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How to sell house in Malaysia

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How to sell house in Malaysia

Table of Contents

If you are looking for a guide on how to sell a house in Malaysia, this article is definitely for you. This guide cover all aspects, from price setting until you handover the key to the purchaser.
If you would like to read in Malay language please refer to Panduan Dan Cara Jual Rumah Di Malaysia.
 
Chapter 1
How to Price Your House For Sale
Here are 5 tips to set a price and position it appropriately in the market to get buyer’s attention.
1) Get rid of emotional attachment
Some sellers have a great emotional attachment to the house they are selling. They have been staying there for a long time, renovated the house and see their kids grew up.
This can be an obstacle when the seller wants to price the house.
They end up setting the price too high and did not sell.
Or if they have a negative emotional attachment…
They set the price too low and did not get what they should be getting.
When setting the price…
You need to have an open mind and get rid of your emotional attachment first.
Your house will compete with hundreds of other houses in the market and your emotion can stand in the way to success.
After you have done this, only then you can set a price based on facts and data.
2) Check the market value of your property
You should check the market value of your house.
Setting a price based on the market value helps the purchaser to get a sufficient loan to buy.
Most loan packages only give a margin of financing of 90%.
If the house costs RM100,000 for example, the loan amount is RM90,000. The difference of RM10,000 is the deposit which the purchaser pays in cash.
Imagine if you do not check the market value and set a price of RM150,000. It burdens the purchaser since he has to fork out RM60,000 in cash.
That’s not even counting the legal fee and stamp duty yet. These can cost around 5% of selling price.
It is likely that buyers will not buy. Even if they can pay that money, they won’t. There are better deals in the market.
So how to check a property market value?
Use the following methods:
  • Use my free house valuation service
  • Ask a banker
  • Check with a local real estate agent
  • Appoint a professional valuer
If you ask a banker, it depends on your luck. They maybe be reluctant to check for you. Their main clients are real estate agents or the purchasers. Not the seller.
The best way to check how much your home worth is by appointing a valuer. The valuation is accurate and you will get a report. But it will involve a professional fee.
To check the market value, you need to give the following details:
  • Type of house
  • Full address
  • The land area and the built up area
  • Lot position (intermediate, corner or end lot)
  • Number of rooms
  • Details of renovation, if any
If you renovated the house, and it involves structural change such as house extension, you need to have a permission from the authorities.
Or else, the bank valuer will not count the renovation cost in the market value.
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3) Study the competition and demand

Market value is useful to know the estimated price. The valuer determines the value based on past data and his judgment.
But you cannot set the property price using this indicator alone.
You also need to check how much are your competitor selling price in the market.
For example. The market value of your property is RM500,000. But if your competitors are selling at RM400,000, your house will not attract any purchaser at all.
This can happen if the demand in the area is soft. For all you know, all your neighbours are selling below the market value!
Unknowingly, I already tell you a secret. This what I called Arif’s Law in setting property prices. Hah!
Property price = the lower of market value and your competitor price.
If you follow this rule, your house will attract buyers’ attention.

So how do you analyse your competitors?

You can do the followings:
  • Browse the property portals and look up your competitor highest and lowest price. Make sure the property is comparable. Is your price competitive? Your competitors will sell their unit first if they put a lower price than yours.
  • Ask a local Real Estate Agent on the recent transaction in your neighbourhood. This is to gauge demand. Although the asking price is high, but the purchasers may not be willing to pay and the transacted price can be much lower.

4) Consider negative factors affecting your house

You cannot sell at a high price if there are negative factors affecting your house. Account for these factors.
Here are a few examples:
  • House nearby the sewage plant. It’s a big letdown. Discount your price.
  • Home nearby electric substation or power line. There is a study saying there is a cancer risk. Although the study is not conclusive, buyers will think twice.
  • Damaged house. Make sure you repair the house before selling. Cracks and leakages turned the buyers away.
  • Top-floor apartment. There is a low demand for this especially if it is a walk-up apartment.
  • Problem location. For example house near a recent landslide area or a high crime rate area.

5) Include a margin for negotiation

You need to inflate your property price for negotiation.
Real estate is a high-value item that people will definitely negotiate. If you want to sell for RM500,000 for example, set the price around RM520k.
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Chapter 2

The Costs of Selling a House

There are four main costs involved when selling a house.

1) Real Property Gains Tax (RPGT)

The Government will tax your sales profit in the form of Real Property Gains Tax or RPGT.
The tax rate for RPGT depends on how long you already bought the property.
Starting 2019, the rates for an individual citizen and permanent resident are as follows.
  • Sale in the first year to the third year: 30%
  • Fourth year: 20%
  • Fifth year: 15%
  • Sixth year and afterwards: 5%
For example. If you bought a house in December 2015 for RM150,000 and then sell at RM250,000 in June 2016, the RPGT rate is 30% because the sale took place in the first year after your purchase.
Here, your profit is RM100,000 (RM250k – RM150k) and this amount is subject to tax and the amount payable is around RM30,000 (30% X RM100,000).
Note: this is a rough count. There is a correct method to calculate the tax payable where you can deduct certain expenditures as specified in the RPGT act. Please consult your tax accountant.
As you can see, the sum can be huge! But you can eliminate or reduce the tax the following ways.

