Do "experts" really know what they are doing?

I just got home from view 3 HDB apartments with my sister.

This is not the first time I'm viewing apartments, but it's the first time I'm paying close attention to the valuation amounts. The property market is hot now - but the time when everyone is willing to hand out cash easily is the time to exercise extra prudence.

For the purpose of obtaining loans from banks, the apartments need to be valuated. Bank will grants loans based on the valuation amount. I find the valuation of property questionable.

Surely, everyone values things differently, e.g.
- facing the road and being able to hear the traffic,
- your door facing a neighbour's door,
- privacy, e.g. corner unit,
- regularity of the floor area, any oddly-shaped spaces that make it difficult to fit furniture in,
- lift available on the level of the apartment,
- being near an open space where functions are frequently held, and therefore noisy,
- north-south facing or east-west facing,
- facing greenary and nature,
- accessibility and location,
- whether the apartment is in move-in condition or requires renovation, etc.
The condition of the home and whether it had been renovated before is taken in account. However, looking at the 3 valuation reports today I found that even when the renovation that was done was beyond awful, poorly maintained and very old-fashioned, it is still priced into the valuation! Did the valuators seriously think anyone was going to re-use the navy-blue coloured kitchen cabinets and sleep in rooms painted in crimson yellow? Besides, apartments with noisy, dusty surroundings and with less privacy are given higher valuations.

I wonder who the valuators are. Do they live in big houses or do they live in HDB apartments? Do they drive big cars or do they take the bus? Do they have at least 6-digit amounts (in front of decimal places) in their bank accounts or less? Are they fresh grads or experienced at their work? I'm asking these questions because the buyers, sellers and banks depend on the valuators.

Many buyers now take the valuation price as a given and focus on the cash-over-valuation (COV)* portion because that's the only portion of the price that is negotiable. But I think buyers should use their own brains to arrive at the value of the place instead of relying heavily on the valuation report which is dubious to start with.

I find that in life, we frequently rely on some "expert" to tell us how much something is worth, e.g. how much an undergraduate or postgraduate degree is worth, how much we are worth or should be paid, how much a stock is worth, etc. But how much do these experts really know? If the valuators really knew what they were doing, they would have borrowed every cent they could from banks to buy up as many properties as they could during the downturn and be sipping champagne somewhere in the Bahamas now.

"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway." - Warren Buffet

*COV is the additional amount that buyers need to pay. E.g. if the valuation amount is 200K, and the seller and buyer agree on 30K COV, this means the buyer pays 230K. It is common practice here.


~Pink Miu Miu~ said...

Well-said babe! :)

Anyway am planning to sell our flat so i hope we can get a good valuation :P

Anonymous said...

Hi Yu-Kym

Very well said. I always question the value of advice from the deem experts who seem none the wiser and pull some random figures from thin air.

The world seems to be filled with professionals who are professionals because they did a course in that certain fields or have a year or more experience in certain areas.

Looking at property valuation, you will be amused by the simplicity of their models.


HeWolf said...

Yes your observations are right, valuation process is just BS. They simple make reference to recent neighbouring transactions and adjust a bit.

But 1 thing you are wrong, selling price can go BELOW valuation, that's when the econ is bad.

And all thanks to our PAP's policies and failure in anticipating demand that drives the HDB price thru the ceiling. Go read more from Temesak Review and Online Citizen to know more.

David said...


Wonder who the valuators are? Most likely people similar to you. Valuators are not highly paid officials.

The decision on how to determine property value is based on matrix of factors that does include anything you mentioned.

There used to be some COV here in the states. However when the housing bubble burst here, property values plummeted. Many home owners are in my situtation. When one owes more on the mortgage than the value of the property it is called being upside down, or underwater. That is I could not sell my condo for the amount I owe on the mortage.

What a way to start 2010 Yu-Kym. You have covered topics from high finance, sex, sexual parts and anti-depressants.

What new topics will we read about in the remainder of 2010?


Yu-Kym said...

~Pink Miu Miu~, good luck! Now's the seller's market. COV is so high.

Hayek, probably the models are simple but they try to make it sound complicated.

HeWolf, I'm waiting for the time that HDB is sold below valuation. When was the last time that happened?

David, I can probably bullshit my way through being a valuator myself! Sad that that mortgage crisis happened in the US. It affected housing here too - property prices went down alot. But now people are on a buying spree again.

David said...


A buying spree for some first time buyers and wise investors has opened here in the U.S. and in a few other parts of the world including SG. For first time buyers with money saved, or realestate investors who have waited for the market drop this is a great time to pick up properities at lower prices than one could have found 24 months ago.


Anonymous said...

Hi Yu-Kym

"the models are simple but they try to make it sound complicated", that is why they are called professional.


HeWolf said...

The last property bubble burst in mid 90's.

I'm also looking to get a resale flat, but then the prices are ridiculous, and sellers are asking for insane COV.

At the rate it is rising, just a little 'event' (like SARS, 911, ...) will trigger the collapse.

HeWolf said...

Check out this graph:

Demon_Inc said...

hmmm, from another point of view, if you are not willing to even pay the price of the valuation, im pretty sure the buyer wont want to sell the flat to you.

If it does not allow him to even break even, he will be incurring a loss. Price of flat when being sold should be original price + interest incurred + interest lost from taking out that sum of money from your cpf.


Rock Hard said...

It's a case of demand and supply.
There's demand for HDB flats as our government want to increase our populations to 6 million from 4 million.
By increasing the citizenship, there will be more CPF contributions and taxes. That means more wealth for them.
More and more foreigner are coming to Singapore to stay for good. Getting a Singapore citizenship is easy as long as you got money. Money as in lot's of it.
By building less HDB flats, the resale flats will go up in prices.
In fact, HDB cost as much as a Condo now.
You may ask, I rather buy a condo then.
But, do not forget. When you buy a condo, you lose some of the privilege from the government subsidy. You do not get a cent from the budget hang out even though you are a Singaporean.
A 3 room HDB dweller gets the most compare to a 5 room HDB dweller.

Btw, there are tons of con artist out there who claim they are professionals. They do what is required to certify themselves.
Go pay some $$$ and time, anybody can be certified a professional in no time.

One eg. I hate most is..
(Professional)Feng Shui Master.
By telling you to shift some furniture or renovate your interior of your house, you believe it can bring you wealth and happiness?
Use a bit of common sense when comes to decorating your house for goodness sake!