Buying a subsale property in Malaysia: A layman's step-by-step guide for first-time home buyers

For most Malaysians, buying a house is by far the biggest investment in their lives. Hence, given the substantial amount of money involved and potentially decades of loan financing commitments, the prospect of purchasing a property can be daunting, especially for first-time homebuyers.

Well, if you’re in the market for a subsale property and feel overwhelmed, fret not, as we’ve prepared a comprehensive guide for you to expertly manoeuvre the housing market. From finding the right property to presenting documents to the land office, read on for an in-depth understanding of the whole process of buying a subsale property in Malaysia.

3 main markets for buying properties in Malaysia

Before we go any further, it’s best to establish the distinct housing markets in Malaysia and whether the subsale market is the right choice for you. In our country, there are 3 main housing markets, namely the primary, secondary and auction markets.

The primary market, also known as under-construction properties or newly completed, involves brand-new properties where consumers purchase directly from developers.

Meanwhile, the secondary market, also known as the subsale market, involves purchasing properties from existing owners. This guide will focus solely on buying a house from the subsale market.

Lastly, the auction market involves purchasing properties that have been foreclosed on and repossessed by the bank or a court, usually due to the previous owner’s failure to settle the outstanding payments on the property.

The pros and cons of buying a subsale property

Given that this guide mainly focuses on the subsale market, here are some pros and cons of buying from the secondary market so that you can decide whether a subsale property is the right fit for you:

Pros:

• Immediate availability, as you don’t need to wait for construction to complete
• Potential room for price negotiation
• The property is readily available for you to check its conditions
• The neighbourhood is already established, i.e. you can check on the neighbours, surrounding amenities, schools, etc.

Cons:

• Older properties, hence, may require higher maintenance costs
• Higher entry cost, as you need to put in a 10% down payment and other fees
• Seller-related risks, as you’re primarily dealing with individuals
• May require renovation or refurnishing, compared to the “new slate” of a new property

How to buy a subsale property in Malaysia

With all of that established, here is a layman’s step-by-step guide for you to buy a subsale property in Malaysia:

Step 1: Find the right property

Of course, the first step in your home-owning journey has got to be finding the right property for you. The subsale market in Malaysia is vast, and you can filter out the best houses for you by browsing property portals, speaking to property agents or getting referrals.

Things to consider in selecting a subsale property:

• The location of the property and its neighbourhood
• The market value of the property
• Whether the property is freehold or leasehold. In simple terms, a freehold property means you own the property indefinitely, while leasehold means you own the property for a set period, but not the land
• The remaining tenure of the property (for leasehold)
• Monthly maintenance fees (for strata properties such as apartments)

Step 2: Negotiate and sign the offer to purchase

Once you find the right subsale property, negotiate the price with the owner. Afterwards, you and the property owner will sign an Offer to Purchase (OTP) agreement. The OTP is usually prepared by the real estate agent's company (if you're buying the property through a real estate agent).

The OTP should mention the following:

• Purchase price
• Vacant possession terms
• Time frame to sign the Sales Purchase Agreement (SPA)

Furthermore, you will need to make a payment of 3% of the purchase price as an earnest deposit. The amount may vary based on mutual agreement with the real estate agent and the purchaser.

Usually, the earnest deposit is made to the real estate agent or stakeholder lawyer.

Step 3: Get loan pre-approval (if needed)

Before you commit to any subsale property, you should first get a housing loan pre-approved from the bank. This will tell you the amount of loan you can get, which will help you set your budget.

For this, you may also use an online mortgage calculator or speak to a mortgage broker.

Step 4: Appoint a lawyer (and valuer if needed)

Next, appoint a licensed conveyancing lawyer to handle the legal process. The legal process includes:

• Conducting title and land searches
• Drafting and reviewing the SPA
• Advising you on costs and risks

Should you choose to get a housing loan, the bank will appoint its own lawyer to prepare the loan documents (this can be the same lawyer in many cases).

