This is what happen in United States, i.e. if you cannot qualify for loans or are having difficulty obtaining credit through the normal channel, then a subprime loan may be your next port of call. A subprime loan is a loan that is given to people with a bad credit record. The interest rate on a subprime loan is likely to be a lot higher than an interest rate you would expect on a loan from a bank.
In Malaysia, the closest to its kind is probably credit company. However, this kind of credit loan is usually smaller in amount and is not widely used when purchasing real estate in Malaysia unlike its peers in United States. Once defaulted, as with the case with "loan-sharks", it creates more social issue rather than economic issue.
What I'm more concerned with is the so-called "Full-Loan" package the developers are offering in the market for the past few years. Yes, you can now own a house by paying a nominal sum of probably RM500. The developer can achieve this by marking up the true selling price of the property by 10%, enabling the buyer to obtain 100% loan, or full-loan so to speak. Unlike the conventional way of buying houses, where the buyer used to fork-up minimum 10% downpayment for the house price, this new marketing strategy has given more people (even the less affordable ones) to own a house at an earlier stage.
As a result, the banks now loses their comfort zone of this 10% of the house price. Once defaulted, the borrower may still owe the bank's a considerable sum of money even after the property is being auctioned. In other words, house buyers today are much more heavily-indebted as compared to the conventional ones. They are also exposed to higher risk on variation in the interest rates, i.e. Base Lending Rates.
Spending future money seems to be the trend now. Even when we buy a few thousand mobile phone, some still opt to pay by installment, thanks to the bank's "zero-interest" repayment scheme.
We are in the midst of building another economic bubbles, which we don't know when it will burst. But if it does burst, are we then prepared for it?
Over 30 years of experience in Iskandar Malaysia's property market, Johor Bahru -based registered estate agency, Tiram Realty, offers FREE tips and info on the selling, buying, renting and auction of properties in Iskandar Malaysia through the blog.
Friday, August 17, 2007
Tuesday, August 7, 2007
Real Estate Tips #19: Sell your property through a registered estate agent
By way of referral or advertisement, you may call up a registered estate agent to sell your property for you. On your first meeting, the following should be discussed:
(1) Joint inspection of the property
- Before the joint inspection, you might want to give the address of the property to the agent for him to gather some information on the market price. During the inspection, the owner should produce documents such as photocopy of the title or quit rent receipts as proof of ownership.
- The owner should clearly point out to the agent any renovation involved and any known defaults on the property.
(2) Formal written instruction to procure a purchaser
Any registered estate agent should have with themselves a an instruction form, normally known as " Appointment to act as an estate agent (to secure a purchaser) " . This form may vary from one agent to another, but the general information should be as following as prescribed under the Malaysian Estate Agent Standard:
(a) Vendor's (seller) details and contact.
(b) Type of property
(c) Property address.
(d) The permission for the agents to display signboards/advertise in the media/send out flyers and promote generally the sale of property.
(e) The general terms and condition of sales, which includes:
- Asking price
- Earnest deposit on acceptance of offer, which is normally 1%
- On signing of Sale & Purchase Agreement, which is the balance 9%
- After signing the balance to be paid within, which is normally 120 days
- With or Without vacant possession, it simply means the buyer can or cannot take over the occupying of the property after purchase
- Other terms and conditions include, such as 8% p.a. charged on any extension give to the completion period of the agreement.
(f) Types of agency, such as exclusive/sole/sole joint/joint/ad hoc agency. Further explanation can be found in my previous article named Types of Agency you may come across with an estate agent.
(g) Appointment period.
- It can vary from 2 months to 6 months or so.
(h) Agreed fee
- Commission payable as prescribed by the Valuers, Appraisers and Estate Agents Act
- Payable upon the creation of a binding contract for the sale and purchase of the property, i.e. the signing of a unconditional Sale & Purchase Agreement.
- Other reimbursement may include :
I. costs of printing, plans, copies of documents, lithography, traveling (only when the distance between the agent's office and the property is more than 40km) and other expenses actually incurred;
II. costs of media advertisements, signboards, brochures or other promotional materials;
III. costs of private auction, conductin a tender, open house , exhibitions and tele and electronics marketing services.
IV. the total cost of reimbursement is payable on receipt of a statement of accounts even in the event of the transaction not being successfully concluded.
(i) In the case of this appointment being aborted, the estate agent is entitled to claim 50% of the full fee or 50% of the forfeited deposit/ compensation received, whichever is the lower.
(j) The capacity of the instruction given, such as registered proprietor, attorney of the registered proprietor pursuant to a Power of Attorney or a trustee for the legal owner.
(k) Signatory and witness.
(l) Viewing arrangement need to be decided as some property may be tenanted , then special arrangement needs to be made with the cooperation of the tenant before viewing.