Use the once-in-a-lifetime exemption

The Government entitles you to get a full tax exemption but you can only use this once. So make sure it counts!
If you have multiple properties to sell and all of them are taxable, use the exemption on the property which you save tax the most.
You need to take note as well…
If the house you are selling have a joint owner, both owners must use their entitlement to get a full exemption.
If only one use their entitlement, you only get half of the exemption.
For example, Mr Ali bought a house together with his wife Ms Aminah as the joint owner. They sold the house and the RPGT amount is RM30,000. If only Mr Ali used his entitlement, the tax imposed is RM15,000. If both exercise, there is no tax payable.
Upon signing of the sales and purchase agreement, you must inform the lawyer if you wish to use your entitlement.

Deduct relevant costs in the RPGT calculation

If you don’t use the above exemption, the alternative method is to reduce the RPGT tax payable.
We do this by deducting allowable costs of buying and selling in the RPGT calculation.
These costs include:
  • Legal fee
  • Agent commission
  • Administrative fee
  • Repair and renovation
Again, you need to inform the lawyer to account for these costs in the RPGT calculation and provide them the supporting documents.
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As a seller, you can appoint or not to appoint a lawyer.
If you appoint a lawyer, they will protect your rights but you need to pay the professional fee. You can check the amount using the legal fee calculator.
Not appointing a lawyer saves you the professional fee.
You only need to pay the purchaser’s lawyer for his administrative work such as to discharge the property title from your bank and RPGT filing to the LHDN. I estimate the amount to be around RM2000 to RM3000.
But you must remember. The purchaser’s lawyer is not yours and they are not obliged to protect you. Communication also can be difficult.

3) Lock-in period penalty

Some banks charge a lock-in period penalty if you sell within a certain year (generally 3 to 5 years) after you get the loan.
You should refer to your loan offer letter to check whether this applies to you.
The bank penalised you based on the original loan amount and penalty rate can range between 2% to 5%.
For example, if your original loan amount is RM500,000 and the lock-in-period penalty rate is 3%, you need to pay the penalty of RM15,000.

4) Agency fee

If you sell through a property agent, the agency fee for residential property is 3.18% of the selling price, inclusive of the SST.
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Chapter 3

Documents To Prepare

Here are documents you need to prepare when selling your property:
  1. Copy of your identification card
  1. Purchase agreement copy
  1. Property title copy
  1. Current loan statement
  1. Quit rent and assessment bill
  1. Maintenance bill
  1. Utility bills
The lawyer will require document 1 – 4 before drafting the sales and purchase agreement. The rest you can provide after you signed the agreement.
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Chapter 4

How To Sell a House Fast. First Impression Is Very Important.

The first impression of your house is very crucial. Make sure the condition is good and damage-free.
In addition, I also recommend you for example to:
  • Throw away or hide unnecessary items
  • Make the house look more spacious
  • Tidy the house
  • Paint it
  • Cut the grass in the yard
It looks trivial. But the first impression is the make or break factor to successful selling.
This is because the buyers assessed the current condition of your house, not the future condition if they themselves repair.
You can’t expect them to imagine how good the house will be, during the viewing session that lasts around 20 minutes.
It’s such a short window. They will turn you down despite minimal repair costs.
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Chapter 5

How To Market Your Property

Make sure your advertisements are visible. Here are 4 tips.

1) Take beautiful photos

A picture worth a thousand words. And with selling a property, trust me, good photos sell your property faster if your price is right.
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This is a sample photo I took using a DSLR, and I sold the house within a week.
Taking real estate photos is not so much about art. And you don’t need an expensive camera to this. But your preparation and technique must be right:
  • Tidy the house so it looked more spacious.
  • Switch on all the lights and draw the curtain. Good lighting will make the photos sharper, brighter and your house more attractive.
  • Take pictures of the space not the items. Many owners advertise their homes without showing the overall space. Despite they advertise the shiny new fans or the cupboard.
  • Take pictures from the corners. Photos from the corner look more spacious.
  • Do not shoot against the sunlight. If you take pictures against the sunlight especially facing the window, the pictures will be dark.
There are popular property portals you can use:
  • Mudah
  • Propwall
  • Newspaper
Note I did not list iProperty and PropertyGuru.
These two mediums are popular but limited to real estate agents.
If you would like put your advertisement in these portals, use their service.
For your advertisement…
Use the best photos of your house. Also, make sure the details of the house are complete and accurate.
These are the details you should include:
  • House location
  • Built-up and land area
  • Number of rooms and bathrooms
  • Type of property title
  • Description of the neighbourhood
  • Facilities near the house
  • Road access
You should confirm the details to the sale and purchase agreement and the title. Or else, you may encounter problems later if you put up a wrong description.

