The real estate market in Bali is not stable, it goes through periods of ups and downs due to several factors such as environmental crises. Everyday lease periods are expiring, so appraisal becomes necessary and crucial in such a constantly changing environment. The valuation is used, in these examples, to renegotiate the price of the new leasehold contract.
In Bali, many real estate projects are being developed on a regular basis, offering luxury apartments, villas and hotels with European standards.
You can buy a beautiful Balinese house of 100 m² living space in a tropical garden with its swimming pool in the heart of the rice fields for 130 000 $.
The market for villa rentals is flourishing. The quality of the service and the low cost of labor allow to offer high level services at very affordable costs.
In this article we will introduce you the essential notions of appraisal if you are interested in investing in Bali or want to sell a property or start a business in Bali.
1-Valuation of properties:
The valuation of a property is a crucial step to define the right value of a property. It is not in the seller’s interest to over or undervalue the property. In order to set the “right price”, it is necessary to evaluate a number of points objectively.
The influence of the environment in the valuation of a property
Within the same city, we can observe differences between neighborhoods but also from one street to another.
The environment, the attractiveness of the area, the notoriety of the district, the presence of local shops, good schools, the feeling of security, the prospects for development of the territory.
All these elements have an influence on the selling price and will therefore be taken into account in the valuation of your property. Some defects are expensive, the characteristics of the dwelling and the property also have an influence on the selling price.
In order to carry out the valuation of a property, assessing the strengths and weaknesses of the property allows a price to be determined per square meter.
In general, the starting point is the average price of the property, which is weighted according to the property’s strengths and weaknesses
The determination of a “fair price”
On the one hand, the buyer wants to get “a good deal”. On the other hand, the owner wants to sell at the “best price”. But what is a good price?
For the seller, it is often above the market price. The owner, who has an emotional relationship with his home, tends to lose objectivity. He is all the more biased as he generally wishes to realize a capital gain.
For the buyer, the “best price” will, on the other hand, be below market rates. In fact, he will tend to look at the slightest defects to better negotiate the purchase price.
Between the two estimates, there is the “right price”. The one that allows you to sell a home within the average time frame.
Appraisal to get bank loans (for locals only):
Sooner or later, you’ll probably need a bank loan to help you finance your dream home.
To find out the exact amount you need to ask your bank for, you will need an appraiser. He will provide you with a full report on the value of your property at that particular time. All banks will ask you for this report before giving you any loan, so it’s a fundamental step especially if you don’t have enough money to finance your whole property at once.
2-What are the main Valuation Methods for assets and businesses?
All the strengths and weaknesses of your business are used as a basis for its valuation, which in turn is the basis for negotiations with the potential investors. But keep in mind that valuation is about assessing the value of your business, not about setting the selling price! To estimate the value of your business, there are different approaches: market approach, future income approach. And of course, you can combine several of them.
It aims to put your company in perspective with others, with as close a profile as possible, and with a known transaction value. These methods are particularly suitable for business transfers for which there is an official listing. Certain craft trades or certain businesses thus have useful statistics for a “market” approach to the value of the business, collected in scales.
Comparative methods are more or less a reflection of the results of other methods, as applied by the market of comparable transactions.
To estimate the business’s future ability to generate profits, and then to deduct its value, taking into account the risk of not realizing these benefits.
These methods have the advantage that they can be used both by the seller, based on the history that you can project into the future, and by the buyer, based on the expected future profitability of the business.
You will thus be able to compare the valuation of the business (and therefore the proceeds of its sale or the financing mobilized to acquire it) with its projected profitability.
The cost approach considers the price of the asset as the value of its constituent parts, the value of the underlying land and the amortized value of the upgrades that has been done on the property.
The cost method is founded on the economic conviction that well-informed buyers will not pay more than the cost of producing a good than the actual cost of producing a similar good with the same level of utility. The cost approach is easier to use when the asset is new and has the highest and best rate of use.
3-Assets and business evaluations are also appraisal:
A real estate or business appraisal must be done objectively, without emotional attachment and without pecuniary interest. Using an appraiser recognized by the Indonesian Society of Appraisal (MAPPI) or an appraiser who is a member of a professional association in the field of real estate appraisal ensures an impartial and neutral opinion on your property or business.
Using an appraiser member of the MAPPI:
- Guarantees their technical competence.
- Guides their work by setting standards for evaluation methods and techniques and the nature, content and manner of reporting.
- Certifies that they have professional liability insurance.
The appraisers agree on the coupled use of several methods in order to obtain not an average price but rather a multifaceted view of a company or a property, in order to prepare the price negotiation for either the leasehold, freehold or rental contract.
If you search a competent appraiser or just want to learn more about appraisal you can visit our website.