The prospect of selling a house can be daunting, especially during a sluggish property market. The decisions you make along the way could save you – or cost you a few thousand Ringgit. Here’s a step-to-step guide which will help house sellers secure a buyer faster.
Selling your property does not have to be a long and complicated journey. In this article, we will detail everything you need to do towards securing a buyer and what’s the rough time frame for each step. You will have to get involved with several parties before you are ready to sign the Sale and Purchase Agreement (SPA) and officially transfer the property to its next owner. This may take up to 6 months or more. Hence, if you are looking to put your house up on the market sometime this year, it is best that you start preparing now.
The recent Real Property Gains (RPGT) exemption announcement under Budget 2022 provides a huge incentive for property sellers – the government will no longer impose RPGT for property disposals by individuals comprising Malaysian citizens and permanent residents starting from the sixth year. This means that the RPGT rate for property disposals in the 6th year and subsequent years after the acquisition is to be reduced from 5% and 10% to 0%, effective from 1 Jan 2022.
Let us begin!
1. Clear all your outstanding payments
To make your house available for the next owner, you must clear all outstanding payments which are tied up with the house. Not sure what’s left? Follow the checklist below:
Quit Rent
Quit rent or parcel rent for strata buildings is a land tax that all property owners must pay to the Malaysian Government annually via the respective state’s Land Office or Pejabat Tanah Dan Galian (PTG).
Assessment tax
This tax is paid to the local council based on the rental value of your property. The tax is calculated at 4% of your property’s rental value and takes other factors into account such as the location and type of property.
Maintenance fees
If you own an apartment or condominium unit, then you have to settle all outstanding maintenance fees which are paid to the Management Committee for the maintenance and repairs of common facilities in your strata building.
Rental income tax
Though this is not a direct property tax, you are required to pay tax on your rental income while filing your income tax. The amount of tax differs according to your status in Malaysia.
- Malaysian citizens and permanent residents are liable to pay around 0%-28% tax on rental income
- Foreigners and non-permanent residents are obligated to pay a flat rate of 28% on their rental income
Average time: The time needed to clear all these payments and compile the receipts depends on how regularly you attend to your payment obligations. If you’re fairly on schedule, this phase can be completed in a day.
READ: Declaring your rental income to LHDN & tax incentives available for landlords
2. Get a valuer to assess your property value
The list price or sales price of your property depends on your property’s worth. This step is only valid if your house is a sub-sale property. Therefore, if you are selling a newly launched property, you can skip this step.
Although there are a few ways to assess your property value – like checking with local real estate agents, asking a banker or browsing online property platforms – the best way is to appoint a professional valuer. A valuer will be able to help you determine the right selling price by assessing market data, property type, price of similar properties in the surrounding area and other valuable market factors.
Be sure to hire a valuer from an authorised firm, or valuation experts who are representatives of a bank. We recommend confirming that the valuer or valuation company is registered with the Board of Valuers, Appraisers and Estate Agents Malaysia (BOVAEA) before proceeding. Then, you can move to secure an appointment with your valuer of choice and set a time for them to visit your property for valuation. The valuer will then assess your unit and produce a report with an estimated value of your property.
Average time: The whole process may take around 1 week to complete.
CHECK OUT: Property Valuation In Malaysia: What homebuyers and sellers need to know
3. Set your selling price
The valuer determines your property value based on data and their personal assessment. However, this should not be your only indicator for setting the final selling price. Residential properties that are attractively priced relative to their market value, will attract buyers even if they are not located in a hotspot location or boast a new and glossy facade.
Pricing your home largely depends on your personal goals as a seller – are you in need of cash and are looking for a quick sale or do you have the holding power to wait for the right buyer who is willing to pay your desired asking price? Once you have decided on this, there are several things that you should find out:
What is the current buying sentiment in your area? Study recent property transactions for the similar property type and build-up sizes in your neighbourhood – you can use our Transactions Section for this. The online platform provides accurate and up-to-date pricing information on transacted properties in Malaysia, sourced from brickz.my.
How competitive is your property? Browse property portals like iProperty.com.my to find the highest and lowest sales price of your competitors in the local market, in order to set a competitive price for your buyer. Considering that it’s currently a buyer’s market, your asking price must reflect the property’s market value and preferably, be lower than your competitor’s. Keep in mind that you have to factor in a negotiation margin on your property’s selling price. Buyers will usually try to negotiate a discount, hence it is advisable to add 5-10% more to the figure you are prepared to accept.
Average time: This ultimately depends on how long you take to conduct your research and due diligence. You should be able to complete your assessment within a week.
