Property Valuation In Malaysia: 6 Factors That Will Affect Your Home's Price

Property valuation takes into consideration a few factors such as general economic trends, location of property, conditions of general property market, general demographics, recent renovations, and the property itself.

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If you have plans of selling your home in the future, you’re gonna need to find out how much your house is worth, yes?

Well, property valuation, also known as real estate appraisal, is the process of evaluating how much the house would be worth if it were placed on the market for sale.

Estimating the price of your property is the first step towards attracting prospective homeowners to take an interest in what you have to offer.

Here’s more information of what exactly property valuation entails, and the factors affecting the process!

First, you need to know a little more about property valuation

Market value: This is the estimated amount that the property is likely to fetch on the day both parties (namely, the buyer and seller) enter into an agreement.

It’s the price which has been agreed upon by all parties involved in the transaction.

This is different from the asking price, which is the amount that the seller of the property quotes to potential buyers when negotiating the exchange process.

The actual valuation process is an estimation of how much money the property is likely to be worth.

A valuation is carried out by authorised firms and their representatives (usually banks and their associated valuation experts) after having taken into consideration recent property transaction prices, as well as other market factors.

Benefits of having your property evaluated

There are several instances when you’d need to know your current property valuation. For example, you may be planning to carry out major renovations in the near future, prior to selling your home.

In this instance, you must find out the value of your home after having altered it, or after having lived in it for a considerable amount of time.

This is to make sure that you know exactly how much your house is worth so that you can maximise your profits in the event that you wish to sell your home, and sell it fast.

Factors that affect property value:

1. General economic trends

People will be more inclined to buy homes in cases of an economic boom, where employment, salary levels and labour markets are all on the rise.

During these times, people will also be more willing to spend more on properties, which will likely drive up the prices.

As a result, it wouldn’t be unreasonable to ask for a higher price, especially if you’ve received a high valuation.

2. Location of property

Is your property located in a neighbourhood that is highly coveted by prospective homeowners for the amenities, or is a stone’s throw away from major central landmarks, offices, and buildings of public interest?

Or perhaps it’s very well connected, with a variety of buses and trains which serve the area? These are some factors that can make a property highly valuable and attractive in the eyes of many interested buyers.

3. Conditions of general property market

Another thing to consider is demand and supply patterns in the property market. Do check to see if houses in your particular area are preferred by buyers, as opposed to other neighbourhoods.

But, if nearly every other house in the area where your property is located goes on the market at the same time, you’ll have a harder time trying to convince potential homeowners why yours is the superior one.

4. General demographics

Is your property in an area occupied mostly by expats? Then they might be interested in smaller, more compact high-rises where they can be part of a larger community and with multiple tiers of security.

If it’s situated in a neighbourhood with young professionals and growing families, then prospective buyers may prefer larger homes to accommodate more people.

5. The property itself

Naturally, a bigger property (more floor space) will command a higher valuation than a smaller one in the same neighbourhood.

If the property has any amenities such as around-the-clock security, swimming pools, gyms and/or parking spaces, buyers will be willing to part with a larger sum just to secure these extra perks.

Additionally, whether it’s a freehold or leasehold property will also influence people’s purchasing decisions.

While the owner of a freehold title owns the property indefinitely, the owner of a leasehold title ceases to own it after the tenure has expired.

As a result, more people typically prefer to purchase freehold homes.

6. Recent renovations

If you’ve recently made renovations to the place, particularly major ones such as upgrading materials or erecting a partition in one portion of the house to create more private spaces, the valuation of the property will be affected.

Even touch-ups to improve and uplift the overall quality of the property for the new owners will contribute to a higher valuation for the property.

Selling A House in Malaysia: 5 Things That You Need To Pay For!

You have to pay money to sell your property in Malaysia: true or false? Well, while it’s not an actual payment to have a successful sale, you have to consider several fees and taxes when you put your property up for sale.

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When selling a house in Malaysia, it’s not just about getting the money from the sale. If you want a successful sale, you’ll actually have to pay a bit to get it sold – plus you don’t get to keep 100% of the proceeds!