Again , the above may vary from one agents to another, but this is pretty much the terms needed to be agreed upon between the agent and the vendor at the stage of appointment.
(1) Joint inspection of the property
- Before the joint inspection, you might want to give the address of the property to the agent for him to gather some information on the market price. During the inspection, the owner should produce documents such as photocopy of the title or quit rent receipts as proof of ownership.
- The owner should clearly point out to the agent any renovation involved and any known defaults on the property.
(2) Formal written instruction to procure a purchaser
Any registered estate agent should have with themselves a an instruction form, normally known as " Appointment to act as an estate agent (to secure a purchaser) " . This form may vary from one agent to another, but the general information should be as following as prescribed under the Malaysian Estate Agent Standard:
(a) Vendor's (seller) details and contact.
(b) Type of property
(c) Property address.
(d) The permission for the agents to display signboards/advertise in the media/send out flyers and promote generally the sale of property.
(e) The general terms and condition of sales, which includes:
- Asking price
- Earnest deposit on acceptance of offer, which is normally 1%
- On signing of Sale & Purchase Agreement, which is the balance 9%
- After signing the balance to be paid within, which is normally 120 days
- With or Without vacant possession, it simply means the buyer can or cannot take over the occupying of the property after purchase
- Other terms and conditions include, such as 8% p.a. charged on any extension give to the completion period of the agreement.
(f) Types of agency, such as exclusive/sole/sole joint/joint/ad hoc agency. Further explanation can be found in my previous article named Types of Agency you may come across with an estate agent.
(g) Appointment period.
- It can vary from 2 months to 6 months or so.
(h) Agreed fee
- Commission payable as prescribed by the Valuers, Appraisers and Estate Agents Act
- Payable upon the creation of a binding contract for the sale and purchase of the property, i.e. the signing of a unconditional Sale & Purchase Agreement.
- Other reimbursement may include :
I. costs of printing, plans, copies of documents, lithography, traveling (only when the distance between the agent's office and the property is more than 40km) and other expenses actually incurred;
II. costs of media advertisements, signboards, brochures or other promotional materials;
III. costs of private auction, conductin a tender, open house , exhibitions and tele and electronics marketing services.
IV. the total cost of reimbursement is payable on receipt of a statement of accounts even in the event of the transaction not being successfully concluded.
(i) In the case of this appointment being aborted, the estate agent is entitled to claim 50% of the full fee or 50% of the forfeited deposit/ compensation received, whichever is the lower.
(j) The capacity of the instruction given, such as registered proprietor, attorney of the registered proprietor pursuant to a Power of Attorney or a trustee for the legal owner.
(k) Signatory and witness.
(l) Viewing arrangement need to be decided as some property may be tenanted , then special arrangement needs to be made with the cooperation of the tenant before viewing.
Again , the above may vary from one agents to another, but this is pretty much the terms needed to be agreed upon between the agent and the vendor at the stage of appointment.
Thursday, August 2, 2007
Real Estate Tips #18: Getting a registered estate agent to source a house for you
Over the years in the real estate industry, I've noticed one phenomenon, i.e. many people tend to seek service from a registered estate agent (REA) without knowing exactly what they want! Here's a simple guide or questions rather, that can help you to determine what you want before looking for a REA, hence making things easier for a REA to work on your instruction more precisely.
Qualifying process:
(1) What is the purpose of this instruction?
- Investment
Then you are looking at tenanted properties, giving you consistent rental income with possible growth in capital value.
- Owner-occupier
Then you are looking for properties that can deliver vacant possession, i.e. that even if it's tenanted at the time of buying, but the tenancy can be terminated, giving back to you the right to use the property at a timely manner.
(2) Budget
What's the initial outlay and installment that you can afford? For a residential property, you should be prepare minimum 15% for the house price as initial outlay, i.e. 10% for the downpayment, balance 5% for the incidental costs such as legal fees and stamping. The monthly installment figure should not be more than 30% of your monthly net disposable income. Net disposable income is the balance sum of your monthly gross income less monthly commitment with financial institution, such as car loan or other mortgages.
For example,
Gross Monthly salary = RM5000
Car Installment = RM1000
First house Installment = RM1000
Then your net disposable income is equals to :
RM5000 - (RM1000 + RM1000) = RM3000
Monthly installment that you can afford now = 30% @ RM3000 = RM1000
Based on the above calculation, your loan approval should be hassle free, provided you are not blacklisted under CTOS or CCRIS. This is how the banks look at your financial standing as to how much you can afford to pay monthly.
(3) Buying a house for owner-occupier purpose
After decided your budget, few things you need to determine here:
- Location
- Landed or highrise
- Number of rooms
- Prefer house with renovation or without
- Value added features such as gated and guarded
- Orientation , if that's of importance to you
By now, you should be able to know clearly what sort of house that you are looking for. The REA can now work effectively as per your instruction.