4. Decide on your target buyers
Once you know your property’s worth, you can focus on the type of buyers who are looking for properties like yours. This will increase your chances of having a profitable and fuss-free sale. Based on your property’s characteristics, build a rough persona of your target buyer, their income level, current living circumstances and household size. Other questions to ask include:
- Will you prefer a cash buyer?
- Are you open to selling your property to foreigners?
- Do you want to focus on first-time homebuyers? (as they could secure a higher margin of financing from banks)
Having a buyer demographic on hand will help you to entice buyers and adopt strategies to secure a sale – for instance, if you are keen on first-time homebuyers, you can offer to sweeten the deal by throwing in complimentary fixtures and fittings such as a refrigerator or a kitchen hob.
Average time: This can be sorted out within a day.
5. Get some home improvements done to increase your property value
First impressions are everything when you are presenting your house to a potential buyer. Obviously, your house must look presentable before you put it up for sale in the local market, but it is also wise to take a few extra steps to further boost your home’s appeal.
Some of the things that you could do besides basic repairs include:
- A fresh paint job
- Refacing your kitchen cabinets and surfaces if they are outdated (the kitchen is the heart of the home after all!)
- Redo the lighting in each room – this is more important than you think for setting the right mood and ambience.
- Declutter your home but don’t overdo it to the point where it is no longer homey.
- Tidy up the garden and clean the patio and gutters thoroughly.
Average time: Depending on the amount of work you put into the work, it may take about 1-3 months to create a beautiful first impression.
6. Prepare the necessary documents
This step is pretty straightforward. You will need to get the following ready:
- Copies of the latest bank mortgage statement
- Identity card and passport
*Take note that if your current passport number is different than the one stated in the title deed or purchase agreement, you must provide copies of both passports.
- Copy of SPA
- Property title copy
- Latest Quit rent and assessment bill
- Maintenance bill (latest 3 months)
- Utility bills (latest 3 months)
Average time: Again this depends on your personal speed, preparation can be done within a day.
7. Look for a reliable real estate agent to market the property for sale
Appointing a registered real estate agent can help you sell your property faster. You need to choose an experienced agent with the best marketing plan to sell your property – look for one who has working experience in the area where the property is situated and has an in-depth knowledge of the property market.
Do not hesitate to ask for their portfolio or any evidence of their past sales. These could be showcased through booking forms/offer letters, client testimonials and so on.
Once you have your agent, hand over all the necessary documents as mentioned above so they can start pitching your property to potential clients.
Average time: Depending on how soon you can conduct interviews and finalise on a real estate agent, so start looking early on. It will be an added plus if the agent is described as an area specialist or a property-type specialist.
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8. Find a suitable buyer and negotiate the terms
With the help of your agent, you can organise open houses that can speed up the sale. Finalise the list of the buyers and make sure your agent is taking the initiative to push these buyers to take the next step by connecting them to lawyers and bankers who can assist the buyer in pre-checking their loan eligibility, and all the works.
Selling your property in a slow real estate market might prove tricky; you will have to up your game to close the deal. Often, offering an attractive discount is not the key to selling faster. Forging a solid relationship with your potential buyer and earning their trust is the stepping stone toward a successful sale. Most times when a deal does not go through, it is not because of the property’s price but due to the buyer’s dissatisfaction; with either the seller, the service offered or any hassle they faced.
Average time: The negotiation process and the time it takes to sell depends on how soon both parties can come to an agreement.
9. Consult a lawyer when you are ready to sell
It is recommended to hire a solicitor or conveyancer to handle the legal work in transferring ownership of the property. They will prepare the necessary documents for you and advise on what are the processes involved.
You will need to provide the signed offer agreement, which is the first document with all the terms and agreements included therein. Your lawyer will also obtain the redemption statement from the bank and prepare all the necessary legal documentation to transfer the property title to the buyer.
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Average Time: The sale and purchase transaction would be completed approximately 3 months after the Sales and Purchase Agreement is signed.
10. Prepare a Letter of Offer and ask for an earnest deposit
If both parties have their lawyers ready, then the buyer will have to sign the Letter of Offer and pay an earnest deposit amounting to 1-2% of the property’s selling price. This earnest deposit goes towards the 10% downpayment that the buyer will have to pay to you to close the sales deal.
Average Time: This ranges from 1 week to a month – it depends on how soon you can prepare the Letter of Offer and how fast the banker processes the application.
11. Buyer applies for a housing loan
If you have a cash buyer, you can skip this step. However, if your buyer is taking out a mortgage to finance the property purchase, they will need to apply for one before proceeding to the next step.
In assessing the buyer’s loan application, the bank will usually send over one of their panel valuers to assess your property’s value and produce a valuation report.
