Home Buying Guide

The Home Buying Guide for First Time Buyer Buying a home can be a scary experience, especially if it’s your first time. What is the rate? Where do I begin to search for a home? Do I have to hire an agent? Here are the four easy-to-understand stages offer helpful tips and advice for each one. Part 1 – Evaluate your Finances and Know your Rights Take a look at your situation to discover if this is the right time for you to buy a home. Part 2 – Shop for a Loan Speak with financial lenders and mortgage brokers to determine the loan amount and terms that eligible for you. Part 3 – Find a House Research area neighborhoods. Talk with real estate agents and look at houses. Or look for the new property thru website, newspaper, magazine, etc to search for your house. Part 4 – Close the Deal a. Buying from owner Make an offer. Get the house appraised and inspected. Sign the paperwork and get the keys to your new home! b. Buying from developer : Compare the price with the existing property at the area to ensure the new property is not over price. Make booking and sign SPA. Buying from Owner/Developer Before deciding to buy a house from a developer, it is essential to ensure the track record of the developer. The developer should be capable to complete the construction of the property according to the schedule stipulated in your Sale and Purchase Agreement. Here are some questions to assist you: • Is the developer a reputable company with a proven track record? – experience, quality of their product, timely completion of project • Is the developer financially strong and capable of completing the project? • Is the company registered with REHDA Malaysia? ( Real Estate and Housing Developers’ Association – http://www.rehda.com ) Buying From Individuals (Sub-sale) If you are buying a property from individuals, it is important to ensure that the owner is the owner of the property. You can obtain all relevant information on the property by conducting a search on the property at the relevant land office/Registry and get confirmation of the registered owner and as to whether the said property has any encumbrances. Leasehold/Freehold Land Status All properties should have a Document of Title as proof of ownership. Generally, all Titles fall under two categories, namely either freehold or leasehold. What is Freehold property? • You own the property and gives the owner perpetual ownership. What is Leasehold property? • You own the property for only a certain period. Once the lease has expired, you have to renew it, otherwise the ownership will revert to the State Authority. Restriction of Interest in the Document of Title Some land is subject to certain limitations of interest in the Document of Title. These limitations could be found on land which: • Require State consent or/and Executive Committee Board consent; commonly found in leasehold properties • Require Ruler of the State in Council approval for Malay Reserved Land • Are classified as Customary Land in Malacca and Negeri Sembilan • Are held by natives in Sabah and Sarawak Documentation & Procedures The standard Sales and Purchase Agreements for purchases from developer has been provided for under Schedule G & H of the Housing Developers Act 1996. Payment of the purchase price under the said Schedules G and H is by progressive payment based on completion of work as certified by the architects. A legal firm shall act as stakeholders will hold payment of the last 5% of the purchase price for the defect liability period; which is currently 18 months from the delivery of vacant possession. There are no fixed rules on the form of agreement for purchases from existing house owners (more commonly called sub-sale). However, it is common practice that upon signing of the sale and purchase agreement 10% of the purchase price be paid to the seller, and the purchaser be given 3 months to pay the balance of purchase price with an extension of 1 month (subject to penalty interest) if he fails to do so within the first 3 months’ period. Interest at the rate of 10% per annum calculated on a daily basis is normally charged for the extension period. Payment of the balance of purchase price is usually made to the solicitors acting for the seller as stakeholders to ensure redemption of the house (if the same is still charged or assigned to a bank or financial institution at the time of sale) and payment of real property gains tax by the seller. Other than the sale and purchase agreement, a memorandum of transfer, which is Form 14A of the National Land Code 1965, must be completed to transfer the title from the seller to the purchase. In instances where the title has not been issued, then if the purchase is from a developer, the developer will undertake in the sale and purchase agreement to transfer the title when the same is issued; and if the purchase is through a sub-sale, the transfer can be done by virtue of an assignment of the sale and purchase agreement between the developer and the seller (Principal SPA) to enable the buyer to have the right and interest over the property concerned. Sales & Purchase Agreement SPA is a Sale & Purchase Agreement. It is a signed contract between the buyer and the seller which states the purchase price of the property and other terms and conditions pertaining to the above transaction. It can be between a developer and individual buyer or between individuals more commonly known as sub-Sale. Legal Fees The first Schedule of the Solicitors Remuneration Order 1991 sets out the fees to be collected by lawyers for work done in handling the sale or purchase of house based on the purchase price as follows: Consideration or Adjudicated Value Scale of Fees For the first RM150,000 1.0% (subject to a minimum fee of RM300) For the next RM850,000 0.7% For the next RM2,000,000 0.6% For the next RM2,000,000 0.5% For the next RM2,500,000 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) For each sale and purchase of a house, the solicitors concerned can only collect fees based on the above scale from either the seller or the purchaser and not from both of them. Notwithstanding the above rates, in the case of any transaction governed by the Housing Development (Control and Licensing) Act 1966 [Act 118] or any subsidiary legislation made under that Act, the remuneration of the solicitor having the conduct of and completing the transaction, whether acting for the vendor or the purchaser, shall be- (a) RM250, if the consideration is RM45,000 or below; (b) 75% of the applicable scale fee specified, if the consideration is in excess of RM45,000 but not more than RM100,000; (c) 70% of the applicable scale fee specified, if the consideration is in excess of RM100,000 but not more than RM500,000; or (d) 65% of the applicable scale fee specified, if the consideration is in excess of RM500,000. Down Payment / Stamp Duty • What is Down Payment? Down payment is the difference in purchase price and the loan amount. This is the portion of purchase price that you need to pay on your own. • How much is Down Payment for a house? Under the general practice of the market, the down payment is normally 10% of the purchase price. Therefore you are required to pay the amount before signing the SPA. Once you have decided to buy a house, whether from the developer or from an individual, you have to express your approval of offer to the seller. Normally, a token sum of money of about RM1,000 to RM3,000 is given to the seller as security deposit. You must ensure that a receipt for this sum is issued to you, indicating the sale of the property. This security deposit will be taken as part of the down payment for your property. • Stamp Duty Stamp duty is levied on the document of transfer (i.e. the memorandum of transfer if the title has been issued, or the deed of assignment of Principal SPA if the title has not been issued) based on the purchase price as follows: a) 1% on the first RM100, 000 b) 2% on the next RM400, 000 c) 3% on the next RM1,500,000 and d) 4% on the remainder (item 32 [a] of the Stamp Act 1949) • Loan Agreement Stamp Duty is 0.5% on the loan amount

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One thought on “Home Buying Guide

  1. Good post but I was wondering if you could write a litte more
    on this subject? I’d be very grateful if you could elaborate a little bit further. Kudos!

    Cruz

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