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How to Buy a Property in Malaysia
A step-by-step guide to acquiring a property.
Both foreigners and local investors are subject to similar property regulations. Malaysia’s land tenure is based on the Australian system of land ownership – the Torrens system. A small percentage of land, mainly in rural areas, is reserved for the indigenous Malay people and cannot be owned or purchased by the non-native locals or foreigners under normal circumstances.
If you are wondering what it takes to purchase a property in Malaysia, here is a basic guide to help you understand the procedure better. Buying a property requires almost the same procedures for both Malaysians and foreigners:
- Once the purchaser decides to buy a specific property, he is required to fill in a letter of undertaking (Agreement to Purchase) prepared by the real estate agent and pay the booking fee or earnest money (minimum of 3%) evidenced by a receipt of payment. If subsequently the purchaser renegades on the intention to go ahead with the purchase, this earnest money is forfeited by the vendor. On the other hand, if the vendor renegades on the sale then the purchaser can claim double the sum of earnest money as damages for non-performance.
- There are two choices:
i) Purchaser finds his own banker; or
ii) His lawyer can submit to his panel of bankers.
- The real estate agent/broker will have to forward the following documents/details for the lawyer to prepare the Sale & Purchase Agreement [referred to as S&P or SPA]:
a) Purchaser’s & Vendor’s identity card or passport if foreigner.
b) A copy of the previous S&P/SPA from the Vendor
c) A copy of the title (if any)
- Once the Sale & Purchase Agreement (S&P/SPA) is completed the lawyer will fix a date (usually 3 weeks after signing the letter of undertaking) for the signing and settle the required monetary deposit of another 7% (in addition to the earlier 3% earnest money) to make up a down-payment of 10% in total.
- Thereafter, the purchaser is given 3 months to settle the balance sum of the loan. In most instances, the purchaser would have taken a 70% loan from the bank and he will have to pay from his own pocket the 30% (i.e., he had earlier paid 10% during the signing S&P/SPA and pays only the differential sum of 20%). He can request the vendor another month’s extension of time subject to interest accruing at some 8% per annum.
- The purchaser will hand over the balance 20% deposit to the lawyer for settling the mortgage from the bank, in order to redeem the property. Then the process of transfer can be carried on.
- As the property is being redeemed and the vendor has settled all outstanding bills, the lawyer will submit the transfer form to the Land Office for registration. If the transfer form is approved, the lawyer will hand over the rest of the deposit to the vendor. At the same time, the seller has to pass the right of the property to the buyer as final realize.
How much should you prepare to purchase a property?
Apart from the purchase price, other applicable fees are:
• Legal fees:
- For the first RM150,000, the legal fees payable is 1%
- For the next RM850,000, the legal fees payable is 0.7%
- For the next RM2,000,000, the legal fees payable is 0.6%
- For the next RM2,000,000, the legal fees payable is 0.5%
- For the next RM2,500,000, the legal fees payable is 0.4%
- For the remaining, if any, negotiable
- 1% for the first RM100,000
- 2% for the next RM400,000
- 3% for RM500,000 & above
• Disbursement fees: RM300-700 (include fees for registration of charge, land search and bankruptcy search)
• Loan agreement stamp duty: 0.5% of loan amount transfer
• Loan processing fee: RM50-1,000 (one-time fee imposed by the bank)
Tips for the Buyer
Thinking of buying a home and/or an investment property? Here are some basic tips:
Buying a home - be it a house or condo - can be a daunting experience. For most people, it is the biggest investment anyone will make in their lifetime. As such, you may want to consider these several points when doing your homework, which is the most important task you need to complete before acquiring a property for your personal use.
Before You Start Looking For Your New Home:
- Determine a comfortable monthly budget for your new purchase, including down payment and monthly payment. Use the loan calculator to assist you.
- Find a loan program that meets your needs and get pre-qualified (preferably pre-approved).
- Choose a real estate agency or negotiator that you trust and who understands your needs.
- Determine what type/which neighborhood that best matches your needs.
- Identify important features you need your new home to have (see below).
When Looking For A Home - Points to consider:
When buying a home, ask yourself how the property is going to fit your needs. Think hard and understand how you live your life or the kind of lifestyle you prefer. Separate that form the sometimes fiction of what you think you want in a house. Nevertheless, it is also advisable for potential buyers to not get emotionally involved. Many people talk themselves into falling in love with the property before they've really looked at it. What you really should be looking at is the quality as well as location.
