A house is the single biggest piece of investment anyone can make in a lifetime
Buying a home is a big deal. Too often, I think people rush into home ownership because it’s seen as a sign of adulthood and financial responsibility. But owning a home is a big commitment, it’s not a guaranteed good investment, and it’s a truckload of work. It is not always the creative paradise remodeling shows make it out to be). And last but not least, believe me, lots of people own homes and yet their finances are a mess! Home ownership can be a smart long-term move, but you want to know what you’re getting into. With that said, I know that if you are reading this, you are probably going to buy a house anyway. Meanwhile, happy house hunting! ;)
Planning your home budget
With the inevitable skyrocketing prices of property in Malaysia, one must really be firm and committed about managing budgets and debts. To own a piece of real estate, the first thing to take note is your budget. If you are a first-time house buyer, most banks may approve you a loan of 90%, as long as it does not exceed one third of your income. However, exceptional cases do apply. Let us suppose you hold good past credit records and the bank might permit your monthly installment to increase to half your total net income. Among other expenditures to take into account are legal fees, stamp duty and government taxes. As such, it is not recommended to allocated a fixed amount for the property you are planning to purchase since it may exceed or go beyond your budget or finances.
Finding your desired property
You can never be totally clueless about property searching. At least have a basic or rough idea on the location site and type of residential/commercial properties that you are seeking or targeting for. Typically, landed properties are much more expensive, so it is imperative to choose one that matches your affordability. Search for a property via the internet and key in your preferred location partnered with (keeping in mind) your budget to generate results that cater to your interest. Advanced searches can also be performed by shortlisting or narrowing down your choices according to the number of bedrooms, bathrooms, tenure, etc. Also, read up about the descriptions of the properties, check out their exact location on the map provided, as well as look through the images available.
Property surveys & inspections
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 the following below:
• How long has the agent in question been marketing the respective property?
• Number of past owners and previous tenants, including their property histories.
• Overall condition and structural defects such as leaking roofs or wall cracks, etc.
• Copy of property title – check owner’s name, official address, tenure & land size.
Research your neighbourhood
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 property that attract you, and if you find one that interest you, return to it on a later date to consult with the neighbours. You can thereby learn about the neighbourhood’s social interaction, security status and at the same time, ask if there have been nearby houses that have been sold recently and at what price.
Bank loans are of utmost importance so take up the initiative to check with your local banks on how much you are entitled or eligible to borrow. To be more detailed or comprehensive, scrutinise and check out their housing loan plans as well as their respective interest rates. All transfers of ownership need to be done by a certified lawyer, so engage a trusted (trustworthy) lawyer to draft the sale and purchase agreement (SPA) and loan agreement for you. Legal fees are strictly regulated by law and are carefully 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. Henceforth, 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 specific letter to sign. On the letter itself are details or particulars of your bank loan – i.e. amount, rate, monthly instalments and terms.
Deposit & miscellaneous payment
Once both parties have 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 usually 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 typically contains the legal names of vendor and buyer; price agreed upon by both parties; amount of deposit to be paid by the buyer; any items included in the sale of the property; and the date before which the SPA must be signed.
The SPA and other agreements
SPA (i.e. sales & purchase agreement) is often 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. Other essential documents such as 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 will be required to sign the Deed of Mutual Covenant and Memorandum of Transfer.
Settle all outstanding balance
You will also 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 within three months. Then you could obtain a copy of the land or property title from your lawyer and it should be in your name.
Handover of house and keys
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 form or along with the items that have been agreed upon. Remember to also make sure all outstanding utility bills have been settled and request for statements or receipts for proof. Any bills up to the date of transfer must be borne by the seller of the property. Finally, you can get to enjoy your new ‘home sweet home’. – HFM