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The Definitive Guide: How To Buy A Subsale House in Malaysia

Subsale properties are referred to as second-hand properties. It is a kind of secondary market in which you purchased it from a previous owner. The primary market is the one where buyer typically bought properties from property developers.

Land owners who sell their residential properties between 1 June 2020 to 31 December 2021 will be excluded from paying the Real Property Gains Tax (RPGT) in Malaysia, according to the Malaysian budget.

As a result, owners who have been putting off selling their land will be more likely to accept lower selling rates due to the RPGT exemption, which would save them a considerable amount of money. It could be the best time to purchase the subsale home you’ve been eyeing for a while.

Nonetheless, for a first-time homebuyer, buying a subsale property may be daunting, but it doesn’t have to be if you grasp the procedure. Let’s dive into our step-by-step guide on securing your dream property.

Step 1: Check Loan Eligibility By Calculating Debt Service Ratio (DSR)

By understanding how to calculate DSR, you can start planning how and when to buy a home. If you don’t know about this, you will never know when you can afford to buy a house. If you can afford it in terms of salary, you can’t necessarily afford to buy a house again because you don’t have a plan. Buying this house is not an easy thing for a first timer, so planning is a must.

Here is the formula to check DSR.

DSR = RM (Commitment / Net Income) x 100

For example: RM (1000/2500) x 100 = 40%

40% is your DSR. You will calculate DSR (Debt Service Ratio) to know loan eligibility. You will also need to check your own profile using the CTOS report.

The lower the DSR, the easier loan eligibility.

By knowing your DSR, you will know how many loan qualifications are out there for you. Here is where streams of steady income are important, so you can buy more properties.

Each borrower has a different financial profile. Therefore, banks set a maximum DSR limit depending on the financial profile of the individual. While writing this article, generally:

For individuals with a net income below RM3000, the bank’s DSR limit is 60%.
For individuals with a net income of more than RM3000, the bank DSR limit is 70%.

Different banks have different maximum DSR limits. And there are half the banks can provide a limit of up to 80% for those on high incomes.

There must be a little commitment. If it is clean or there has never been a loan, it is difficult for the bank to accept your loan application. Get a credit card, use a little and pay directly within the stipulated grace period.

Step 2: Determine your after-purchasing budget.

You will need to prepare a budget of 10% of the total price of the house, which must be paid when you sign the Sale and Purchase Agreement (or Sales and Purchase Agreement, SPA).

You should also consider other important things such as stamp duty, legal fees, and even renovation costs (if the selected property needs to be renovated). Be prepared to write some large cheques on this day.

There are some incentives out there that can be used to help you buy a subsale home, but they are very limited because most incentives prioritize newly built projects (such as the PR1MA scheme).

For those who apply, there are financing options available to pay deposits. Here are a few initiatives that can be very useful:

  1. My First House Scheme – for properties worth up to RM500,000.
  2. Bank Negara Affordable Homes Fund – for properties worth up to RM150,000.
  3. MyDeposit Scheme – for properties worth up to RM500,000.
  4. Youth Housing Scheme – for properties worth from RM100,000 to RM500,000.

Only when you know how much you can afford, then you can choose the right offer. Determining your budget is a crucial step before embarking on your real estate buying journey.

Step 3: Start looking for subsale home listing that fits your profile.

By having budget and loan eligibility, now is the time for you to start looking for your subsale house.

Get a listing of subsales houses. You can search properties website in the country that suits your needs. You can walk around the home area, chat with neighbors, and be able to explore the unit on its own.

It is very helpful if you get in touch and seek the help of a more knowledgeable local real estate agent. Choosing someone with a good understanding of an area means you will get a variety of transparent views on:

  • Local trends
  • The best neighborhood to buy
  • Knowledge of property types
  • Situations you are likely to face
  • And the great thing about this subsale house is … there are real properties you can visit!

There are different factors that can affect the cost of subsale properties in Malaysia.

Not like under-construction properties, the opportunity to see the property you want to buy with your own eyes, touch it with your own hands, and identify the amenities that are already available in the area, is your advantage to know if the house or place is right for you.

If you find the right one, you can invest in subsale homes at a better price.

Pay attention to these 3 matters before booking.

a) Check any damages.

The only disadvantage is that this subsale house does not have a Defect Liability Period (DLP) so there is no warranty to repair any damage like the primary market. Because of that, you have to be good at finding what is right to meet your needs.

Basically, the defect liability period is the guarantee provided for the new property, in which the developer is obligated to correct any faults in the new unit bought within a certain time frame.

