BOVAEP Valuer TPC common mistakes
BOVAEP Valuer TPC · Understand the traps and how to avoid them.
The candidate labels every opinion 'market value' and never tests the figure against the definition. A mortgage-security or auction instruction is answered with a figure the report itself concedes is a 'forced sale' or 'realisable' level, but the basis, the departure and the different assumptions are not stated anywhere.
Definitions are memorised as paragraphs to reproduce rather than as a set of conditions to satisfy. The report template is recycled from a previous market-value job, so the basis line is inherited rather than chosen at the point of instruction.
What to do instead
Before inspecting, write a one-page instruction summary fixing purpose, basis, definition source (current Malaysian Valuation Standards edition aligned with IVS), valuation date and key assumptions. After the calculation, audit the figure against each element of the definition - willing and informed parties, no compulsion, reasonable marketing period, payment in cash/equivalent - and where the basis is not market value, name the basis and disclose the departure and its effect.
Comparables are taken from property portal listings and agent chatter at asking price, with no verified transaction price, no transaction date, no adjustment for floor area, condition, tenure, age or location, and no reconciliation between the comparables used.
Portal data is instant, free and feels authoritative. Candidates have not practised building an adjustment grid, and are reluctant to quantify adjustments because quantification feels like invention rather than analysis.
What to do instead
Source verified evidence: stamped instruments, valuation and property services data, and confirmation from the parties' agents or solicitors. Present a table showing price, date, area, basis of measurement, tenure, condition and each adjustment with a stated reason and a percentage or ringgit figure. Then weight the evidence and explain why the adopted figure sits where it does within the range.
The investment or discounted cash flow method is internally inconsistent - the rent used is a net rent but outgoings are also deducted, the discount rate is the client's borrowing rate or the candidate's guess, growth is applied in perpetuity at the same rate as rental growth without testing the implied exit capitalisation rate, and nominal cash flows are discounted at a real rate.
The spreadsheet is copied from a teaching example whose assumptions are never re-examined. Candidates know the mechanics of discounting but have not been trained to derive a rate and to make the rate, the cash flow and the growth assumption tell one consistent story.
What to do instead
State the cash flow convention (nominal, after tax or before), show the net operating income build-up line by line, derive the discount or capitalisation rate from evidence (comparable implied yields, weighted average cost of capital, target returns) and justify the gap between it and the growth rate. Cross-check the terminal value by capitalising the final year's income at a market-derived rate and run at least two sensitivities.
A residual development appraisal is presented as arithmetic: total saleable units multiplied by a headline price per square foot, less construction cost, producing a land value - with no phasing, no finance or professional fees, no contingency, no developer's profit test and no verification of the planning position or approved plot ratio.
The appraisal looks like a simple subtraction, so candidates treat it as a calculation exercise rather than a risk exercise. It is also the section where candidates are least likely to have had real project experience.
What to do instead
Build the appraisal in the standard sequence: gross development value from verified comparables, development period and phasing, construction and infrastructure cost with quantity surveyor input or published rates, professional fees, contingency, finance on the cash flow, marketing and legal costs, then developer's profit expressed as a percentage of gross development value or cost. Show the residual as a range, disclose the planning status and the assumption on which units and density depend, and test the answer against land sales evidence.
In a compulsory acquisition instruction the candidate applies an ordinary market value approach, adopts a value that already reflects the scheme being built, omits severance and injurious affection or disturbance and incidental losses, or applies the standards' definition instead of the statutory one.
Acquisition work is treated as another valuation job. The statutory framework, its disregards and its separate heads of claim are studied as a list to be recited rather than as instructions that change the arithmetic.
What to do instead
Work from the acquiring Act and the statutory definition of market value, and value the land on the assumption that the scheme does not exist. Value the whole holding, then apportion to the acquired area and assess separately any severance, injurious affection, disturbance and consequential loss with evidence for each head. Identify and strip out any element of value attributable to the scheme, to special suitability, or to illegal or non-permitted use.
In a rating matter the candidate computes a net operating income and calls it annual value, deducts items the statute does not permit, confuses annual value with improved value or with capital value, and ignores the valuation list, the statutory notice, the grounds of objection and the objection deadline.
Rating is assumed to be the investment method with a different label. Candidates revise annual value as a definition but do not study the local authority's statutory powers, the form of the valuation list and the procedural timetable attached to objections.
What to do instead
Reproduce the statutory definition of annual value in the applicable local government legislation and apply only the deductions that definition allows. Keep annual value, improved value and capital value as three visibly separate concepts in the file. Before advising, obtain the valuation list entry, confirm the service and date of the notice, and set out the objection window, grounds and forum, noting that a valuation objection is not an appeal against the rate percentage.
Title, tenure and land use are taken from the client's description or the marketing brochure. The document of title and register are not examined, so express conditions, restrictions in interest, Malay reserved status, native title in East Malaysia, lease expiry and the need for State Authority consent or conversion approval are discovered late or not at all.
Candidates rely on the physical inspection and the brief because they are uncomfortable reading the register and the title document, and because the legal due diligence is assumed to be someone else's task.
What to do instead
Obtain and read the current title document and register search, the survey or strata plan, and the latest quit rent and assessment records. Extract into the file the tenure, term and expiry, land use category and express conditions, restrictions in interest, caveats and encumbrances. State in the report how each constraint affects the valuation, including the cost and time of conversion, subdivision or consent, and any value effect of a use that is not permitted.
For a specialised property or a going concern, the candidate values the land and buildings only, or values the business, and presents the result as one figure. Plant, machinery, fit-out, licences and trading goodwill are neither separately identified nor reconciled, and the cost approach is dismissed because 'the market is thin'.
The distinction between real property value, business enterprise value and the value of the operating asset is not intuitive, and specialised assets rarely have direct comparables, so candidates cling to whichever figure is easiest to defend.
What to do instead
Define the subject asset in the report preamble and state explicitly what is included and excluded. Value land and buildings, plant and machinery, and any intangible separately, and show how the components reconcile to the going-concern figure, testing for double counting of goodwill. Where comparables are scarce, use depreciated replacement cost with a clear statement of its limitations, or the profits method with the maintainable earnings and capitalisation rate evidenced.
The candidate accepts an instruction where the fee is a percentage of the value achieved, acts for both lender and borrower or for both buyer and seller without disclosure, values a class of property outside the scope of the registration held, or submits work not reviewed by the supervising registered valuer.
Commercial pressure and inexperience. The candidate wants the instruction, does not recognise the conflict at the point it arises, and assumes ethical rules are matters of intent rather than specific prohibitions.
What to do instead
Screen every instruction against the Act and the standards at acceptance: fee basis, conflicts, competence, registration scope and supervision. Put the fee on a fixed or time basis and record in writing the refusal of any contingent arrangement. Disclose conflicts and obtain written consent or decline. Where supervision is required, name the supervising registered valuer and confirm the review in the file and in the report.
The report is submitted without the mandatory declarations and limiting conditions, confuses the valuation date with the inspection date and the report date, gives a figure with no reconciliation of the methods used, and cites standards or legislation that are out of date or misdescribed.
The calculation is treated as the deliverable and the report as a wrapper. Little time is spent learning report structure, so declarations, assumptions, scope and reconciliation are dropped under deadline pressure.
What to do instead
Use a compliance checklist derived from the current reporting standard before submission: addressee, purpose, basis and definition, valuation date, inspection date and date of report, scope and sources, market and property analysis, methods and reconciliation, assumptions and limiting conditions, valuer's declaration, signature, registration number and firm particulars. Have the supervising valuer check the checklist, and read the report as a stranger would to confirm the figure is traceable from the evidence shown.