Does the property have curb appeal? Look at the outside of the house from the curb because that is going to give you a great clue as to how the rest of the house has been maintained. For example, savvy buyers would look for signs of water damage on the exterior; deterioration or damage of the roof; is the there peeling, bubbling or stain damage on the paint, or does it look worn or thin?; do you see cracks in the exterior brick?; etc. Of course, it doesn't necessarily mean you should pass on the house, but rather a sign that you need a qualified expert to examine the situation before you buy.
From an investment perspective, how easy is this property going to be to resell? Look into features of the property that can affect or effect the resale.
Be nosy - but not intrusive - when you tour the property. Open cabinet doors, inspect the appliances (e.g. oven doors, refrigerator, dishwashers) if they come with the house, walk through the attic and garage (if any), test out the heating and air-conditioning systems, check the condition of built-in furnitures/fixtures, take note of how well the garden in kept, look for signs of quality (e.g. materials used in the home), take note if there are fresh paint, mold and/or rust (they "may all be telling you something"), etc. Hidden spaces like air filter and the ducts can also sometimes gauge how well the property has been taken care of in the past. But if you're touring someone's home, do refrain yourself from touching their personal belongings. Remember, you're still a visitor.
To check the condition of the floor, walk from one corner to another of the room and the length of the hallways and stairways. You should be able to feel the depressions, dips or bubbles if there are any. Also, diagonal cracks above the interior door jams or windows and windows that don't open properly could mean a foundation problem.
Talk to the present owners to find out what sorts of work they have done to the property while it has been in their care. And if you are planning on remodeling it yourself later on, make sure the house is up to the job. Verify any ongoing costs like utilities, maintenance fees, taxes, etc.
If you are buying a condominium, you may want to talk to some residents to find out if the condo board has a good working relationship with the community and check if the association is well funded and maintains a good financial record.
Show some appreciation. Real estate professionals often sing the praises of location, location, location. For the higher priced neighbourhoods in particular, the value to the property is the land it sits on. Is the property located near to shopping centres, a commercial area, parks and schools?
For a new neighbourhood, talk to the developers and/or local municipal office and find out the development plan for the area, e.g: Will there be a highway or road expansions to offer easier access? What kind of facilities will there be in the area six months from now? Do analyse the potential for appreciation based on location, distance from adverse conditions and the likelihood that the neighbourhood improves or stays the same.
Also, don't forget to try out your commute, i.e. from your workplace, shopping centres/commercial areas, your kids' schools, etc. Talk to the neighbors, too. Ask them if there is anything that you need to know about what is happening in the general area.
1) Neighbourhood: Evaluate the location according to the atmosphere, the proximity to nearby facilities/amenities (e.g. shops, eateries, schools, clinics, petrol stations, etc.)
2) Noise: Look for factors that may disturb your sleep, e.g. sound of traffic from nearby highway or train/commuter tracks.
3) Smells: Odours from manufacturing, waste processing facilities, oxidation pond, etc.
4) Animals: The sound of constantly barking dogs could be very annoying, especially if they belong to your new next-door neighbours. Also, check if the neighbourhood has any pest-control problems in general.
5) Crime: Gated and guarded neighbourhoods are the norm these days. However, you may also want to check with the Residents' Association and/or the police if the local area has a problem with home break-ins, burglary or car theft.
6) Commute time: What is the cost and how long will it take to get to work by car or public transport? What are the alternative routes or short-cuts available?
7) Schools: For families with your children, you would want to find find out how accessible schooling is and the reputation of schools in the local area.
8) Hospitals: Make sure that there is a medical facility not too far away.
9) Home Garden: Sure, it is nice to have a garden, but it won't look after itself. Do you have a personal gardener or is there one in the neighbourhood that you can hire on regular/occasional basis?
10) Property condition: It is essential to determine the necessary work that needs to be done and how much it will cost, particularly if you are prepared to do work on an old property. Be sure to check the structural soundness, which should be evaluated by a property surveyor and/or other qualified experts.
11) Interior features: Is there ample living space for the whole family? Is there an additional room for a visiting relative/friend to stay over or might a grandparent move in? Will there be enough rooms for a growing family? Are there enough wardrobes and how much clutter must be accommodated? Do you need a small office area or working space? How important is the balcony and its view to you? For those who do a lot of cooking, is the kitchen big enough? And for those who like to eat in the kitchen, is there space for a table? How many stairs are there and how steep are they? Determine the property layout and consult your feng shui expert if necessary.
12) Car Parking: Check if the front porch can accommodate the number of cars your family has, or if there is an additional garage. For those who expect frequent visitors, take note if there is ample space or a proper parking lot nearby your property.
* Also read:
- FAQ: Tribunal for Homebuyer's Claim (TTPR)
- MyHome Scheme
- PR1MA : My Home, My Community
- REHDA's Quick Guide on Home Buying
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