Qualifying process:
(1) What is the purpose of this instruction?
- Investment
Then you are looking at tenanted properties, giving you consistent rental income with possible growth in capital value.
- Owner-occupier
Then you are looking for properties that can deliver vacant possession, i.e. that even if it's tenanted at the time of buying, but the tenancy can be terminated, giving back to you the right to use the property at a timely manner.
(2) Budget
What's the initial outlay and installment that you can afford? For a residential property, you should be prepare minimum 15% for the house price as initial outlay, i.e. 10% for the downpayment, balance 5% for the incidental costs such as legal fees and stamping. The monthly installment figure should not be more than 30% of your monthly net disposable income. Net disposable income is the balance sum of your monthly gross income less monthly commitment with financial institution, such as car loan or other mortgages.
For example,
Gross Monthly salary = RM5000
Car Installment = RM1000
First house Installment = RM1000
Then your net disposable income is equals to :
RM5000 - (RM1000 + RM1000) = RM3000
Monthly installment that you can afford now = 30% @ RM3000 = RM1000
Based on the above calculation, your loan approval should be hassle free, provided you are not blacklisted under CTOS or CCRIS. This is how the banks look at your financial standing as to how much you can afford to pay monthly.
(3) Buying a house for owner-occupier purpose
After decided your budget, few things you need to determine here:
- Location
- Landed or highrise
- Number of rooms
- Prefer house with renovation or without
- Value added features such as gated and guarded
- Orientation , if that's of importance to you
By now, you should be able to know clearly what sort of house that you are looking for. The REA can now work effectively as per your instruction.
Wednesday, August 1, 2007
Real Estate Tips #17: What are the types of agency you may come across with Registered Estate Agent?
There are few types of agency as noted under the Malaysian Estate Agent Standard :
(1) EXCLUSIVE AGENCY - This refers to the instruction from a client to a single registered estate agent to act on his behalf. The client may make introduction but will leave the closing of the transaction to the registered estate agent. The principal must pay the appointed estate agent the agreed fee even if the estate agent was not the effective cause of the transaction.
(2) SOLE AGENCY - Just as in exclusive agency, a single registered estate agent is engaged. The client may, however, wish to reserve the right to close deals in addition to making introduction and the client may plays an active role. The principal must pay the appointed estate agent the agreed fee.
(3) SOLE JOINT AGENCY - This is a variation of the Sole Agency. The registered estate agent works together with the client as a team and the fee is divided on a pre-agreed formula. The client has the flexibility to compensate additional registered estate agents and at the same time maintain the advantage of having one registered estate agent in control.
(4) JOINT AGENCY - This is where more than one registered estate agent is appointed and only the registered estate agent who closes the deals gets paid. The number of agents appointed is limited and each is aware of the appointment of the others.
(5) AD HOC BASIS OR COMMONLY REFERRED TO AS OPEN LISTING - In this case, the principal can engage an unlimited number of estate agents on an ad-hoc basis and fees are paid only on successful conclusion of the estate agency transaction.
If you ask me from the perspective of a registered estate agent, they will definitely opt for Exclusive Listings. Very often, how much effort an agent will put in one particular listing for sale, is very much dependable on the types of agency he's getting. The higher the hierarchy, the harder he will try to dispose the property for you in the shortest time possible.
(1) EXCLUSIVE AGENCY - This refers to the instruction from a client to a single registered estate agent to act on his behalf. The client may make introduction but will leave the closing of the transaction to the registered estate agent. The principal must pay the appointed estate agent the agreed fee even if the estate agent was not the effective cause of the transaction.
(2) SOLE AGENCY - Just as in exclusive agency, a single registered estate agent is engaged. The client may, however, wish to reserve the right to close deals in addition to making introduction and the client may plays an active role. The principal must pay the appointed estate agent the agreed fee.
(3) SOLE JOINT AGENCY - This is a variation of the Sole Agency. The registered estate agent works together with the client as a team and the fee is divided on a pre-agreed formula. The client has the flexibility to compensate additional registered estate agents and at the same time maintain the advantage of having one registered estate agent in control.
(4) JOINT AGENCY - This is where more than one registered estate agent is appointed and only the registered estate agent who closes the deals gets paid. The number of agents appointed is limited and each is aware of the appointment of the others.
(5) AD HOC BASIS OR COMMONLY REFERRED TO AS OPEN LISTING - In this case, the principal can engage an unlimited number of estate agents on an ad-hoc basis and fees are paid only on successful conclusion of the estate agency transaction.
If you ask me from the perspective of a registered estate agent, they will definitely opt for Exclusive Listings. Very often, how much effort an agent will put in one particular listing for sale, is very much dependable on the types of agency he's getting. The higher the hierarchy, the harder he will try to dispose the property for you in the shortest time possible.
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