There are several costs you’ll have to take into account. Among them are things such as property agent fees, valuation fees, legal fees, and Real Property Gains Tax (RPGT).

Since we're now faced with highly uncertain times due to COVID-19 and the Movement Control Order (MCO), there's even more reason for you to be careful when it comes to choosing the right time to sell your property.

We take a closer look at each of these costs:

1) Property agent fees

If you decide to engage the services of a property agent or real estate agent to sell your house, you’ll have to pay their fees.

A property agent’s services include pricing and advertising your property, arranging for viewing and bookings of the property, as well as negotiating with the prospective buyers on behalf of the seller.

In return for these services, the agent will charge a commission, which is usually 2-3% of the property’s selling price, and capped at 3%.

The 33 Essential Real Estate Jargon For Selling A House In Malaysia

If you've decided that it's time to sell off your property and it's your first time, this guide will walk you through some of the important words to take note of, so you won't get confused by the big words!

Real estate jargon can be a bit of a whirlwind at times. There’s a whole world stretching from basic real estate terms to complex real estate terminology to understand.

When you’re trying to sell a house, you don’t want to get bogged down in estate agent jargon. You just want to get the process done and enjoy the rewards!

We're here to help. We’ve put together an extensive list (arranged alphabetically) of everything from essential complex legal wording, to basic real estate terms to help with the process for when you’re selling a house.

1) Appraisal

Appraisal is an alternative term used to refer to property valuation. It is the process of evaluating a property or piece of land to determine its worth, and the price which might be considered fair and accurate to place it on the market for sale.

2) Asking Price

Asking price is the term used to refer to the price at which a property is listed for sale. It is the defined price which the seller is providing to buyers to indicate the sum of money they wish to sell their house for.

This does not have to directly reflect the market value or appraisal price, as it is ultimately down to the decision of the owner on what price they wish to set for their property.

3) Bumi lot

A Bumi lot is one of the four main types of land for sale in Malaysia. Houses built in these areas may be sold or leased only to bumiputera citizens. An application can be made by an owner to release a property from these restrictions in order to place it for sale, although it is challenging to succeed.

4) Conveyancing

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Conveyancing is the term used to refer to the end-to-end legal process of transferring ownership of a property from one owner to another. In simple terms, it describes the process of a current property owner selling their property and transferring ownership to the buyer.

5) Covenants

A covenant is a condition or agreement recorded in a property deed such as an SPA, which commits the owner to certain conditions. This could include elements such as a restriction on how and when you can sell the property.

6) Deed of Assignment (DOA)

The Deed of Assignment (DOA) is a document used to transfer ownership of property between parties. It confirms that the assignor (who currently owns the property) is transferring ownership to the assignee (who is acquiring the property).

This legal document of transfer is used in cases where a Memorandum of Transfer (MOT) cannot be used, due to the current status of the property title.

7) Down Payment

A down payment is a lump sum payment made upfront to a seller during the purchase of a property. The minimum payment is 10% of the total purchase price, although purchasers can pay more than that figure if agreed.

The first part of this may be paid as a 2% earnest deposit (see below!), which contributes to the mandatory 10% minimum downpayment.

8) Earnest Deposit

An earnest deposit is a sort of downpayment that's made on purchase of a property to demonstrate your intention. It's a non-refundable payment of typically 1%-2% of the total purchase price, which is designed to show you are sincere about a property purchase

Usually paid in conjunction with submission of a Letter of Offer. Where possible, this should be held by a trusted third-party in anticipation of the house purchase.

9) Encumbrances

Encumbrances are conditions attached to a registered property or land title, which reference burdens of interest, rights, or claims that apply to the property.

The most common form of encumbrance is a home loan noting the bank's interest in a property, but it can include elements such as deed restrictions, border limits, or rights of access.

10) External Appraisal Service/Third Party Appraisal Agent

External appraisal services or third-party appraisal agents refer to the act of engaging an independent property appraiser to value your property.

This can provide a professional view of the true market value of your property, or a second opinion on the value of your property to further inform the asking price.

11) Fixtures and Fittings

Fixtures and fittings are the movable objects often defined under a Sale and Purchase Agreement, that may or may not be removed/included at the time of a property sale. They include elements such as the fridge and freezer, light fixtures, curtains etc.