This means, when you enter a subsale house, you need to pay more attention to any damages, including minor ones. You must also keep an eye out for any of the usual (and costly) ‘defects,’ such as water leakage.

If you are a serious buyer, you can ask the agent to let you inspect the house until you are satisfied. You might want to bring along a trusted contractor to inspect together with you.

With this privilege, do avoid inconveniencing the seller with multiple visits. There is no after-sales warranty and the seller will not be responsible to fix any damages discovered after you take possession of the property.

b) Ability to increase the property value with cheap renovation.

For example, if you are the type who likes to upgrade a property, you may be able to buy a cheap property to renovate and thus increase its value.

A subsale house that requires renovation work has the potential to provide a good return on investment (ROI) if you are an investor.

c) Check market valuation.

You will need to check on the subsale’s market value. Subsale properties also have a risk where the owner puts a much higher price than the actual valuation during the home selling process.

So, you have to be cautious when negotiating the price and value of a subsale house while in the process of purchasing his/her house. Here are some valuation strategies you can use:

  1. Soaring prices – The high price tag (higher than the loan value) can try to create an impression that the property is worth more than it should be.
  2. ‘High demand’ – Telling that many offers have been made for properties so that prices can be raised.
  3. ‘Cheap price’ – If the original price given is indeed inflated, it is very easy for the seller to pretend to offer you a discount or a lower price. Make sure that you make a comparison between the price given and the actual valuation report prepared by a private professional.
  4. ‘Uncertain valuations’ – Some unscrupulous agents may disclose valuations at a much higher price than third parties. This can sometimes be a ploy to raise prices unethically. Always compare prices with banks, and get ratings from several different banks if you want real certainty.

d) Subsale’s ownership – Check necessary consent.

You need to check the house’s grant. It needs to get the necessary consent as follows to proceed deal.

  • Developer consent (if the title is still master title)
  • Land office consent (if the land is leasehold)
  • State consent (if the buyer is a foreigner)

You can get help from a real estate negotiator to check for you. If the property is still a master title, it is necessary to know whether the developer is still active or not.

After checking the market value & copy of the grant, you can pay the house deposit 10%.

e)  Withdraw seller’s mortgage.

If the seller has loan, you need to pay to the bank first to withdraw the mortgage.

Step 4: Prepare the document to apply for a home loan.

Before paying the 10% house deposit, you need to prepare a document to apply for a home loan.

The required documents are almost the same. They differ depending on whether you are a salaried person, self-employed, have your own business, or work abroad.

The following is a complete list of documents that an individual must provide when buying a property in Malaysia.

a) Malaysians Employees

Malaysian employees only need to provide personal documents to show their credit-worthiness, whether they are on a fixed income or on a commission basis.

  1. Identity Card (copy).
  2. Home Purchase Booking Form.
  3. Vendor Purchase Agreement / Title (copy) / New Purchase Agreement Letter.
  4. Salary slip for the last 3 months (for Basic Salary) / Latest salary statement for 6 months (for Basic Salary + Commission).
  5. Bank account statement for the last 3 months (for Basic Salary) / Latest salary slip for 6 months (for Basic Salary + Commission) showing your salary is credited according to the salary slip.
  6. Latest EA Form.
  7. Latest EPF statement.
  8. Income Tax – Latest B / BE Form with proof of receipt of payment.
  9. Supporting documents for additional income (rent, ASB, etc.).
  10. Statement of deposit such as Fixed Deposit, ASB or Bond (if any) – to show you have a strong enough emergency fund.

b) Self -Employed Malaysians

Typically, self-employed individuals are those who run their own businesses. These individuals will also need to show proof of their credit-worthiness.

  1. Identity Card (copy)
  2. Home Purchase Booking Form.
  3. Vendor Sale and Purchase Agreement Letter / Holding (copy) / New Sale and Purchase Agreement Letter.
  4. Latest Company Bank Statement for 6 months.
  5. Latest Personal Bank Statement for 6 months.
  6. Supporting documents for additional income (rent, ASB, etc.).
  7. Statement of deposit such as Fixed Deposit, ASB or Bond (if any) – to show you have a strong enough emergency fund.
  8. Business registration.

Bank will also check CCRIS to see your credit history. So, make sure your credit is clean!

Step 5: Pay 3.18% to Lock the Unit

After choosing a subsale property to buy, a real estate negotiator (from real estate agency) or lawyer will provide 1 OTP (Offer to purchase or Letter of Offer (LO)) to sign.

