The Real Estate Laws Series. 12 January 2023
Guide to buying a Residential Property in Malaysia
Whether you are a home owner or working your way to become an eventual property owner, you would often start off the property acquisition process by following a standard way of purchase. Since property ownership is a major investment and would take up most of your financial commitment, there are several steps to complete before you can finally get your keys. This guide helps to explain the process and regulations of buying a residential property in Malaysia based on the country’s land laws and procedures.
Step 1: Research the Property Market and Set a Budget
The first step in the process is to research the property market and set a budget for your purchase. Researching the market will help to ensure that you select a property that meets your needs and budget, as well as being in a desirable location. It will also help to identify any potential restrictions or zoning laws that may affect your purchase. It is advisable to have your budget arranged and decided prior so you don’t end up being offered more than you can afford.
Step 2: Find a Suitable Property
Once you have made your budget, you will naturally want to narrow your search by location and property type to find a suitable residential property. It can be beneficial to hire a realtor to assist in the search as they are knowledgeable in the local market and can find information on various locations, property types, and costs.
Step 3: Making an Offer and Completing Paperwork
Once you have found a residential property which meets your needs and budget, it is then time to make an offer to the seller. Generally, offers for residential properties in Malaysia are non-binding so you will need to complete the paperwork required for the purchase including an Offer to Purchase, Sale and Purchase Agreement, and a Deposit Agreement.
This is typically done through a real estate agent who can also help you negotiate and close the deal. As a matter of practice, the real estate agent or negotiator's fees are fixed under the Valuers, Appraisers and Estate Agents Act 1981 so please be assured that you would usually be dealing with a licensed negotiator for a controlled fee. You can also be prudent by always checking the existence of the company which the real estate negotiator works for as well as customers' reviews on their social media.
Step 4: Check the Authentication of Document
Before legally owning the residential property, it is important to make sure that the documents used in the transaction are authentic. This is done by checking the original copies of the document you used in the transaction, normally copies of the original and stamped sale & purchase agreement (or principal S&P) together with conducting a search on the title ownership to discover who is the registered owner of your desired property.
This can be done with the help of the lawyers or solicitors who you have appointed to handle the transaction, or you can visit the land office website where the property is situated to order a land search at a certain cost.
Step 5: Complete the Legal Documentation
Once the documents have been authenticated, the legal paperwork will need to be completed and the transaction finalized. This may include transferring the funds, setting up a trust fund, stamp duty payment, registering title, and more. If you are taking a home loan, at this time you would have signed a letter of offer from the bank (ie the financier) together with the loan documentation as well as its security documents which in most cases involve your soon to be new property to be charged or collateralized in the interest of the financier. An alternative way to fund your purchase would also include applying for your one of your KWSP/Employees Provident Fund (EPF) accounts withdrawal if you meet its requirements.
Step 6: Informing the Property & Survey Department
Once the legal paperwork has been completed, the Sales & Purchase Agreement needs to be registered with the Property & Survey Department. This is done to give the buyer assurance that the property is legally theirs and also aids in the protection of all parties. Normally, if you are taking a home loan, your bank will appoint a valuer to assess the value on your property to provide you with certain margin of finance with terms and conditions attached rated against your ability to repay the loan should the loan offer is given by the bank.
Step 7: Final Payment and Possession of Property
The last step in the process is to make the final payment: all fees and taxes must be paid in full and the seller will then transfer possession of the property to the buyer.
Buying a residential property in Malaysia is a big investment and a major commitment and there are several steps to follow to ensure that the transaction is done legally and correctly. Researching the market and understanding the laws and regulations are essential in order to make the process smoother, quicker, and easier.
In my next post, I will share on how foreigners can buy and enjoy their residential home in Malaysia.
Meantime, you can email me at brentyap@vikneshyap.com if you have enquiries.