3) Check the visibility of the ads

You should not upload your advertisements in the property portals, leave and expect buyers to call you.
You need to monitor the ads from time to time because yours may drop to page 5 after a week and nobody sees your listing.
If you notice this happened, renew the ads to ensure it is visible.
In my experience, the more frequent you renew your ads, the faster you sell the house.
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4) Use for sale banner

Putting a for sale banner in front of your house is an effective strategy.
The prospects you will receive are more serious because they already located your house and the surroundings.
It’s cheap too. You can get a big one costing less than RM30.
Despite that, consider the following points:
  • Are your comfortable letting people know you are selling?
  • Will privacy be an issue?
It’s okay to put a for sale banner if the house is vacant.
But I don’t recommend doing that if you occupy the house. There have been many cases where criminals disguised as buyers.
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Chapter 6

How to Deal With Purchasers

If done wrong, managing potential purchasers can be tiring.  Here are tips to get a motivated buyer:

1) Find out purchasers preparation

When a buyer contacts you to view the house, there are questions you can ask to gauge his motivation to buy a house:
  • Where do they work? They are not so motivated if the location is far.
  • Whether they know the surrounding of your house. Keen buyers do their homework and already know the neighborhood.
  • Who will come to see the house? You want them to come with the decision maker. Often, this can be their spouse or parents.
  • How many houses they have viewed? If your house is the first house they view, most likely they will consider viewing other houses before deciding.

2) Check their financial preparation

You also need to check their financial preparation.
These questions are sensitive and it is better to ask in a friendly and casual manner:
  • Have they made preparation to pay the deposit and legal fee? If they are not ready, ask them whether they will pay using other methods such as EPF withdrawal.
  • Have they checked their loan with bankers? Smart buyers will check their eligibility first.
Note: before you ask these questions, know the profile of the buyers. While it’s okay to ask first home buyers on these, you need to judge whether they already bought a house or houses before. Some people will not be comfortable.

3) Do these when buyers view the house…

On viewing day, make sure your house looks good. Switch on the air conditioners, lights and fans before the purchaser arrives.
Also ensure there is no garbage and an unpleasant odor in the house.
Treat the purchaser well. Understand their needs.
They may already view other houses before. But you a high chance to seal the deal if only you can solve their problems.
These are examples of purchasers needs and problems:
  • Not having enough money for the deposit but eligible for a housing loan
  • Cannot get a bank loan, but eligible for a government loan
  • Need to shift to your house early because the tenancy agreement is expiring
  • Want to invest and need to know whether your house is a good prospect.
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Chapter 7

Procedures to Sell A House

The 6 steps to sell your house.

1) Sign the booking form or letter of intent

Once the buyer agreed to buy your house, he will sign a booking form or letter of intent. He will also need to pay a certain amount as the booking fee, usually 3% from the selling price.
I suggest the purchaser pays the booking fee to a realtor or a lawyer. This gives more confidence to him.
Apart from that, make sure you understand the terms in the booking form or the letter of intent. These terms can be:
  • When the purchaser needs pay the booking fee, balance deposit and the balance purchase price? It is normal that the purchaser pays:
    • 3% of the selling price when he booked the house
    • 7% upon signing of the sales and purchase agreement (SNP); and
    • The balance 90% within 90 days after the SNP date or after the state authority approves the consent to transfer
  • How long is the period given to the purchaser to sign the sales and purchase agreement? This can be around 14 to 21 working days.
  • What happened if the purchaser cancels the deal? You want to make sure there is a term that protects you. Include a term where the booking fee is not refundable if the buyer cancels.

2) Purchaser apply for a loan and sign sales and purchase agreement

After that, the purchaser will submit a loan application to the bank.
This can take up to 14 working days to know the result.
The process can be longer for certain banks of if the documents are not complete.
If the bank approves the purchaser’s application, you and the purchaser will then sign the sales and purchase agreement.
Depending on your agreement, the purchaser may need to pay the balance deposit of 7% at this point.

3) Entertain the valuer

After the purchaser sign the loan agreement, the bank will then appoint a valuer to produce a valuation report.
A valuer will come to inspect your house. This can take around half an hour.
But don’t be afraid. The value of your house is almost certain at this stage.
It is rare that the bank will value your house less after it has approved the purchaser’s loan unless there are major defects to your house.
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4) Wait until the transfer is complete

The completion of the transfer depends on complexities of the case and the property title.
For freehold property with individual or strata title, it can take around 90 working days.
Leasehold property with individual or strata title can take longer.
The lawyer needs to get a consent from the state authority and it might take around one to three months.
Only after that, the lawyer can start the transfer which takes about 90 working days to complete.
Master title property is trickier.
The lawyer must get a letter of confirmation from the developer before he can start the transfer.
The process can be long if the developer is not responsive or if the developer yet to perfect the title to the seller.
There are also cases where the developer is already bankrupt, adding to the complexity of the case.

