- Complete Guide and Checklist to Purchase Residential Properties in Malaysia
- This is the complete guide with 19 pages of contents
- Sample property viewing checklist
- List of documents for loan application
- Sample Inventory list
- Sample legal fees
and many more.
- Preliminary questions to ask yourself
- The Property search
- Things to do while you are property hunting
- Making the offer
- Payment of earnest deposit fee & signing of booking form, with agent
- Appointing lawyers
- Applying for Mortgage
- Determination of inventory list – what does the Vendor leave and what does he take?
- Signing of SPA (Sales and Purchase Agreement)
- Valuation Report
- Opening your home loan account
- EPF withdrawal
- Loan Agreement
- Insurance on the property
- Partial disbursement & Full disbursement
- Vacant possession
(Appendix is can be found in the PDF file downloadable on this page)
APPENDIX A: SAMPLE PROPERTY VIEWING CHECKLIST
APPENDIX A1: LIST OF DOCUMENTS FOR STANDARD LOAN APPLICATION
APPENDIX B: SUMMARY OF ASKING/TRANSACTED PRICES
APPENDIX C: SAMPLE INVENTORY LIST
APPENDIX D: GUIDE TO PARTIES INVOLVED IN THE TRANSACTION
APPENDIX E: Sample Legal Fees
APPENDIX F : AGREED APPORTIONMENTS
WHAT ARE YOUR KEY QUESTIONS IN DETERMINING WHAT THE RIGHT PROPERTY FOR YOU IS?
- Proximity and access to work
- proximity and access to schools
- amenities including shopping, leisure, religious facilities, parks
THE PROPERTY SEARCH:
1. Identify potential properties
2. Call up the agents/owners
3. Fix viewing appointments
Take a checklist with you when viewing properties. See Appendix A for a sample checklist.
THINGS TO DO WHILE YOU ARE PROPERTY HUNTING
- pre-qualification of loan - meet up with the bank and develop a relationship with an officer to assist with pre qualification.
- Documents you will need at this stage will include those described in Appendix A1.
MAKING THE OFFER
- Once you’ve found the right ONE(s), you got to make the offer to purchase
- Do further research. Agents will often intimate that they have a large number of buyers “about” to make an offer in order to bump up the price.
- Create a summary of units sold and last transacted prices in the last 1 year to get a better idea of the real market price. You can do this by researching on the various websites. Look for other listed properties and call up the agents to find out if the unit is still available. If it has been sold, ask for the transacted price. Most likely the agents will tell you, if you call them up. See Appendix B for a template for creating a summary of last transacted prices.
- Get your bank to do a valuation and assessment for loan. Be very careful here as a lot of Vendors simply price their properties at prices far in advance of the actual valuation offered by Banks. Be wary of agents who tell you that they “can get their valuer who is a personal friend, to give you a higher price if you use x and y bank”. Don’t be fooled – if 3 independent banks give you the same valuation, and only the agent’s “friend” is willing to go much higher, this only means that someone along the way is taking a kickback. Such practices are unethical and in breach of the professional rules that govern registered valuers. So even if the “friend” is able to come through with a higher valuation and justify a higher margin of financing, the Purchaser is left to bear the risk that during a future sale, the valuation may not be as high; or, at the point of an auction for default, the actual price of the property will be much lower based on independent valuation. The ultimate loser here is the Purchaser (while the agent would have already collected his fee).
- Plan your budget. It should include:
- Down payment: the proportion of the purchase price not covered by financing (banks will typically lend 80-90% of the purchase price)
- Legal fees:
- 1% for the first RM100,000,
- 0.5% for the next RM4,900,000
- Property stamp duty:
- 1% for the first RM100,000,
- 2% for the next RM400,000
- 3% for the next RM500,000 – RM2million
- 4% above RM2million
- Loan agreement stamp duty: 0.5% of loan amount transfer
- Disbursement fees include fees for registration of charge, land search and bankruptcy search (RM300–700 in Wilayah Persekutuan and Selangor)
- Processing fee: one-time fee charged by the financial institution for loan processing (RM50-1,000)
PAYMENT OF EARNEST DEPOSIT FEE and SIGNING OF BOOKING FORM, WITH AGENT
Earnest deposit is normally 1-2% of the agreed property price. Agent will have a standard template booking form to facilitate the transaction.
Appoint a firm of solicitors to act for you as the Purchaser. As part of the instruction, forward the firm a list of parties involved in the transaction. See Appendix D for a sample list of parties involved in the transaction.
APPLYING FOR MORTGAGE
Loan letter of offer will be issued by the bank. It will contain the salient terms of your loan. A list of such terms would include:
- Type of loan
- Amount of loan
- Purpose of loan
- Description of property
- Processing /Set up Fee
- Monthly service charge
- Prevailing interest and Repayment
- Security Documents
- Interest rate on excess
- GMTA – Group Mortgage Term Assurance or MRTA – Mortgage Reducing Term Assurance (if any)
- Conditions precedent to drawdown
DETERMINATION OF INVENTORY LIST – WHAT DOES THE VENDOR LEAVE AND WHAT DOES HE TAKE?
- Do a recci (fact finding visit) of the property and note down what items you want the Vendor to remove and what items you would like the Vendor to leave.
- Once agreed, this list becomes the agreed inventory list – a list of items that you will expect to find when you take over vacant possession. This document also forms part of the SPA.
