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1. Understand and draft your budget
With the skyrocketing property prices in Malaysia, one must be really clear about managing budgets and debts. To own a real estate, first thing to take note is your budget. If you are a first time buyer, understandably banks will approve you a loan of 90% for as long as it does not exceed one third of your income. But exceptional cases may occur if you hold good past credit records and the bank may permit the monthly installment to go up to half of your net income.
There are also other expenditures to take into account such as legal fees, stamp duty and goods and services tax (GST) so do not allocate just an exact amount for the property you are purchasing as you may very well go beyond your budget.
2. Search for property
You can never be totally clueless about property searching. At least have a rough idea on the location and type of residential (or commercial) properties that you are aiming for. Typically, landed properties are much more expensive so it is imperative to choose one that matches your affordability.
3. Survey and perform physical checks
To fully and completely understand the potential properties, you will need to visit them yourself. Set up a meeting via the agent or home owner to view the house.
Among the issues to look into or questions to probe include:
- How long has the agent been marketing the property?
- Number of past owners
- Overall condition and structural defects such as leaking roof or cracks, etc.
- A copy of property title – scrutinise for owner’s name, official address, tenure and land size
4. Conduct sophisticated research
You need to be an informed buyer by not only obtaining one-sided information from the agent and seller but also from within the vicinity. You may view more than one properties that attract you and if you found one that you are interested, return to it on a later date to speak to neighbours. You can learn about the neighbourhood’s social interaction, security and at the same time, ask if there have been nearby houses that were sold and at what price.
5. Bank loan and lawyer
Bank loans are of utmost importance so take up the initiative to check with the banks on how much you can borrow. To be more detailed, check out their housing loan plans and interest rates. If you have the intention to withdraw your Employees Provident Fund (EPF), you can get the withdrawal form from EPF office or download it at www.kwsp.gov.my
All transfers of ownership need to be done by a certified lawyer so engage a trusted lawyer to draft the sale and purchase agreement (SPA) and loan agreement for you. Legal fees are regulated by law and they are calculated based on the properties’ prices. For instance, the legal fees of a property priced at RM500,000 would total up to approximately RM8,000. Then, the bank will conduct a valuation where you will have to bear the costs of the valuation report. Based on the valuation, the loan officer will give you a letter to sign. On the letter are details of your loan – loan amount, rate, monthly installments and the terms.
6. Deposit Payment – 2-3%
Once both parties agreed on a price, sign your Letter of Offer or Offer to Purchase form and you are subject to paying a deposit of 2-3% of the purchase price. The 2-3% is often paid to the agent as a stakeholder account as the agent is a neutral party, also referred to as “in escrow”. The remaining figure that amounts up to 10% should be paid once the SPA is signed.
A Letter of Offer will contain:
- Legal names of vendor and buyer
- Price agreed upon
- Amount of deposit
- Any items included in the sale
- Date before which the SPA must be signed
7. Signing SPA
Usually the SPA is required to be signed within two to three weeks. Your lawyer is responsible in conducting relevant title searches, drafting out the SPA and getting both parties to agree on possible clauses and preparing few copies of stamped SPA for them to sign. So this is when you prepare the remaining 8% of the down payment.
8. Other documents
The loan agreement will be signed by both you and the bank. Despite the bank holding more advantages over the loan agreement, the costs of the agreement should be borne by the buyer. Also, if it is necessary, you need to sign the Deed of Mutual Covenant and Memorandum of Transfer.
9. Paying the balance
You need to settle all your legal fees, stamp duty and other entailing charges by now. Your lawyer will ensure that the seller pays off all outstanding assessment fee and quit rent before payment is given to the seller’s lawyer. You may need regular follow-ups so that everything is paid within the date stated in the SPA, usually three months. Then get a copy of the title from your lawyer and it should be in your name.
10. Keys and authority to the house
Lawyers of both parties will meet and complete the transfer process, abiding by the deadline set out in the SPA. Once everything has been paid up, the seller must deliver the property and keys to you, as the new owner, either in vacant or along with items that have been agreed on. Remember to also make sure all outstanding utility bills have been paid up and request for statements or receipts for proof. Any bills up to the date of transfer have to be paid up by the seller of the property.