5) Handover the keys

When the transfer is complete, handover the keys to the purchaser.
Meanwhile, do not forget to close the utility accounts and get your utility deposit back.

6) How long is the process to sell a house?

I get emails from the readers asking me:
“Arif, please tell me, how long is the sale process exactly? I don’t want to know the steps, just the duration.”
To be honest, there is no exact duration. It’s case-to-case basis.
But the estimate duration from the time the purchaser booked your house until you handover the keys is like this:
  • Freehold property with individual or strata title: 4 – 5 months
  • Leasehold property with individual or strata title: around 7-8 months
  • Master title property: around 5-7 months
  • Master title property with perfection: around 1 year and can be longer
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Chapter 8

Property Selling Issues

There are many problems you might face when selling a house or property. Here are the common issues and how to mitigate them.

1) Hidden costs when the purchaser inflates the selling price

The popular terms for this method is “mark-up”.
In this method, a purchaser inflates the selling price of the property to get a higher loan amount.
The purchaser then receives the difference between the inflated loan amount and the balance purchase price.
They do this to cover for the deposit, legal fees and may be to get cash. It is a questionable practise but I do not want to discuss on the legality.
What’s more important here…
When a purchaser inflates the price, there may be two incidental costs that the seller must bear:
  • Legal fee
  • Real Property Gain Tax (RPGT)
If you appoint your own lawyer, the legal fee will be higher because the selling price in the sales and purchase agreement is the inflated amount.
Same goes to RPGT. Since the selling price is now higher, your profit is higher on paper. LHDN will tax you based on the inflated profit.
So how to mitigate the issues?
Choose not to allow this practice at all. But if you proceed, put a term where the purchaser needs to bear all incremental costs arising from the mark-up practise.
In addition, you can also pick not to appoint any lawyer and use your RPGT once-in-a-lifetime exemption.

2) Hidden costs and longer duration for master title property

There are cases of master title property where the developer yet to transfer the property title to the seller.
We call this the perfection process.
When you sell a property pending perfection, most developers require you to change the ownership to you first, and then only you can transfer to the purchaser.
It is rare developers allow a direct transfer to the purchaser.
Because of this, the duration of sale is lengthy.
It can take months to transfer the title to the seller, and longer if the developer is not responsive or involving a leasehold property.
The transfer to the purchaser can only start after the above process is complete.
And expect the whole process to complete around 1 year or more.
This process also might require you to pay certain costs such as the Memorandum of Transfer and the developer’s admin fee.
So if you have a master title property, check with the developer on the status of your property title. And plan your sales carefully.

3) You might not receive all the deposit

After the purchaser signed the sales and purchase agreement, you will receive the 10% deposit, right?
Wrong. You will not get all.
First, lawyer will deduct their professional fees and disbursement costs.
Second, the lawyer will hold 3% of the selling price as a collateral for the RPGT payment to the LHDN.
After LHDN satisfied with the RPGT tax return, and your RPGT amount is lesser than the 3%, they will refund back the balance to you.
They will ask you to pay if the 3% if not enough to cover your RPGT.
So in summary, plan and do not expect to get the deposit amount in full.

4) Title problem

You cannot sell your house if there is a caveat. Cancel the caveat first.
With bankruptcy, the seller need to talk to the Insolvency Department first before selling.
I imagine the sales process will be very difficult.

5) Divorced sellers

If the sellers are divorced, and both the ex husband and wife owned the property, it can be a challenge to sell.
I advise to go through the court process first and let the judge determines how to go about with the property.
However, if the sellers choose otherwise, both need to agree on the following ground rules:
  • Both intend to sell, in good faith
  • They agree to sell at a certain price and respect the other party entitlement
  • They commit to complete the sale

6) House with restrictions, sold to non-Bumiputera

If your house have any of the restriction below, do not sell to non-Bumiputera:
  • Bumi lot
  • Malay reserve
  • Leasehold property
Bumi lot and Malay Reserve property are self-explanatory.
The cause of confusion is always property with leasehold title.
Many think they can sell to a non-Bumiputera.
But in reality you need to get a consent from the state authority before transferring the ownership.
The state authority may have a policy to maintain Bumiputera ownership in real estate.
As a result, the state authority will reject the transfer. If this happened, you can appeal the decision. But chances to succeed is slim.
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Conclusion

I hope this article helps. I will update it from time to time if there are additional information. Thank you.