Buyer’s Guide

The buying process

Firstly, hire a real estate lawyer to assist in the transaction. Once you have selected your dream home, a Letter of Offer & Acceptance is signed, and a 3% deposit is expected from you.

Within 14 days, the Sale and Purchase Agreement is signed. You will be required to pay 7% of the purchase price. Deposits paid are non-refundable if you withdraw from the sale but are subject to obtaining finance and checking of title deeds. Make sure that there is a clause added to the standard agreement, stating that if the vendor pulls out, they must refund the deposit plus an amount equal to that to you for the inconvenience.

From the date of signing the Sale and Purchase Agreement, you have 90 days to accomplish the full payment.

During this 90 day period, the Sale and Purchase Agreement will be stamped at the Stamp Office. Don’t worry. Your lawyer will do this for you. After the examination of the property by the Valuation Department, stamp duty is paid to the Stamp Office. The transfer will be registered at the Land Office Registry.

Documents to ask when house hunting

  • A photocopy of the title. If the property does not have any title, then get evidence of the seller’s ownership i.e. a copy of the Sale & Purchase Agreement (SPA) made by the Vendor with the developer when he purchased the property.
  • If the Vendor is the 2nd / 3rd owner, then he would have to give you:-
    (a) 1st SPA made by 1st owner with developer;
    (b) 2nd SPA made between 1st owner and seller, (if 2nd hand); and
    (c) 3rd SPA between 2nd owner and 3rd owner seller, (if 3rd hand) as proof that the seller is the owner of the property;
  • A photocopy of the current quit rent & assessment receipt;
  • The vendor’s bank’s statement of how much he still owes the bank (redemption statement). With the redemption statement, you would know how much money you can release to the vendor and how much is to be paid to his bank to obtain a discharge of the property from the bank.
  • In the case of an apartment, the maintenance and other charges that need to be paid to developer/management committee. You should check that vendor is up to date with his payments and there are no arrears due to developer/management committee.

Footnotes to transaction costs table

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Stamp Duty
First RM100,000 = 1%
Next RM400,000 = 2%
Remainder (Over RM500,000) = 3%

Lawyer’s Fee
First RM150,000 = 1%
Next RM850,000 = 0.7%
Next RM2,000,000 = 0.6%
Next RM2,000,000 = 0.5%
Next RM2,000,000 = 0.4%
Where the consideration or adjudicated value is in excess of RM7,500,000 = negotiable on the excess (but shall not exceed 0.4% of such excess)

Other Fees
Stamping fee (per document) = RM10
Adjudication fee = RM10
Search fee = RM60
Registration fee = RM100
Total = RM180

Real Estate Agent’s Fee
3% of the transacted price. Agent´s fees are paid either by you or the seller, subject to a maximum discount of 30% but a minimum fee of RM1,000 per case. The scale is not applicable to sale of foreign properties in Malaysia.

Useful tips

  • Make sure you deal with Vendor of the property or his duly authorized agent;
  • Be cautious when buying new properties in unfinished condominium projects. You may not be fully protected against default, an issue vigorously raised by the Malaysian House Buyers’ Association, which has pointed to flaws in The Housing Development (Control & Licensing) Act 2002, and the Strata Titles Act. Those buying unfinished property from developers should ensure that the developer has a valid Developer’s License and a valid Sales & Advertising permit.
  • Avoid leasehold properties if possible as the transaction will test your patience. Historically leasehold properties trade at discounts to freehold properties and it also takes longer, about seven to ten months for the transaction to be completed as state authority approvals are required.
  • To achieve the best rental returns on the property, renovate the property so that it caters for the target market you require. Depending on the state of the property, the Rule of Thumb for renovation cost is estimated at RM150/sq.ft.

    Rental income derived from the property is taxable, as a non-resident individual buyer, the taxable rental income is subject to a flat rate of 28%. In the case of a company owning the property, the allowable deduction rate is 25%*. If the company owns more than three properties, it is then entitled to full deduction on property-related expenses against the rental income.

  • It is vital that a background check on the developer and its track record is carried out. This typically includes the developer’s financial standing, debts, necessary permits and approvals, particulars of past, present and other on-going projects being undertaken.

    It is wise not to be taken in with glossy brochures and show units as these do not necessarily reflect what will be in the property that is being purchased. Typically show units are upgraded with fancy fittings and furniture that are not part of the original property.

  • Before making a decision on the location of the property take into account the positioning of the property whether it is east facing, whether it is at a dead end lane, what are the other facilities or amenities next to the property, whether is it is located next to a highway, factory, vacant land etc.

    These factors are crucial to the future capital appreciation of the property and cannot be determined in the show unit or brochure.

  • Be aware of the type of material and fittings used in the interior of the property. Shoddy workmanship can drastically reduce the yields on the property and it can be difficult to dispose of at a later date.
  • Happy Hunting.

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