What is the difference between pricing a property and appraising it? SRX's Sam Baker explains.
In March, HDB moved its official valuation from before the Option-to-Purchase (OTP) to after it. This sparked a major public debate about what this rule change means.
What will replace the HDB valuation in the negotiating process? Will HDB valuations match the sale price?
What is the difference between pricing a property and appraising it?
In explaining the change, National Development Minister Khaw Boon Wan said: "HDB will rationalise the process of price negotiations and restore the original intention of valuation, which is to help buyers get a housing loan.
Negotiating based on price rather than COV will take some getting used to. However, it is a useful move for long-term market stability."
In X-TV's episode Pricing vs. Appraising a Home, the Singapore Real Estate Exchange (SRX), reviews the debate over valuations matching the sale price and then shows how information technology is resolving the debate.
Why can technology provide a better pricing guide than valuations?
Sam Baker, Chief Executive Officer for SRX, submits that the primary reason is that a computer is impartial. It has no skin in the game.
"Technology is transforming the real estate market and making it look more like the stock and bond markets," said Baker, "In those markets, you can call up your broker and you get the exact price that a particular stock or bond is trading at that moment. Price, in those markets, is very transparent.
Now you can go to srx.com.sg and your agent and get X-Value, a computer-generated estimate of a home's market value. By reviewing the similar transactions and appraisal adjustments that make up the X-Value calculation, you have a head start in negotiating a final price for the home."
Watch X-TV to learn what five criteria a pricing mechanism, like X-Value, must meet for it to be an affective guide for Singapore's real estate market.
Sam Baker is co-Founder of Singapore Real Estate Exchange. He is also the director & CEO of CoSine Holdings Pte. Ltd. for the StreetSine Group .