Part 2 | Tips 5 to 8
As promised to all our property buyers, here we are with the second part of this 8 strategic tips articles to bring some useful information, tricks and tips to all home seekers who are now hunting, or thinking to start soon, for a home to buy.
We do hope you could find some interesting tips in our two previous blogs and here we go with part 2 of Property Buying 101.
Assuming that the previous 4 steps have been accomplished, hopefully in a smoother way by following our tips, now our home buyer is ready to proceed further. The dream home has been identified and a loan pre-screening has defined that mortgage eligibility is there, how to move further?
Tip 5: Letter of Offer to Purchase
As per its name, a letter of offer to purchase is the actual “kick off” of the Property Buying Journey. It is an official document where the person filling it, commits to complete the purchase of the said property within a certain timeframe and complying with terms and conditions contained in this document.
Again, we need to differentiate our explanation between primary and secondary market.
Development project wise, the letter of offer to purchase is normally prepared by the developer an printed in carbon copies. The document has been vet through by lawyers, it contains all the information a purchaser and the developer needs to have including a PDPA (Personal Data Protection Act) clause, which normally requires a specific signature. Once the chosen unit has been reserved the buyer will be given a copy of the signed document that he will need to apply for a housing loan.
What needs to be checked is the exactness of the personal information and all the details of the chosen unit. After this the buyer can sign it and start the final stretch of the property buying journey.
Filling up a letter of offer to purchase a second hand property, instead, is a totally different story. If the buyer is using a Real Estate Negotiator (REN), which is a good thing as RENs are professionals aiming to help buyers and advising them on what is best, the letter of offer will be normally under the agency letterhead. It should include all the personal data of vendor and buyer, a complete description of the property (where it is and how it is), a full inventory of unmovable and/or movable items agreed to be left in the property and the time frame to organise the Sales & Purchase Agreement.
Tip 6: Does a property buyer need to appoint a lawyer?
Where it is definitely true that you do not need a lawyer when buying a property from primary market, new under-construction projects, when it comes to buying a property in the secondary market, previously owned and/or used homes, where you normally deal with a person who owns it, it is definitely a must to have a solicitor of your choice
Why you do not need a lawyer when buying in a new development project is because the Sales and Purchase Agreement for residential projects is controlled by the Housing Development Act and it is imposed, as a standard and fixed format, in the Act itself. No one can modify any of the clauses.
I think it is worth spending few words on the Housing Development Act for better understanding of all homebuyers reading this.
Maybe not all readers know that the HDA protects buyers’ progressive payment as all the money that a developer collect from buyers has, by law, to be deposited in a special account called Housing Development Account. Developers must use it to manage all the money related to the project. Receiving from buyers and paying main-contractor and all other project’s related costs.
Hopefully, this has clarified why in a purchase from primary market a buyer does not need to have own lawyer.
For a dwelling purchased from the secondary market, instead, it is really advisable to “invest” few thousands Malaysian ringgit and get an experienced solicitor to take care of all the needed paperwork. The following are just few of the actions done by a solicitor while preparing the SPA for your purchased property:
- Confirming the ownership of property with the land office.
- Checking that the previous owner is not under bankruptcy which might jeopardise your money and throw the purchaser in an endless nightmare.
- Checking if any existing loan has been charged on the property and defining how much is the due balance.
- In case the purchased property is in a condominium or gated and guarded compound, checking that there is no overdue maintenance fee payable.
The above, I imagine, justify the way I define the lawyer’s bill as “investment”, always found it a well spent and reasonable amount of money which has avoided possible nightmares.
In case you are short of lawyers friend, here are few simple tips on choosing the right Real Estate Lawyer:
- Find a lawyer who specialises in conveyancing as great and successful criminal or litigation lawyers have no experience in Real Estate
- If you really have no friends who has experienced the services of a real estate lawyer and could recommend it to you, ask your banker or your insurance agent, they always have a list of good lawyers to recommend.
- Once you have at least three possible candidates, have a look at their website, if available, and social media profiles. LinkedIn in this case could be the best place where to get complete information.
Tip 7: Signing the Sales & Purchase Agreement and the Loan Agreement
This whole thing has been rolling along nicely! You’ve got your dream house picked, your financing, loan for the purchase of the property, has been already sorted, and you’ve laid out your intentions clearly. Next up, signing the Sale and Purchase Agreement (SPA).
The SPA is a very important legal document which sets out the full terms and conditions of your purchase and, for this reason, is why, when buying your dwelling from secondary market you must have a lawyer involved in the first place advising and guiding you.
The fine print of the SPA is a crucial part of getting the right deal on your chosen second hand property. Saving few thousands Malaysia Ringgit and not having a good lawyer might, again, be the beginning of endless discussions and fight.
Loan agreement wise, instead, is normally not so complicated and the only thing to be double checked is that all the conditions previously stated in the bank’s letter of offer to lend are also all reported correctly in the loan agreement documents.
The only two variables, from the loan side, relate to, firstly negotiate with your banker on the possible inclusion of loan agreement legal fees, stamp and duty and insurance costs in the loan amount, which I strongly recommend. Secondly, to make a wise choice on the type of insurance you deem best for your needs. The latter, however, is going to be a topic for a blog on its own which will come soon here, keep on following us.
Tip 8: Receiving Vacant Possession of Your New Property
It’s finally come the time to receive the Vacant Possession of your property! You did it, this is when a property becomes a home, or better, a dream home!
The Notice of Vacant Possession, issued by the developer to all purchasers, must be delivered within the declared number of months in the clause “Time for Delivery of Vacant Possession” in the Sales and Purchase Agreement.
Part of getting the right deal on a new property comes precisely now as, even top developers, sometimes might be missing out some little faults or problems in a brand new property.
It’s up to the purchasers to ensure that what has been promised is delivered by performing a detailed checking of the new unit and reporting on any defects or issues. Just to be clear, your new property comes with a 24 months guarantee covering possible workmanship defects in your new dwelling.
My advice to all buyers is to perform a complete checking of the new unit and keeping in mind that “perfection does not exist” and is always a good thing to manage our own expectations, as property buyers.
It happens sometimes that buyers, upon receiving the keys of their property and after a first short inspection, go back to the developer’s management office and complain by referring to what they saw in the show house or what was said or promised to them by the sales person. The only “term of reference”, on this matter, is the Sales and Purchase Agreement where all the sizes, technical specifications and other details are clearly stated and defining what the developer is committed to deliver and what the purchaser is entitled to receive.
Hoping this second part of a Property Buying 101 will help all our readers to know more on the indispensable steps to walk during a property buying journey and, if anything has been missed out, please drop a comment below, we’ll revert soon with a reply. You may also want to check out our upcoming projects here and enquiry our team for more information!