- See Appendix C for a sample inventory list
SIGNING OF SPA (SALES AND PURCHASE AGREEMENT)
- The signing of the SPA can take place separately ie. you sign and forward to your solicitor, and they will forward to the vendor’s solicitor who will arrange for the vendor to sign and return to your solicitor. Your solicitor then forwards to the Bank. You will need to issue the cheque for :
o The RPGT sum (2%) of the purchase price; and
o 8% being the remainder of the earnest deposit (10% - 2% already paid in the form of a booking fee).
- *Make sure that the premises are correctly described in the SPA – ensure that any additional parcel forming a car park that comes with the unit, is included in the description under the SPA.
- You may wish to arrange for all parties to sign at the same time. This is because after you have signed and issued the cheques, you will want to go to EPF to get your reimbursement from Account 2 as soon as possible. However, the signed and stamped SPA is needed before you can do this. As such, if you sign the SPA separately, you could have a situation where the Vendor takes his own sweet time to sign and you cannot go to EPF for your reimbursement – and yet, the money has already been debited from your account. (It will be placed in a clients/stakeholder account with the Vendor’s solicitors – but still, the money would have been debited from your account). Don’t be caught in this situation, make sure the Vendor signs the SPA at the same time as you.
- Prepare to pay the solicitor’s bill. A typical bill at this stage will look as set out in Appendix E.
• The Bank will send a representative from its selected firm of property valuers, to take photographs of your apartment and prepare a valuation report.
• The cost of the valuation report
OPENING YOUR HOME LOAN ACCOUNT
• A separate account in which funds to service your loan and interest payments needs to be opened with the bank granting you your loan. Your loan officer should sort this out for you. Choose a branch nearest to your place of work to facilitate easy sorting out of administrative matters.
• Friends and family may tell you that this is a relatively straightforward process and that you can expect to withdraw your money easily and without hassle.
• Be warned – this may not necessarily be the case.
• As a general rule, purchasers of property located in Selangor are advised to visit the PJ EPF branch, while purchasers of property located in Wilayah Persekutuan are advised to go to the KL EPF branch. Trying to process the paperwork for a KL-based property at the PJ branch can result in complications and confusion over the type of forms from the Land Office which are required for the submission.
• A list of documents required by EPF is set out on their website at www.kwsp.gov.my. The relevant forms to be filled in prior to submission can also be downloaded from the website.
• Be prepared however – sometimes, the EPF officers will ask for additional documents. It’s best to take all documents that you have, with you just in case.
The bank will send their standard loan agreement and charge document to your solicitors (If your solicitors are also on the bank’s panel, they will prepare the documents according to the Bank’s approved template.
There are lots of onerous terms, one-sided clauses etc. Unfortunately, the bank will not entertain any attempt by you or your solicitor to amend the clauses.
INSURANCE ON THE PROPERTY
• What often happens is the bank will send an automatically-generated notice requesting a copy of the existing fire insurance policy for the property within 2 weeks of date of the letter failing which the bank will take out a policy on the property without further notice.
• The problem here is that for condos purchased on the sub-sale market, there should be a master fire insurance policy maintained by the building management office for the whole condominium already valid and in force. If this is the case, there is no reason for the bank to take out another policy over the same unit and bill you for it, as you will already be paying management fees – a component of which is for your existing policy.
• What to do : Immediately contact the bank – use the number in the letter – get the email address and name of the officer who picks up the phone and instruct them via email NOT to take out any additional policy first
• Next, contact the building management office and ask for a copy of the front page of the existing fire insurance policy to be faxed/emailed to you. This page should contain the details of the policy including validity period, unit number and details of the current owner.
• Once received, email a copy of this document to the bank officer and ask for instructions what to do next. Ideally, you should leave the existing insurance policy as is until the transfer of title is updated to reflect your name as the new owner, after which you should notify the building management and get them to update the policy accordingly.
• Meanwhile, the bank should not be allowed to take out another insurance policy over the unit and bill you extra.
PARTIAL DISBURSEMENT and FULL DISBURSEMENT
• The bank will issue a cheque for the partial drawdown – sufficient for the Vendor to discharge the outstanding on any loan he/she may have taken out over the property. This cheque will be sent to your solicitors and they will forward it to the Vendor’s solicitors.
• The MRTA portion will also be disbursed (if you have obtained financing for this portion).
• Once the Vendor has utilized the partial drawdown to procure the discharge of the charge (assuming he had charged the property to a bank earlier), the bank will release the original strata title to the Vendor’s solicitor. This will then be forwarded to the Land Office for the updating of details, etc.
• The Vendor’s solicitor will send it to the Bank’s solicitor (which could also be your solicitor as the Purchaser).
• The Bank’s solicitor will issue the advice to the Bank to proceed with full drawdown.
• Once full drawdown has been issued by the Bank into the Vendor’s solicitor’s account, you will be notified.
• From this point, the Vendor has a specified number of days within which to deliver vacant possession to you, failing which you have the right to charge interest. The number of days is usually between 5 to 7 days and is specified in the SPA.
• The next step is for the Vendor’s solicitor to release the Agreed Apportionments figure to your lawyer. This is essentially, a list of all payments which the Vendor has already paid in part/full for items such as management fee, sinking fund, water, etc.
• You will need to reimburse the Vendor for the portion that he may have pre-paid, as he will not be enjoying the use of the property from the date of vacant possession onward.
• Conversely, there might be outstanding payments which are already due prior to the date of vacant possession, which the Vendor should have paid. These amounts should be calculated as well and set off against the total agreed apportionments figure outstanding.
• See Appendix F for a sample agreed apportionment template.
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