2) What Are The Property Valuation Methods Available?

Property valuation comes into play not just when you’re selling your property, but also when you’re renting it out.

To determine the best price your property can fetch in today’s property market, you’ll need to utilise one of these common property valuation methods below:

a) Comparison Method

Comparing your property to similar ones nearby in terms of location, size, condition, features, etc. Identify and examine the sale prices of these properties, and you’ve got an estimated figure for yours.

b) Profit Method

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More commonly used for businesses, as opposed to residential homes, and when there are no other similar properties to compare it to.

This method estimates the gross profit and nett profit in order to determine the value of the property and business.

c) Costing Method

The unique thing about this method is that the properties evaluated are already constructed, but are not sold.

Properties that fall under this include public infrastructure and buildings like hospitals, schools, government buildings, and public facilities.

d) Residual Method

This property valuation method estimates the value of the property and/or its location based on its potential to be developed or redeveloped.

What’s more, it helps identify how much a development site or building would cost first, so as to gain a significant profit later on.

e) Contractors’ Method

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A property valuation using the contractors’ method is reserved for rare cases where special or atypical properties are involved.

What kind of special properties do we mean? Things like a school being converted into a business suite, or even old apartment blocks turned into a hotel.

f) Investment Method

This particular method helps property sellers identify the value of their property based on the profits they are able to earn off their property in the future, like renting it out. Even properties under Buy-To-Rent schemes fall in this category.

All in all, these different property valuation methods can be used for different property types, scenarios, and even to determine more than just the value of a property.

Although the comparison and costing methods are two of the more well-known and widely used types, it's always best to discuss with the property evaluator/expert on the best method to proceed with.

 

3) What Will Harm My Property’s Value?

Where there is good, there can be bad too. The value of your property can be negatively affected by the smallest of things that you might not even consider a problem, like pets!

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It isn't wrong if you're an animal lover, but potential buyers or renters might be instantly turned off by the fur flying everywhere, and the strong odours.

You could also think that old school is the new cool, but the outdated and faded wallpaper all over your home just won’t cut it for your new buyers, plus it’ll cost them more to redecorate.

The same goes for exposed wires and panels indoors; not only is it a safety and health hazard, but it makes the home appear neglected (and possibly abandoned!) too.

Another thing that may bring about a less-than-expected valuation? The perceived size of your property, which is why interior design gurus always encourage people to create the illusion of spaciousness.

 

4) How Do I Increase My Property’s Value?

After all that rewiring and gathering interior design inspiration from Pinterest, there are still many other ways for you to increase the value of your property.

It could be something as simple as clearing up your porch and garden of dry leaves, or checking that there are no leaky pipes and loose taps.

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It could also mean setting the right ambience, by introducing a slice of nature indoors with houseplants, and improving the use of natural lighting with squeaky clean windows and strategically placed mirrors.

Although most of these value-enhancing tricks are focused on the aesthetics or appearance of your property, there are still important technical aspects to take care of, like renewing your lease (for leasehold properties).

 

5) What Affects The Price Of My Property?

For starters, the price of your property should not be confused with the market value of your property.

The actual price of your property is the amount quoted to potential buyers, while both are still negotiating the process of exchanging ownership.

However, the property’s market value is the estimated price of the property on the day that both buyer and seller agree on when signing the agreement.

If we look at how the value of your property can be affected both positively and negatively, the same thing can apply to the final price of your property.

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The final price of your property is affected by bigger things in Malaysia’s landscape like accessibility, location, upcoming future developments, politics, economy, and most importantly, the health of the property market.

Whether you’re a seller or buyer, understanding the property market is crucial if you intend to seize on a profitable opportunity, especially in terms of property supply and demand.

 

6) How Do I Set The Right Property Asking Price?

Begin by charge of factors (that are still within your control) that will impact the price postively:

  • Maintaining your property in a good condition, with repairs where necessary
  • Upgrading certain areas so that it stands out more
  • Ensuring that the premises are clean, clutter-free, and clear of anything that blocks natural lighting and ventilation

Once you know how to make your property more appealing, and better in valuation to potential buyers, herein lies the most important question: What exactly IS the right asking price?

You might be tempted to follow the prices of other homes on sale in your area, but not everybody’s house is the same, hence the justification for the (sometimes enormous) difference in pricing.

The key is to watch the general price trend for the year, and take into consideration any factors which will make your property worth more such as renovations, proximity to amenities, and built-up size.

Before you decide on a final price, it's important to know why it's so important to set the right asking price and how to really go about it ⁠– including consulting a property expert so that you aren't swayed by emotions!

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7) Is Property Valuation Just For Sellers?

Not at all! Although you’re comfortable in your home at the moment, you might want to consider property valuation (as a buyer) if you intend to ask a bank for financing on a sub-sale property.

Alternatively, getting a valuation for the property of your choice before a purchase decision is made is a smart way to go. You'll then be able to find out if the price matches its condition, thus allowing you to calculate the return on investment (ROI).

When in doubt, it never fails to know the ins and outs of the property market with adequate research so you can be better prepared for anything that comes your way!

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