You are advised to check the terms thoroughly. Should it contain:

  • Legal names of vendor and buyer
  • Price agreed upon
  • Amount of deposit
  • Any items included in the sale
  • Date before which the SPA must be signed

You definitely need to do some research to see prices for similar houses around the area. Usually, sellers will expect some negotiation to happen, so they will list the price higher. You might want to counter-offer something lower than the listed higher price especially if the house will require some renovation to make it “acceptable” to you.

You also could get real estate negotiators to help your situation.

Tip to avoid burning your booking fee.

  1. Make sure you deal with a registered real estate negotiator. Ask them to show you a tag & business card.
  2. If you buy directly with the owner, the signed money will be paid to the lawyer as the trustee.
  3. Read, study and abide by the offer to purchase clause.
  4. Make sure we are eligible to borrow in proportion to the house price. Put a money sign clause (booking fee) will be refunded if the loan does not pass.

How can a Real Estate Negotiator help your Buying situation?

Real Estate Negotiator’s job is to promote and market as many creative properties as possible to get sales. They have large networking and usually resourceful. They seem to come in one complete package. They have the marketing team, the sales team, the creative team, and much more.

In fact, there are agents who are willing to help potential buyers on how to apply for a home loan, checking the background of potential sellers, checking defects or damage in the home, choosing the best property within your range choices, and even help you with extra guidance like getting the best home insurance for you!

According to the Malaysian Institute of Estate Agents (MIEA), for the sale and/or purchase of land/buildings in Malaysia, the commission fee is set at a maximum of 3% of the sale price of the property.

As mentioned above, they are willing to help you check for property defects while handling important documents.

What If You Want To Buy A Subsale Property Without Using A Real Estate Agency?

You will still need to pay a 10% deposit anyway to the lawyer that was appointed by the homeowner/seller. The law firm will act as the trustee. Know that the lawyer is representing the seller. He or she is not your lawyer.

Buyer and seller might want to share the same lawyer to save cost but this is not advisable because you want your own interest to be protected.

You can try to ask a few legal firms to give you a quotation and choose the best one. They have a fixed rate for legal fees but they can usually give a discount. They will also quote you an amount for stamp duty and that is non-deductible. Your situation will be more at ease.

Once seller and buyer are agreed on the price.

Both parties will need to agree on the price, and upon agreeing to sign the OTP, you will need to pay 3.18% as a booking fee or to lock your selected unit. The real estate agency or law firm will act as the trustee or an escrow. This is to ensure that money is managed safely and fairly.

Step 6: Get a Home Loan With Home Insurance and Get Approval.

Submit the document.

Submit the document that you have prepared in Step 4 to the bank (mortgage). The amount of loan margin depends on current loan commitment, age, and number of properties.

Usually, the loan application process will take 14 days to know the loan result, depending on your document & banker’s experience on the secured property.

For the first-time buyer, a housing loan can usually be 90% or a full loan. Depending on the offer and the bank loan scheme, if the housing loan margin is low, the buyer must top-up more funds.

No. of properties Loan
1st property 90%-100%
2nd property 80%-90%
3rd property 70%-80%

The sale and purchase agreement must usually be signed within 14 working days from the date of booking.

Within 14 days, you must make sure the loan has been approved.

You also must know how much you are borrowing exactly and what is loan tenure you want. The loan tenure is the amount of time you’re given to repay a loan.

Get a mortgage assurance.

Mortgage assurance is a type of insurance that will settle your outstanding property loan/mortgage if you are unable to do so in the event of death or total permanent disability.

At this stage, you might need to get an MRTA or MLTA. If you are taking MRTA from the bank, you must chase them to make sure the MRTA is approved. Otherwise, it could delay the disbursement of the loan.

If you are a serious home buyer, should you already have researched which mortgage assurance products such as MRTA or MLTT that you are interested in, before buying a subsale property. Otherwise, you won’t have much time to make a decision.

Muslims in Malaysia have the privilege to buy takaful products (MRTT or MLTT).

There’s no hard and fast rule when it comes to choosing a type of mortgage assurance.Mortgage assurance is not compulsory, but some banks require to cover home loans in the unfortunate event.

If you know you have some medical issues, please inform the loan officer. Ideally, you want to get the medical checkup done as soon as possible as you have a limited time to get the SPA signed.

Get multiple offer letters from different banks.

SubSaleSister suggests getting at least 2-3 offer letters from different banks. You are not obligated to sign on the spot when you get the offer letter.

Please read all the terms and conditions and fine print carefully to make sure the loan offered is exactly what you wanted.

Once you decide, then you can go back to the bank and sign the loan offer letter. When signing you will usually have to pay some processing fees.

