Although property prices have risen considerably over the past few years in Malaysia, it still continues to be a good investment for foreigners, particularly if they intend to live in their own property. Here is some advice on buying an apartment. If you are a cash buyer then just ignore the section on bank loans.
There are several things that you need to check and some of this information can be obtained from the Management Office in the building. These are some of the things to check:
- Have the electrical and water pipe systems been updated and when?
- Run the taps and see if the water is orange, it indicates decayed and rusty plumbing.
- How much are the maintenance fees?
- How many parking spaces are included and where are they located?
- Are there any leaking problems in the apartment?
- Verify the size of the apartment with the Management Office.
- How much is the Property Assessment Rate?
- Ask about security of the building?
- Is the apartment Freehold or Leasehold?
If you plan to apply for a bank loan, shop around. Different banks may offer different interest rates and conditions. Based on the specific address of the apartment, banks will contact a valuer and the loan offered will be based on that valuation. Valuers look at the latest transacted prices for identical apartments. A bank may use several valuers to find the best valuation for you. For any mortgage loan to be considered you will need to provide income support documents, usually by means of your last Tax Return.
Banks can provide you with a list of Lawyers whom they work with regularly, however, you can choose any law firm (or lawyer) that you wish. Law firms can offer discounts on certain parts of their fees, but you'll need to ask them about it before agreeing to accept their services. The firm I have most used gave a 45% discount on all my property transactions. The lawyer and bank will coordinate and take care of everything. Do not sign anything given to you by the Property Agent until your lawyer has approved or revised it.
In my opinion, property agents are not on the side of either buyer of seller however nice they may seem. Their purpose is to make a deal so they will mediate to achieve that. The Agent will usually ask you to sign a Letter of Appointment (it may have a different name), but I always refuse to sign these letters because they are full of small print and binding commitments which are usually to the advantage of the Agent and not in your own interests. Please be careful.
Once you have decided on a property to purchase, you will need to pay the Agent an "Earnest Deposit" of 2% or 3% of the purchase price. I always pay a cheque for 2% and refuse to pay 3%. However, before handing over this cheque you should sign the "Letter of Intent to Purchase" or "Letter of Offer" (it may have a different name) which will be provided by the Agent under her firms letter head. It is usually a standard document.
This "Letter of Offer" is generally a one page printed document with gaps to be filled in. As the Purchaser, you will be the first to approve and sign the document. However I cannot stress how important this document is. PLEASE DO NOT SIGN UNTIL YOUR LAWYER HAS REVISED AND APPROVED IT. This document lays out the main terms such as Sale price, property address, furnished or unfurnished, deadlines for signing the Sales and Purchase Agreement (SPA) etc. The thing to realise is that this document is not just an agreement between the Purchaser and the Vendor, it incorporates the Agent and protects them so that even if the deal falls through they will probably still get a commission at either yours or the sellers expense. Usually my lawyer will make five or six amendments to the Letter of Offer before I will agree to sign it. Also, please note that it is the Vendor that pays the Property Agents commission and not the Purchaser.
Once this document is signed, the process is underway and the lawyers of the two parties will negotiate the SPA which once agreed upon you will be required to sign and to pay a further 8% bringing up your total paid deposit to 10%. During the negotiation of the SPA between the lawyers, my own lawyer constantly keeps me in the loop by emailing me copies of all the correspondence in the negotiation and occasionally asking my preference on certain matters along with giving her own recommendations or advice.
1. Sign the Letter of Offer and pay Agent with cheque 2% of the purchase price. The cheque is usually made out to the Agents Firm's name and retained by the Agent as Stakeholder, but released to them as their Commission once the transaction is completed.
2. Usually 30 days later, sign the SPA once all the terms and conditions have been agreed between the lawyers of both parties. Upon signing the SPA you will need to give a cheque for 8% of the purchase price, bringing the total amount paid to 10% of the purchase price.
3. Between signing of the SPA and Completion of the transaction, the lawyer will be busy checking with the Land Office, obtaining the Foreigners Consent to purchase the property from the Land Office, coordinating with your bank for the loan, checking all outstanding bills that the Vendor hasn't paid, and communicating with the Management of the Apartment building etc. Within 1-3 days of completion, your should have the keys of the apartment in hand.
The entire process commonly takes around 4 months from start to finish. If you are a cash purchaser then it will be quicker and if the Vendor does not have a loan then the whole process might only take 2 months.
From the beginning of the process right through to the end, I cannot stress how important it is to trust your lawyer. Send her copies of everything before signing them. Always ask advice on anything you do not understand.
An important point to note is that when you take on a mortgage loan with a bank here, the bank will automatically deduct a Fire Insurance Premium each year or once every two years. At the same time, the Condominium Management will also bill you a mandatory annual premium for Fire Insurance. Once you have paid and received your mandatory Fire Insurance Policy from the building Management you can pass a copy to your bank and they should reimburse you for the amount they have deducted for their policy which is commonly very considerable and sometimes ten times more than what the condominium management charges.
One additional point, if you are purchasing an apartment or condominium directly from a Developer either before or during construction, the procedures will be somewhat different. I hope to make a new posting for that type of transaction soon.
There is no official limit to the number of properties a foreigner can buy in Malaysia.