How Valuation Is Done?

As I am building graduate and still in learning stage in property field, I start learning giving Verbal Indication to the bank. Below is an example on how valuers calculate the value of terrace houses.

Assume that this is a corner and basic (no renovation) unit.

Subject property:
-Land Area: 2,600 sf

Based on the latest transaction, a standard terrace house at the similar area is sold at RM280,000 with build-up 1,400 sf. Let assume the property is medium-cost property. Medium cost property will cost RM65-70 psf.

Building:
Main Floor Area: 1,200 sf x 70 = RM84,000
Ancillary Floor Area: 200 sf X 35(half of 70) = RM7,000
Total = RM91,000

RM280,000 - RM91,000 = RM189,000
RM189,000 is the value of the land the property on.
RM189,000/1,400psf (land) = RM135 psf

Land:
Standard Land: RM135psf x 1,400 sf = RM189,000
Extra Land: RM67.5psf (half of RM135psf) X 1,200 sf (2,600 sf - 1,400 sf) = RM81,000
Total = RM270,000

Corner Allowance:
RM270,000 X 10% = RM 27,000
RM27,000 + RM270,000 = RM297,000
RM287,000 adds building cost,RM91,000 = RM388,000

I hope you can get a good picture with the calculation.

In Case You Don't Know

Working in property allows me to know how developers price their property during launching. Nowadays, I help the valuers to do verbal indication. The bankers will expect a certain price and most of the time, we couldn't give the price they want. They will question us why the value is so low that the buyer bought it in higher price.

Actually, if you buy a unit in a new condominium, the price of the unit is not a market price. During the feasibility study stage of a proposed development, the developer will do market survey to check the current market value of same type of property. After knowing the market value, they will mock-up the price to maximise their profits earned from the whole development. In another word, the listing price the developer put is not market value. It is the agreement between buyers and developer that buyers are willing to buy homes with that listing price.