Average Time: You have to wait around 14 working days or more to know whether the bank will approve the buyer’s loan or not.
12. Sign the Sale and Purchase Agreement (SPA)
After your buyer has secured a home loan, you can then proceed to sign the SPA. During which, the buyer needs to pay the remaining 8-9% of the property’s sales price to you. The remaining 90% of the money will be paid to you through the bank within 90 days after the SPA date or after the state authority approves the consent to transfer.
This disbursement will happen in 2 stages – the first is where the buyer’s bank will disburse money to your bank (seller) to redeem the property. Following this, your bank will release all the related documents such as the original title and original sales purchase agreement to the buyer’s lawyer, who can then register the title under the buyer’s name and create the new mortgage. You will receive the second stage of loan disbursement after the documents are released to the buyer’s side.
Average Time: The buyer is given 14-21 working days to sign the SPA once your lawyer sends it to them.
13. Property transfer period
The transfer period depends on the complexity of your case and your property title. Here is an estimated timeline for your reference:
- Freehold properties with individual or strata title – Within 90 working days
- Leasehold properties with individual or strata title – 1 to 3 months for the lawyer to get consent to transfer from the State Authority and 90 working days for the transfer process.
- Freehold Master title property – Roughly 3 to 6 months as the process is more complicated. It depends on how long your lawyer takes to get a letter of confirmation from the developer before he can start the transfer. In some cases, it can be a long process as the developer has yet to subdivide the master title into either an individual title or strata title, and have yet to hand over the property title to you (as the owner).
- Leasehold Master title property: Up to 6 to 12 months. The amount of time is doubled as leasehold properties require the state’s approval on top of the developer’s approval (for Master Title).
FIND OUT: Memorandum of Transfer (MOT) and Stamp Duty in Malaysia
14. Settle your closing costs
Once the transfer is complete, you must pay off the following closing costs to complete the sale of your property:
Real Property Gains Tax (RPGT)
This is a Capital Gains Tax payable on the profit made from the sale of your property. Starting from 2022, if you are selling a property in the 6th or subsequent year of ownership, you don’t have to pay any RPGT. The tax rate is higher if you’ve owned the property for a shorter time period – 30% RPGT for disposal in the first 2 years of ownership; 20% RPGT for disposal in the 3rd or 4th year and 15% for disposal in the 5th year.
Nevertheless, if this is the first time you are selling a residential property in Malaysia, you can cash in on a once-in-a-lifetime exemption on the chargeable gain of your property’s disposal – hence you don’t have to pay any RPGT. Do note that it must be a private residence and you are a Malaysian citizen. To find out how more about the RPGT calculations and the available allowed expenses for sellers, read this.
Real estate agent fee / Agency fee
The agency fee for residential properties is 3.18% of the selling price, inclusive of the Sales and Services Tax (SST).
Legal fee
The legal fee rates in Malaysia are as follows, based on the property’s price: First RM500,000 (1%); next RM500,000 (0.8%); following RM2 million (0.7%) and next RM2 million (0.6%). Say your property price is RM800,000 – you can expect to pay roughly RM7,500.
Average Time: Depends on you, it can take as short as 1 day if you are ready to pay.
Ultimately, you will have to take into consideration the time factor when selling off your property; if you are aiming for a higher selling price, you will have to be prepared for a long wait. If immediate disposal is a priority, then you might have to settle for a lower price tag.
Can I sell my house if I still owe the bank?
How to sell a house in Malaysia or how to sell property in Malaysia if you are still paying off a mortgage. The only thing preventing you from disposing your residential property before you have fully paid off your housing loan is your lender, because technically you don’t own the home outright if you are still paying your bank.
The easiest way to sell your house if you still owe money to your bank is to divest the asset for more than what you borrowed. Generally, lenders are willing to agree to a sale if they think they will be repaid the remaining housing loan balance. Your lawyer or property agent can work with your bank to prepare loan closing documents or a settlement statement. When the property is sold, those funds are utilised to pay the remaining balance of your mortgage and you can keep the remainder (if any) as profit on the sale.
Things get trickier if the home is not worth what you presently owe your lender. In that case, you may be able to work out a deal with your bank, wherein they are willing to accept a lower payoff amount for the housing loan once the asset is disposed. In some rare instances, a bank may agree to an assumption of the mortgage, wherein the new home buyer agrees to pay off the remaining debt. But they will likely need to meet certain income or credit requirements in order to do so.
Ultimately, you will have to take into consideration the time factor when selling off your property; if you are aiming for a higher selling price, you will have to be prepared for a long wait. If immediate disposal is a priority, then you might have to settle for a lower price tag.
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Edited by Reena Kaur Bhatt