Step 5: Sign the Sale and Purchase Agreement (SPA)

A Sale and Purchase Agreement (SPA) is the official contract that binds you and the seller of the property. In an SPA, you will have to pay the remaining 7% balance deposit for the subsale property (the total is 10% when you include the earlier 3% paid in step 2).

For leasehold or strata properties, the SPA may include certain conditions such as LPHS, state authority or the developer’s consent. After both parties have signed the SPA, it will then be stamped, as per step 6 below.

Step 6: Pay the legal fees and stamp duties

The typical costs for this step are:

• Legal fees: Scale rate under the Solicitors’ Remuneration Order 2023
• Stamp duty on Memorandum of Transfer Form (Form 14A): 1% to 3%, depending on the property price
• Loan agreement stamp duty: 0.5% of the loan amount
• Disbursement: Search fees, registration fees, application of consent fees, travelling and postage costs, miscellaneous, etc.

Do note that first-time home buyers may enjoy stamp duty exemptions, so do check with your lawyer whether it’s applicable for you.

Step 7: Compliance with the conditions precedent (if applicable)

At times, there are certain steps that must be completed before the sale can be completed. This is known as conditions precedent (CP). When it comes to property title, these conditions are especially important to ensure that the buyer receives legal ownership free of any issues.

Among these CPs are:

• Perfection of Transfer: If the individual or strata title is issued but still under the developer's or previous owner's name, it must be transferred to the seller first or may be transferred to you by way of direct transfer.
• State Authority Consent: For certain properties (e.g. leasehold or bumi lots), consent from the State Authority is required before the transfer can proceed
• Developer’s Consent: For properties under master title (especially in sub-sales), consent from the original developer is usually required.

Do note that all CPs must be fulfilled within the time specified in the SPA, which is usually between 3 to 6 months.

Step 8: Payment of the balance purchase price

For this step, your lawyer will help coordinate the balance purchase price payment either within 3 months or the time frame agreed in the SPA. This will include the loan amount and any differential sum amount (the difference between the loan amount and the Balance Purchase Price) that you may need to top up.

Besides that, the Memorandum of Transfer (Form 14A) and Memorandum of Charge (Form 16A) documents will usually be stamped during this time.

Step 9: Filing of RPGT form (LHDN)

Under the Real Property Gains Tax Act 1976 (RPGT), both you and the seller are required to file RPGT (known as Cukai Keuntungan Harta Tanah or CKHT in Malay) when a property transaction takes place in Malaysia. For context, RPGT applies to the disposal of real property, such as land or buildings.

These forms help the Inland Revenue Board (LHDN) assess any tax payable on gains made from the sale and will be filed by your lawyer. Do note that filing RPGT is still mandatory even if you’re the buyer and not liable to pay the tax.

In this step, buyers must file these 2 forms within 60 days from the date of the SPA being signed:

• CKHT 2A: Buyer’s declaration of acquisition
• CKHT 502 (if applicable): Notification of withholding retention sum

Step 10: Presentation of documents at the land office

For this step, your lawyer will present the following documents to the relevant land office to register your name as the new owner of the property:

• The original Title together with the Plan (for strata properties)
• Memorandum of Transfer (Form 14A) and Memorandum of Charge (Form 16A) [If purchased by loan]
• The Property’s current quit rent and assessment tax statement
• Coloured and clear copies of the Identification Cards of you and the seller

Do note that the registration at the Land Office may take between 1 and 3 weeks to complete.

Step 11: Vacant Possession and Change of Ownership/Name

Lastly, once the full payment of the Balance Purchase Price is received by the Seller, the following will happen:

• Vacant Possession: You will receive the keys, access cards, car stickers for the Property, etc
• For strata properties, you will need to ensure the Management Office is informed of the Vacant Possession
• Change of ownership/name: You will be required to inform relevant authorities to change your name as the new owner for the property, such as Assessment Tax and utility bills (TNB, Indah Water, etc)

Voila! There you have it, subsale property ownership in just 11 steps. We wish you all the best in your home ownership journey and hope that this layman’s guide could help you get one step closer to achieving your dream of owning a property.

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