Ask, before you buy!

Buying your first home can be pretty overwhelming. If you have been shopping around, and you should, you would have met many sales personnel listing 101 reasons you should purchase a particular property.

Ultimately, after all that’s been said, the ball gets thrown back to the homebuyer with a “please feel free to ask me anything you are unsure of”. But where does one start? What questions should a homebuyer ask?

Besides the property price, built-up, tenure, amenities and accessibility, what are the other important but often overlooked questions that one should enquire before signing on that dotted line?

Can the developer be trusted?

Most properties sold by developers in Malaysia are off-the-plan. “This means that what a purchaser is buying is a hope that a home will be built according to the specifications shown on a brochure or by a developer’s sales office. Therefore, there are some pertinent questions that should be asked prior to paying the booking fee,” says Fernstate Sdn Bhd director Shawn Fernandez.

Firstly, just like how we read reviews before visiting a restaurant or booking a hotel, a check on the developer’s track record is crucial.

“Obviously, a developer with a good track record will be less likely to not complete the project. However, this does not mean that a new or small developer will fail to deliver. A new developer will just have to go the extra mile to convince the homebuyer that it can deliver its promises as contained in its marketing brochures,” Shawn shares.

Most developers, he adds, will refer to the Housing Development (Control and Licensing) (Amendment) Act (HDA) as the necessary safeguard. However, some developers offer enhanced protection such as a cooling off period where homebuyers can change their mind and ask for a refund of their deposit. Some developers also offer an extended defects liability period.

When it comes to late delivery of the new home, in general, there is protection provided under the HDA that is mostly incorporated in the Sale & Purchase Agreement in the form of late payment charges, hence it is important to find out the capability of the development company to pay these charges, should they arise.

“Most buyers have to service the mortgage. Therefore, getting the property completed and handed over on time is very important,” says Shawn.

What is the neighbourhood like?

PropNex Realty head of international market Matt Tian believes it is always good to be familiar with the local neighbourhood where the property is located.

“Buyers should check out the neighbourhood, the surrounding existing developments, the existing amenities like malls, public transport and highways, the demand and supply of the properties there and future developments, amenities or infrastructure in the neighbourhood. It is also important to note the prices of the surrounding properties,” Tian notes.

Shawn concurs as buyers should know what they are paying for and whether the property they are considering is reasonably priced in the area.

“For example, should the new home be priced at RM1,000 psf, and the nearest comparable property has been transacted recently at RM800 psf, there should be a valid and plausible explanation for this. Referring to a home as being new, and therefore justified at RM1,000 psf is not really a justification, if the quality of construction and facilities are not much better,” Shawn offers.

What’s the estimated ROI for the property?

While most homebuyers look at comfort and convenience when buying a home to live in, it would be a smart move to consider the property’s investment potential as well. The question then would revolve around the return on equity, says Shawn.

Tian agrees, as ultimately it comes down to the rental yields and capital appreciation the project offers.

“An answer to this question should involve an in-depth study of the surrounding properties. If the answer is merely a reference to the X condo next door that rents for RM Y, then this merely shows that the investment issue has not been addressed at the planning stage by the developer. In this case, the investor should do a great deal more background study before committing to the property.

On the other hand, should the answer to this question involve an excel sheet or info graph showing all nearby developments, matched to what they have rented for and what current asking rentals are, then this would give a better indication that the investment angle has been thought about and addressed by the developer,” Shawn explains.

He adds that some new developments are conceptualised to offer something unique and under-supplied, citing, for example, new townships that offer large common areas like a park with a lake, cycling paths, pet-friendly areas, coupled with good security features.

“Condominiums with direct connectivity to a mall or a Light Rail Transit station are also examples of a development that should command good rental yields and/or capital values. A case in point would be One Menerung in Bangsar. Launch price was RM550 psf but today, the unit transacts for between RM1,000 and 1,500 psf,” offers Shawn.

Is the house in good condition?

Tian points out that when buying a secondary market property, the condition of the house must be taken into consideration.

“Buyers have to inspect whether the home is in a good condition and whether it needs minimal or major renovation. Can they immediately move in or does it need a total makeover? Additional cost is incurred if substantial renovation is needed. The buyer needs to remember that upfront cash is required for renovation works,” he says.

Should I hire a real estate agent?

When it comes to the secondary market, Fernstate’s Shawn says it may be a good idea to seek the help of an experienced estate agent who is familiar with a particular location.

“He or she will be able to share a wealth of information which would be extremely helpful for a buyer in making his or her purchase decision. Experienced estate agents know the sort of properties that rent well. Some of them even have great track records of securing good yields over long periods of time.

“Similarly, these experienced agents have intimate knowledge of sellers who will lower their prices significantly and why. They also know which streets in the neighbourhood command higher capital values than the others. Some are even able to foresee growth areas,” says Shawn, adding that a good relationship with an estate agent can be the difference between getting a great deal and an average deal.

An estate agent is particularly useful in advising on the property’s investment potential. Even if the property is not bought as an investment, it is good to know the factors that make it particularly rentable or command a higher value in future, says Shawn.

Shawn cites an example whereby in certain areas of Petaling Jaya, the tenure of landed property is leasehold with an average lease term of 40 to 60 years remaining. The easiest way to add value to the property (be it as a homebuyer or an investor) is to quickly renew the lease, after buying it.

“Getting a fresh 99-year lease from the state government is not very costly, provided one owns the property for more than five years. The new lease period (a fresh 99 years) adds value to the property, as banks will be more secure in financing the property,” he explains.

He also advises potential homebuyers to foster good relationships with their agents and share with their estate agents the sort of property they are looking for and their budget. “If a proper relationship is fostered (be on time, polite and respectful), the agent will share with you what they feel may be within your parameters. It is perfectly natural for estate agents to want to do their best for someone they like”.

Last piece of advice

PropNex’s Tian offers- some final advice: Take your time before you sign on the dotted line, ask for the terms and agreement in black and white so you can double check all items included or the terms involved; and only take action if you feel it’s right and if the price is within your comfort level.

“Remember to also check your loan eligibility and only commit when you are financially ready,” says Tian.

Both experts believe that it is best to buy during a soft market and that there are good deals to be had at every price point in the current market.

This story first appeared in the EdgeProp.my pullout on July 6, 2018. Download EdgeProp.my pullout here for free.