There will be fines or penalties if you change your mind after you sign the offer letter. So please sign only after you are very sure.

What if the loan cannot be decided within 14 days?

We advised that if you feel that the loan cannot be decided within 14 days, ask the agent to change it to 21 working days.

This is important to protect you from wasting your booking money. The owner has the right to cancel the agreement and forfeit the booking fee paid if this period is not complied with.

There are also situations where you have applied for a loan but most likely it will not be resolved during that period.

Before the 14 or 21 working days end, hurry up and ask the owner for extra time.

If you want to request extra time, it is better to make it by signing a new booking form/offer to purchase or through an official letter addressed to the homeowner.

What if the loan does not pass?

You must ask the agent for an explanation of what will happen if the loan does not pass. Will you be able to return the booking money or vice versa?

The majority of real estate agents can put terms on which the booking money is refunded if the loan does not pass. Usually, after two applications in different banks, rejected.

If the application is rejected, you must obtain a rejection letter from the bank. This rejection letter is an official letter from the bank stating that the loan application was not accepted.

This rejection letter will be the proof to the owner for you to get back the booking fee that has been paid.

But remember, this rejection letter must be given within 14 or 21 working days from the date of the booking form. For after this date it is useless as well. The owner already has the right to forfeit the booking money.

Step 7: Sign the Sale & Purchase Agreement (SNP)

SNP is a buyer and seller signature agreement in a real estate transaction. Some call it as SPA. They are the same thing.

The lawyer will provide the SNP for the signature of both buyer & seller. When the housing loan has passed and the SPA is signed, you have to pay the remaining 6.82% deposit to meet the 10% down payment of the house. If there is no cash, buyers can prepare a deposit using a 2nd EPF or KWSP 2 account.

As a buyer, you will need to make sure that all details in the SNP are correct and accurate. For example,

  1. Names.
  2. IC numbers.
  3. Property premises.
  4. Ensure that all additional details – such as parking lots – are stated in the SPA.
  5. Ensure that all details promised by the sales agent such as additional air-conditioning units, renovations, and furnishings are stated in the SPA.

What is in the SNP?

Among the important contents of the sale and purchase agreement are:

    1. Buyer and seller details.
    2. House details – price, address, size, grant number, and more.
    3. The condition of the house at the time of purchase.
    4. Responsibilities of buyers and sellers.
    5. What if there is a cancellation of the sale/purchase.
    6. What if there is a delay in the purchase.
    7. Method of payment to the seller.
    8. Period of sale and purchase.
    9. How to hand over an empty house?
    10. Utility fees.

*If buyer or seller has any special clauses that they want, they can ask their lawyer to put it in the SPA.

What if the owner wants to cancel the sale?

There is a possibility where the owner has already agreed and signed to sell the house. But once an agreement is reached at the hand of the buyer, the owner cancels the sale.

In this case, the buyer can claim back the booking fee paid. The buyer also has the right to claim the amount of compensation from the owner.

This compensation is equal to the amount of the 10% deposit that you pay.

If the cancellation of the house is done by the buyer, the owner has the right to claim damages. Booking fees paid will be burnt.

Remember to obtain an original copy of SNP.

Your solicitor should go through each page and each section of the SPA together with you and you should understand all the clauses.

Step 7A: Sign 1 more document which is called a ‘Loan Agreement’.

The loan agreement is between you as the buyer and the bank (or other financial institution). The lawyer that comes to you for this is representing the bank, not you.

You are almost done. The lawyer will do her job until you get the house key. Then, you can start paying the house installment.

Remember to obtain an original copy of Loan Agreement.

Step 8: Get the key (Vacant Possession delivered)

For subsale, the vacant possession will usually take 3 – 5 working days after the purchaser has settled the full purchase price.

If you are buying a tenanted unit:

The SNP is subjected to the tenancy. The purchaser will be getting legal possession as the owner of the property but not the keys to the unit. Effectively, the rental and deposits shall be delivered to the purchaser by way of assignment of the tenancy.

Do you have any concerns?

This definitive guide may only apply to Selangor for freehold, bumi residential subsale properties.

If you have different scenarios or any other concerns, you should ask now before starting the whole transaction. It is unfair to delay the transaction process with questions and concerns after the transaction has begun.

Please note, the material available is general information only, and is subject to change without notice. The information held within this website should not be relied on as a substitute for legal, financial, real estate or other expert advice. SubSaleSister disclaims all liability, responsibility and negligence for direct and indirect loss or damage suffered by any person arising from the use of information presented on this website or material that arises from it.

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