Friday, July 08, 2005

How To Buy A New House In Malaysia

Side note: Applause to Memnoch for the wonderful description of Ali's tablecloth yesterday.

Serious post, for those who really want to buy a new house in Malaysia, be it foreigners or Malaysians themselves. The first part is the trap and pitfalls we have to be concerned about, especially about salesman. Then, the processes, and lastly the guidelines. I have moved from selling houses due to not being comfortable with false sales pitch. Cannot stomache it. Hahaha... house-selling real estate salesman will hate me for writing this. If you're a house sales negotiator, please understand that it's not putting money into your pocket (survival) that's important, but also meet your customer's needs. Don't sell what they don't need!

SALES NEGOTIATOR
A sales negotiator working for a real estate company is actually a matchmaker between a potential client and the housing project developer. There are developers who sells on their own instead of using a real estate company.

In MOST real estate company, negotiator (salesman) earns through commission. I will not disclose the amount they get, but let me just put an estimate figure of earning RM500 - RM1000 for every RM200k house sold. Therefore, to survive, negotiators try to sell at least RM500k worth or more, which equals to two houses per month. There are currently more than 6,000 sales negotiator in KL alone, and market demand does not allow all negotiators to earn that much. Because of that, it's the selling skills that's important. There are two ways to sell, one by sincerity and another by bluffing.

Sincerity is easy to detect. They don't talk loudly, and not faking excitement. They will tell you what the house can do and cannot do. Decision will solely based on you. Whatever you ask for, such as house layout and stuff, they will meet your request.

Bluffing is false sales pitch. "Sir, special offer TODAY only!" and things like that. That sentence is sometimes used throughout a two weeks period. It's up to the customer to believe or not to believe, as there are usually no black and white statements even from the bosses to the negotiator to give the special offer. It's done verbally. What you have to watch out for are those bluffs such as "DBKL says they'll remove that unsightly structure", or "The government is doing something about the floods in this area." Should these statements come out, ask for black and white!

There are NO SUCH THING as forest reserved!! Yes, negotiators will say "This is a new piece of development, not crowded, and you're surrounded by forest reserved." Forest reserved is a nicer word for "soon to be developed land". Sad as it is, money talks, and forest dies.

In summary, when dealing with sales negotiator, look at the physical object first! If they don't have the show house for you to visit, take photo of the miniature showcase. Then inquire about the surrounding. If there are no show house, go to the development area, in mornings and evenings to feel the traffic situation. Your eyes tell everything. If you see a swimming pool (a.k.a. shit pool) situated nearby, don't expect them to be removed unless there's a black and white. While technology is better now, they will smell on bad days but not everyday.

House details:
Bricks: At this current moment, most houses uses cement bricks (white coloured ones) and clay bricks (red coloured ones). Clay bricks are better. Most development saves cost by using clay bricks in-between houses only, and cement bricks within the structure of each house. It's not to say cement bricks suck, both are good, but cement bricks are more fragile. That's all. In truth, you won't suffer not having clay bricks. So, inquire whether cement bricks or clay bricks is being used if the house seems too expensive.

Concrete Beams: Almost all of house pamphlets indicates "reinforced concrete beams / pillars". This is the common standard. No where will you find just a "concrete beams". All are reinforced. If they're not using reinforced, government would not approve. So, don't get caught with "Of course it's expensive sir, it's a reinforced concrete beam!!"

Stairs: Stairs comes either with a 3-feet or 4-feet width. 3-feet stairs may make the ground floor looks bigger, but don't expect to easily carry cabinets/cupboards up the stairs. Most of the time you'd need to assemble such things upstairs. Better get a 4-feet width staircase if you're gonna buy furnitures. If you're rich enough to get people to bring wood and construct built-in cabinets and the likes, 3-feet width staircase is enough.

PROCESSES
Upon getting interested in buying a house, you'd need to pay what is called a booking fee. Usually it's about 2% or 3% of the house price. You WILL get a receipt for paying the booking fee. You will need to top it up to 10% of the house price by a week or two weeks time, depending on the developer. Most will give two weeks, and there is usually no exception on delaying that! Upon paying 10%, you'll need to sign the Sales & Purchase (SNP) agreement. Signing it means you're going to be legally the house owner for that house.

