HOME seekers in Jamaica are navigating the property acquisition process incorrectly, prompting calls from one industry expert for a re-evaluation of standard practices.

Ryan Taylor, managing director of TASC Property Appraisals Company Limited, has cautioned against the prevalent trend of signing sales agreements before conducting property valuations, a practice he deems problematic.

“What I’m saying, and I stand firm on that, that is wrong,” said Taylor in an interview with the Jamaica Observer. “You have to link a real estate professional, which is the appraiser, before you sign that sales agreement.”

This approach, he explains, can provide valuable insights and help ensure a fair market value is established before any commitments are made. Taylor noted that financial institutions typically do not invest in real estate without first conducting an appraisal. When banks provide loans, they are making an investment and require an objective assessment from a professional with no stake in the transaction.

“A bank does not invest in a property unless they do a valuation first,” he stressed. “So why would you sign a sales agreement and not do a valuation first? That valuation might save you $2 million.”

Highlighting common misconceptions surrounding property valuation, Taylor recounted a notable case from Green Acres, Spanish Town in St Catherine. In this instance, a client intended to sell a property for $29 million, investing approximately $70,000 for a valuation that determined its value at $26 million. When the client presented this valuation to the vendor, who initially insisted on her asking price, the vendor ultimately accepted the valuation, resulting in a $3 million savings for the client. That $70,000 saved the client $3 million. The typical process for acquiring property in Jamaica often begins with the realtor finding a property, followed by a letter of instruction sent to an attorney to prepare the sales agreement. After the purchaser signs the contract, they become bound to the specified price. However, many buyers skip the crucial appraisal step, often driven by the desire for a quick transaction.

“It’s crucial for buyers to ensure they are binding themselves to a property that holds genuine value,” Taylor advised.

Investments in real estate should be approached with caution, as making emotional decisions can lead to unfavourable outcomes. Taylor stressed the importance of understanding the costs involved and ensuring that the appraiser provides a professional opinion based on objective research and is not influenced by emotions; their assessment is driven by data. Moreover, understanding a property’s true market value before making a commitment is critical.

“For instance, if a buyer pays $28 million for a property valued at $25 million, they risk financial loss if they need to sell the property later,” he explained to the Sunday Finance.

Similarly, he says sellers who skip the appraisal risk not knowing the highest return they can achieve on their investment. He noted that a thorough appraisal can help sellers understand their property’s worth and maximise their return.

“You need to know if you have equity. A person could be selling a property for $30 million while its true value is $40 million. Understanding where you stand is crucial,” he explained.

To avoid potential pitfalls, Taylor urged prospective buyers to conduct both a valuation and a land survey before signing any contracts. He highlighted that a proper appraisal can uncover essential details, such as potential encroachments or restrictive commonality issues, that might affect the property’s value. Furthermore, Taylor elaborated on the distinction between value, worth, and price. He clarified that while a property can be listed at any asking price, it is the valuer’s responsibility to determine whether that price aligns with market data. He explained that if a property is listed for $35 million but market data indicates it is worth only $30 million, the seller should be aware of this discrepancy. In discussing the current housing market, particularly in Kingston, Taylor acknowledged that while some asking prices align with market values, others do not. Ultimately, value is determined by buyer reactions; multiple interested buyers at a specific price reflect its market value. Conversely, if only one person expresses interest in a property listed at $100 million, it may not represent true market value.

“The market is so active that even though I put the value at $15 million based on data, someone might be willing to pay $17 million because it’s worth that to them,” he explained.

As the Jamaican real estate market continues to evolve, Taylor’s insights serve as a reminder for home seekers to conduct their due diligence before making significant financial commitments. Understanding the differences between worth, price, and value is crucial for ensuring a successful investment in the property market.

“You should do your due diligence when acquiring property. The first thing you need to do is an appraisal to see if what is being asked is reasonable and in relation to market value. It will save you money in the long term,” he said.