For a first time home buyer, purchasing a sub-sale property might seem like a complicated process. However, it does not have to be that way once you have understood all of the processes that go into it.
A sub-sale house is a second-hand property that is sold in the secondary market. Essentially, if you’re purchasing a sub-sale property, you most probably are buying it from a pre-existing owner. To learn more about the process of securing a sub-sale property, here we have a comprehensive guideline for you.
1. Set out your budget
It is important to come up with a budget for when you’re making a big financial step towards owning a house. A property is a significant investment, which is why it’s important to plan out how you can afford it and find a property within your budget range.
If you’re interested in purchasing a sub-sale property in Malaysia, the minimum downpayment is 10% of the total price of the house. There are two stages; first, the buyer will pay an earnest deposit of around 1-2% of the purchase price upon signing the Letter of Offer or Booking Form. The remaining of the downpayment around 7-8% and stamp duty fees will follow once you sign the Sales and Purchase Agreement (SPA).
Other than that, there are additional costs you need to consider such as stamp duty, legal fees, mortgage insurance cost and valuation fees. If the property is not to your liking, you should prepare some funds towards renovating and refurbishing the house. Experts recommend that you should not spend more than 10% of your home value on renovations.
2. Find the right sub-sale property
Here comes the fun part, searching for the perfect home for you and your family. When looking for a house to settle in, take into account the location of the property and the neighbourhood, the size of the property, the commute to your office, proximity to amenities and facilities such as schools, hospitals, playground, and malls. Also, check if the sub-sale property is located in a safe and well-kept environment so that you can move into the neighbourhood in a peaceful mind.
Besides that, another factor that you should take into account is the age of the house and also the remaining duration of the land tenure. Freehold sub-sale property are more attractive than leasehold homes as their lease will expire within a certain period. If you intend to extend the lease, you have to apply and if approved, you will have to pay a fee.
If you are planning to move to a different neighbourhood, it is best if you can get in contact with a trusted and knowledgeable agent who is familiar with the area. They will be able to give as much information as you need and be able to advise on what is the best decision to make. You could also talk to friends or family who is living there. Or better yet, survey the home by yourself. Explore the area with your loved ones and view the actual house to see if it’s to your liking.
Do take note that sub-sale properties do not come with a defect liability period (DLP). A DLP is a warranty that is provided by the developer for brand new properties. Under the defect liability period, the developer has to fix any defects encountered in the new property within that period. Since sub-sale properties do not have the DLP, it’s imperative to keep an eye out for any defects.
3. Find your ideal property within your budget
Sub-sale properties have different price ranges as compared to new properties as the home has been occupied by other people beforehand. The overall condition of the property will affect the final price, which is why there are a variety of prices in the secondary market. Any refurbishing or renovation works done by the property owner would most likely increase the value of the property. To find out the current market value of sub-sale property, you have to employ the trust of a local real estate agent and an accredited professional to perform an independent valuation of the property you are interested in.
An experienced and reliable real estate agent with a good understanding of the market will be able to guide your decision-making process and find a home that has all the characteristics you’re looking for with the right price tag. If you think the price of the property is out of your price range due to the seller requesting a higher asking price, then having a valuation completed will be able to confirm the actual value of the property. So, it is vital that you engage help from these professionals to ensure you are paying for a house that is worth the price point. You can also check out sub-sale listings here.
4. Searching the best home loan
Now that you’ve found the property of your dreams, you can start thinking about the financial aspects. After paying the earnest deposit, now is the time to get ready to apply for a home loan. A home loan is a big commitment as the typical mortgage tenure is 30-35 years. This is why you need to find the right home loan that will fit your capabilities in repaying the monthly payments.
The bank will loan up to 90% of the total value of the home after their valuation assessment. For example, if you’re planning to purchase a house priced at RM600, 000, but after valuation, the bank thinks that the house is only worth RM550, 000. That would mean that the bank will loan RM495, 000 instead of the standard RM540, 000. Try to prepare for these types of circumstances and have some money saved up so that you can close the deal.
Do remember to check your CCRIS report, it is a standardized credit report used by financial institutions to assess your home loan application. From there, you will be able to look through all your payment records with the bank and have a higher chance of successfully applying for a loan.
5. Prepare for the Sales & Purchase Agreement (SPA)
The Sales and Purchase Agreement (SPA) is a crucial legal document that states the terms and conditions of the sale. Both parties must check and are happy with the details listed out on the SPA. Do double-check or even triple-check all the details about the sub-sale property and make sure that it does match up with what you have seen in real life. This includes the details on the renovations, additions, upgrades that were performed previously.
Before finalizing the SPA, discuss with the property seller which moveable items and fixtures you would like to be left in the home or removed as part of the agreement. You can decide which items you would like for the seller to keep or remove by visiting the site of the property. For instance, you might want to keep the antique dressing table to match with your other furniture. You may request the seller to save it for you in the Inventory List of the SPA. The Inventory List states the items that you expect to see after the vacant possession of the property.
6. Confirm the details of the MOT and Loan Agreement
After securing the bank loan, the home loan agreement is ready to be signed with the bank to confirm the financing of your home loan. Before putting your pen to paper, this is the final chance for you to assess and evaluate the amount, interest rates, tenure and other terms and conditions on the agreement are accurate and adhere to your financial capabilities.
After reviewing the loan agreement, you should pass it along to your lawyer as well to ensure legality and fairness. Once completed, you’re ready to finally own your home by way of a Memorandum of Transfer (MOT) between you and the seller. MOT is a document that every property buyer must sign to transfer the ownership of the property from the property seller to the new owner. Subsequently, after the new owner is registered on the strata or individual title by the local land authorities, the owner has to pay the remaining 7-8% of the home deposit to the bank. Furthermore, other relevant fees, such as stamping fees and legal paperwork fees, should also be paid.
7. Now you’re the new owner of your sub-sale residential property
After paying the remaining deposit on your home and settling the Agreed Apportionments, now comes the time for the vacant possession (VP) whereby you can finally get the keys to your property. The Agreed Apportionments is a list detailing all the bills which have been paid by the previous owner. Since the previous owner has paid for these bills, you will need to reimburse the owner after taking over the vacant possession as the seller will no longer be using the property.
The VP is confirmed once the property seller hands over the keys to the buyer personally or through the buyer’s lawyers. You can now officially move into your property and call it your home!
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