From signing of SNP, the clock starts ticking to give you up to three months to get house loans (or if you're rich, to pay off the house price). Best thing to do is to get several banks because not all banks can approve your loan. Also, do it the moment you get your receipt from booking fee, at least it gives you an additional two weeks to get approval.

Once you get the approval and get the money, pay the developer. Taadah, deal is done with the developer. You will get your house within four months to two years (for new projects) or within just a few months (completed projects). Now you owe the bank!

What if bank can't approve?! Most bank allow up to 80% house loan easily, but to get a 90% or even a 100% house loan, your net income (salary minus other loans) need to be at least three times the price of monthly payments. Do your maths. If you earn RM6000 per month, and after paying car loan and other house loans, it's at RM3000. Meaning, you can get easy approval if you're paying RM1000 per month. Take note, banks are connected. They will know if you owe another bank for housing loans or even car loans. So don't expect to buy 10 houses from 10 different bank loans.

When the house is ready for occupation, you will get a phonecall to get your key. Rejoice! The house is now yours to stay.

GUIDELINES
EPF
: You are allowed to take out money from account 2 of EPF for your house. The amount you can take out depends on your loan. Of course if the house is RM100k, and you get a RM90k loan, don't expect to take out RM30k from account 2. EPF will check on the amount of loan you wish to take before releasing the money to you.

You are allowed again to take out from EPF in another five years, but ONLY to pay for the same house. If you wish to use EPF for a second house, you need to finish paying off your first house first.

Unsure Of Purchase: If you're not sure whether you want to buy that house, at the same time not wanting to lose the chance to buy it, you have one to two weeks to check out other properties. Pay the booking fee, which is about RM2000 to RM3000 for a RM100k house, and then look out for other properties before signing the SNP. When you cancel your booking, you will be charge anywhere between 2% to 30% of your booking fee for administrative cost. Which means, at RM3000, you will lose RM60 to RM900. Most real estate companies / developers will charge less than 10% punishment,.. I mean administration fee.

After signing SNP, the only way to back out (of course there will be a penalty as well) is if you cannot get approval at all and there is no other way to pay for the house. It is a lot more difficult to back out if there is no other obstacle to buying the house, other than you losing interest.

Bumiputera anyone?! Some development gives discounts to bumiputera of up to 7%. Bumiputera means malay, iban, kadazan and other sarawak/sabah/pahang orang asli, Malaccan portugese, and 2nd generation bumiputera malaysian by marriage. A singaporean malay is NOT a bumiputera in this context, they are considered foreigner. Also, the 2nd generation bumiputera malaysian means, a singaporean malay marries a malaysian chinese. Both are not bumiputera. But their children is considered bumiputera. This bumiputera issue is a very sensitive issue, and may define differently in departments of the Malaysian government. If unsure, please check with the Housing Ministry on your status.

Bumiputera Reserved: Understand that bumiputera reserved development means it can only be bought by a bumiputera, and, after that, be sold to another bumiputera, and sold to another bumiputera and so on. None of the development can be owned by non-bumiputera. So, choose wisely especially if you want to buy for investment to sell again in the future.

I am bumiputera, I buy at discount, then I sell to non-bumiputera and earn 7%!! No such thing!! Well, there is actually, buy only after five years! Government is aware of this naughty practise which is why there is such thing as a Property Gains Tax, I call it PGT for short lah. PGT means, if you sell the house within one year, you need to pay tax amounting to 30% of the house price you have paid. The PGT reduces every year to 20% (2nd year), 15% (3rd year), 10% (4th year) and 5% (5th year).

Foreigners wanting to buy a house in Malaysia: Current law (year 2005) allows foreigners to only purchase houses that costs above RM250,000 after discount/promotion deductions. There is no exception on this rule. However, if they have a relative who's a Malaysian, the relative can be the owner of the house instead. But do you really want another person's name as the owner of your house?

There, I'll stop here. Any questions on house buying, feel free to question me. Any mistakes that I made here, which I believe there's none, please tell me.

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