Oooh! Love at first sight. Isn't that how you will feel when you are attracted to the image of your "dream property" on a developer's flashy website? Soon your heart, mind and soul will be glued to it and you will start waxing lyrical about it to practically everyone who crosses your path.
But in the midst of the euphoria, there is one thing you might have overlooked, especially if the property is just newly launched - and that is, to do your homework on the developer and the project! Sadly, this is one of the biggest mistakes many tend to make!
Of course, not all developers will abscond with your deposit and abandon their project. There are many with excellent reputations and sterling track records too. But like in any high-risk business, they are in it to "make big bucks." As such the onus is on you, as a buyer, to exercise caution and do your due diligence before you sign on the purchase form.
Anyway, in order to play safe and avoid falling for some irresponsible developers' crafty gimmicks here are some useful tips:
#1. "Know Your Developer"
Always run a background check on the developer first - if possible, even before you visit their splendid, eye-catching showhouse! Check whether they have all the valid licences and vet through the company's profile, their directors' names, their past completed projects plus if they have any record of abandoned projects.
Remember also to do a search on Google for reviews on any shoddy workmanship or late delivery of keys. Additionally, you can also check with their previous customers (if you know any) or better still ask your bank's loans officer. Moreover, it's advisable to tread cautiously if it's an "outstation" developer. And what if it's an overseas developer? Well, you better open your eyes real big then!
#2. Who are the developer/project's main financiers?
Firstly, check from their promotion brochure who their bridging financier is? Some major banks are known to be very stringent when it comes to funding a developer's project. Then check which banks are their end financiers? All that should roughly give you a clue about the developer's credibility.
Furthermore, some prudent banks are known to conduct prior research on the developer/project before adding them to their "approved developers' list" for end-financing purposes. If that's your bank's practice, then you may be in safe territory because they would have done the basic screening for you!
Then, there are some cautious banks who may only give a max 80% margin of advance when lending for certain projects. It could mean that the property prices there may have been inflated by the developer which essentially is a red flag that something's not right. So take your cue from that!
Bonus tip: It's also wise to check who their panel solicitors are to make sure they do not have any negative reviews. Remember the saying: Birds of a feather flock together?
#3. Are the developer's salespeople pushy and very good at playing "tai chi"?
Don't ever make a split-second decision when viewing the show house just because the developer's salespeople or their "marketing agents" are pushy… or because the sweet-looking saleslady there had whispered softly to your ear: "Sir, this is the last unit."
Buying a property is a lifelong commitment so naturally, there will be plenty of issues and doubts that need to be clarified first. It's not like buying putu piring from the pasar malam. But if the developer's salespeople appear to be evasive and reluctant to entertain your queries then something is definitely not right.
Conversely, a good and responsible developer will be obliging and will not sidestep your questions. If it's a landed property, ask them to arrange for a brief tour of the construction site before you lodge the booking deposit.
This is important as you have to make sure the property isn't located near to a TNB substation, high tension cables, slope, sewage pond, water tanks or worse still T-junctions! Why? Because all these will affect the value and marketability of your property in the future - and the developer only knows all that too well!
#4. Are they dishing out over-the-top, "heaven and earth" kind of promises?"
Never be swayed by their amazing show house, impressive sales gallery or the classy artist impressions on their colourful brochures that depict shining white houses, spacious lawns, smiling faces of children playing and Olympic-sized swimming pools. Of course, these may not be the real deal. So stop dreaming!
Another thing, don't be so gullible and believe whatever the developer promises you verbally. In the past, even some reputable developers or their subsidiaries have been found guilty of "misrepresenting" by the courts!
#5. Has the developer obtained individual titles for the project?
For landed properties make sure individual titles are already issued. If not, be wary as the delay could be a sign the developer may be bogged down with cash flow problems or other legal/technical glitches. As for fully completed high-rise buildings, if the strata titles are still not yet issued after a few years, then beware.
#6. Is it okay to buy properties from a developer's "roadshow?"
Oftentimes, but not always, it could mean the project is not so sellable even in their own backyard. So, to boost the take-up rate they may be casting their net wider. Of course that's perfectly fine but...
As for buying from "housing expos/campaigns" it may be okay because they often come with special discounts/savings, subsidised legal fees and other freebies but you need to do some due diligence before you put down the booking deposit. Remember, they could be clearing their "overhang" units - with the choice ones probably sold out a long time ago. Again, play safe - do a site inspection of the property first before you sign any papers - unless you don't mind living next door to a place of worship!
#7. What about developers who promise generous "Cash Back"?
Very tempting? Too good to be true? It's obvious in many such cases the sale price would have been inflated, so don't expect much capital appreciation from it in the near future. Many have been left with their fingers burnt by this popular gimmick. Enough said.
#8. What about projects with Guaranteed Rental Returns or Lease Back?
This may appeal to those who are looking for steady, passive income. It's wise to clarify upfront with the developer your exact net returns and if there are any hidden expenses you may have to cough up down the road. Also crucially, check with them - what happens after the contracted lease tenure expires? Therein lies the catch where the value of many such properties may stagnate - even depreciate! By the way, why would you want to take a bank loan to buy a property from a developer, and then "gift" it back to them, so that they can make double or triple the profit from your own money? Isn't it a no-brainer?
#9. Try not to buy a property in cash - even if you can afford it.
This is especially true if the project is still under master title and/or under construction. It's not just to avoid the taxman but also to have an extra layer of protection (against the developer) that your bank will provide because they will be protecting their own interests too. As any loans officer worth his salt will tell you - an unscrupulous developer can do wonders with a master title!
#10. Never "follow the herd" when buying a property.
Try not to invest blindly in a certain project just because your good friend or your golf buddies are buying there. Worse still, if can, don't buy a property with joint names. You might regret it!
Of course buying any property under construction is never 100% safe. The best way to circumvent the risks is to buy a fully completed unit with a ready certificate of fitness for occupation (CFO). Then you will know exactly what you are buying plus it will come with individual or strata titles. If only the government enforces the BTS (Built-then-Sell) concept then alot of problems would be solved.
Finally, remember, the property you buy may be freehold but your life is leasehold! As such there is no point leaving a property to your next generation if they can't sell it in future because it's stuck in a "sick" or abandoned project... or it's still without a strata title after twenty years! So, before you visit a developer's show house and fall head over heels in love with their latest property - do your homework first!
Note: The writer had previously served as a branch Officer-in-Charge of Loans/Credit Operations in a prominent local bank for 15 years. He is currently a Senior Real Estate Negotiator (REN) registered with Lembaga Penilai, Pentaksir, Ejen Harta Tanah dan Pengurus Harta (LPPEH).
JK Joseph is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
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