GEORGE TOWN: Ten days before Michael Geh lost his life to Covid-19, he asked me to call him after 2.30pm. The chat lasted about 10 minutes. He gave his views about a project, the developer’s track record and the previous land owner.
Like most conversations nowadays, the pandemic became a talking point.
I asked him: “How is the Covid situation affecting you?”
“Depressing. But what to do,” he said. He did not say he was down with Covid-19 and was under treatment.
Geh, an experienced valuer and senior partner of Raine & Horne International, died less than 10 days later on May 15.
The property market has been languishing for several years now and the pandemic has worsened the situation considerably, as with other sectors of the economy, with the exception of the glove and medical sectors.
When banks call up for ‘verbal indicators’
Even before the pandemic, banks would call or message valuers to ask for verbal indications for a house or shoplot.
The Board of Valuers, Appraisers and Estate Agents Malaysia (Bovaea) frowns on this but it is “normal market practice” among valuers if they do not want to be removed from a bank’s panel of valuers, said industry sources.
The conversion of these requests into real jobs is 5%. Another said it is less than 10%.
FMT spoke to five industry sources for this story.
Since the outset of the pandemic and the subsequent movement control order in March 2020, these demands have morphed from a house or shoplot to include indicative values of shopping malls, hotels, office blocks or plantation land.
Because of their size, the indicative figures are much harder to calculate. The deadline can be as quickly as 30 minutes or up to 48 hours, two sources said.
“According to the Malaysian valuation standards, we are not allowed to do so. But in reality, market practice is different,” an industry source who requested anonymity said.
A few of the companies said they have to hire people just to man the phone or cater to requests for indications from banks because they are “swarmed”. This has been happening for years. The last straw which broke the camel’s back is that today the requests from banks include indicative value of “larger cases”.
Banks may call between five and 10 valuers to get free indications and give the job to the valuer “giving the highest value with the lowest fee”.
Valuers with the lowest value will not be selected because the client – whether a house buyer or a corporate entity – and the bank usually want to give the biggest loan possible.
Sources said this practice of seeking out a higher valuation versus a more objective real market value results in more loans being disbursed than necessary.
It also encourages undercutting of fees and valuers competing to give a higher valuation in order to get the job, sources said.
Requests for free valuations also “pertain to property which a valuer may have valued before. Some clients may ask for verbal updates”.
Because of Covid-19, real estate investment trust (REIT) managers may seek updates twice a year instead of annually while hotel owners now want more updates on the value of their hotels. Malls and hotels are among the hardest hit by the pandemic, due to the fall in shoppers and tourists.
Bank Negara told of malpractices
Although the comments from the five are anecdotal, a report of such malpractices, which was sighted by FMT, was given to Bank Negara Malaysia less than a decade ago to emphasize to the banking and services sector and to BNM the role played by the property sector in the country’s economy and how a crisis in the lending process would shake the industry and the broader economy.
The report also suggested a series of corrective measures, one of which was to ban requests and demands for quick indicative values at short notice and for commercial banks to stop the practice of shopping around, pitting one valuer against another in a bid to get a higher valuation for lower fees.