12) Guarantor

A guarantor is a named party on a loan agreement, who acts as a guarantee of payment if the primary party fails to meet their financial obligations. They agree to be responsible for meeting the payment terms in the event of a default by the primary party.

13) Individual Title

An Individual Title is a title deed document issued for property with a single owner of a whole piece of land, with no shared ownership responsibilities. This typically covers landed properties such as semi-detached houses, terraced houses, and bungalows.

14) Joint Ownership

Joint ownership is where two or more individuals are named as co-owners on the title of a property. It is often accompanied by a joint home loan application.

This means that approval from both parties is required for a sale. Joint ownership is also sometimes called ‘co-ownership’.

15) Land Title

A Land Title is a legal document which defines ownership of a particular parcel or area of land. It is an overarching term which covers Individual Title, Strata Title etc. A copy of all land titles are kept by the Land Office of the relevant state authority.

16) Legal fees

Legal fees in the property market is a term which refers to all mandatory payments to legal professionals for legal assistance in the purchase or sale of property. These are legislated by law, and are clearly defined costs as dictated by the Solicitor’s Remuneration Order.

17) Letter of Offer/Intent to Purchase

A Letter of Offer is a written commitment by a prospective buyer to an owner or developer of a property, stating an intention to purchase that property. It is usually accompanied with a 1%-2% earnest deposit. It can sometimes be called a Letter of Intent to Purchase.

18) Loan Agreement

The Loan Agreement is the official document between a bank or financial institution (lender) and the home buyer (lendee), defining the terms and conditions of a home loan.

It will include elements such as total loan amount, term of loan, repayment conditions, and named individuals responsible for making payment.

19) Lock-in Period

The lock-in-period is a defined period that can be found in the home loan agreement. This is where, after the purchase of a property, the owner is prohibited from (or can be penalised for) selling the property.

Home loans often define a financial penalty for the lock-in period, where sellers must pay a penalty fee based on the agreement. Some special property types such as PR1MA property exclusively prohibit sale within a set time period.

20) Malay Reserved Land

Malay Reserved Land is one of the four main types of land for sale in Malaysia. This type of land may only be sold or rented to Malay Muslims.

21) Market Value

Market value is a term used to describe the fair price of a property based on the current market conditions as assessed by a property valuation. It is a measure of the expected price a particular property would transact for, between a willing seller and willing buyer.

This assessment takes into account elements such as the type of property, the location, as well as market conditions such as supply and demand, and even the state of the economy. It is influenced by the wide range of these property market factors.

22) Master Title

The Master Title is a property title issued during the construction and development phase of a property development.

Issued after a developer has been granted permission to develop land, and covers ownership of the entire parcel of land under development. It also grants the right to sell off individual parcels of this land under a Strata Title or Individual Title.

23) Memorandum of Transfer (MOT)

The Memorandum of Transfer is a legal document which defines the transfer of ownership of a property. The signing of the MOT is the legal confirmation of transfer of ownership, and generally forms the final step of the transfer process.

24) Property Valuation

Property valuation describes the method of assessing the fair sale price for a property by a skilled real estate professional known as an appraiser or valuer. This can be engaged by a seller, independently, to professionally assess the selling price of a house.

A property valuation is always done as part of the home loan process, where a bank-appointed appraiser will undertake their own property valuation.

25) Real Estate Agent (REA)

A Real Estate Agent (REA) is a qualified agent who is licensed to operate in Malaysia’s real estate industry, having completed a two-year course and attained a Diploma in Estate Agency from the Board of Valuers, Appraisers and Estate Agents Malaysia (BOVAEA).

They will then complete their qualification through a two-year practical training under an existing REA. A REA is legally allowed to open their own real estate agency, and employ up to 50 RENs.

26) Real Estate Negotiator (REN)

A Real Estate Negotiator (REN) is a property market professional with accreditation that enables them to work in Malaysia’s property industry.

They must attend a two-day course known as the Negotiators Certificate, and are then qualified to be registered under BOVAEA and find employment under a licensed REA.