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This guide will go into detail on the documents that a property buyer will need to sign when purchasing a property.
Prior to this, there were the guides to planning your budget, selecting the right property, and obtaining your mortgage loan.
Following up here, is a guide on the documents that you will need to sign upon receiving your Letter of Offer (also known as 'Offer Letter').
Upon selecting your preferred bank with the best interest rates and obtaining your Letter of Offer(s), the next step is to decide which bank is giving you the best offer if you have more than one Letter of Offer.
Upon selecting your preferred bank, you will then need to be prepared to sign a number of documents.
Whether you are buying a new residential development, a subsale residential development or buying a commercial property, the following documents do not differ. They are all necessary for the purchase of a property.
1) Signing the Letter of Offer
Upon selecting the bank which provides the best offer, the borrower will then need to sign the Letter of Offer.
Both parties will need to agree on the price, and upon agreeing to sign the Letter of Offer, the borrower will then need to pay an earnest deposit of 2% to 3% of the purchase price.
The deposit of 2% to 3% is usually paid to a neutral party, often an agent as a stakeholder account. The agent is often referred to as an escrow agent - a grantee.
The remaining amount of the purchase price, which adds up to 10%, is usually paid after the Sale and Purchase Agreement is signed.
The details that a Letter of Offer will provide are as below:
- Legal names of vendor and buyer
- Price agreed upon
- Amount of deposit
- Any items included in the sale
- Date before which the SPA must be signed
2) Signing of the Sale and Purchase Agreement (SPA)
Following the Letter of Offer, the purchaser will next need to sign the Sale and Purchase Agreement (SPA).
Property buyers are usually given a period of between 2 to 3 weeks to sign the SPA agreement, otherwise they will need to ask the bank for an extension of the Letter of Offer.
Within the time period allocated, the property buyer’s lawyer will need to draft the SPA, conduct the relevant title searches, and get both the buyer and the seller to agree to the various clauses.
Upon both parties reaching an agreement, the SPA will then need to be signed in front of the lawyers. A few copies of the SPA will be created, which the purchaser will need to sign all the copies.
It is during this period that the remaining of the down payment will need to be paid. So if the purchaser has already paid the 2% or 3% during the Letter of Offer stage, they will now need to pay the balance.
The typical causes of delay in this stage is when the money for the balance is stuck in a Fixed Deposit account, or is located overseas.
In these situations, there might be delays in transferring the money back to Malaysia to make the payment.
Upon receiving the balance of the money, the purchaser will then need to sign all the SPA copies.
However before signing, the purchaser will first need to ensure that all the critical details are accurate. The details that should be checked and must be correct are:
- IC numbers
- Property premises
- Ensure that all additional details - such as parking lots - are stated in the SPA
- Ensure that all details promised by the sales agent such as additional air-conditioning units, renovations and furnishings are stated in the SPA
3) Signing the Loan Agreement
Upon signing the SPA which dictates the terms between the buyer and seller, the next document that the purchaser will need to sign is the Loan Agreement.
The Loan Agreement is the agreement that is signed between the purchaser and the bank. This document will state all the terms of the loan.
The Loan Agreement is usually skewed to the bank’s interest, protecting the bank. The costs of creating this document will however be borne by the purchaser.
If necessary, a Deed of Mutual Covenant will also have to be signed. The Deed of Mutual Covenant (DMC) is an agreement that is usually applicable only to multi-unit or multi-storey building.
It regulates the rights of the owners, and all the subsequent owners of the unit. The terms that a DMC may include are as below:
- Pets cannot be kept in the building
- Units cannot be used for commercial activities
- Who should specify the management fees
- How to appoint a building manager
- Matters pertaining to the maintenance of renovation of the building
Another document that the purchaser may need to sign is the Memorandum of Transfer (MOT).
The MOT is a document that is signed to change the ownership of the unit from the previous owner to the next owner.
Purchasers of completed subsale developments will be able to sign the MOT immediately – which will require payment.
Purchasers of developments still under construction will need to wait for the development to complete, and wait for approximately 6 months before they will be able to sign the MOT.
The next guide will explain the documents and fees that will need to be paid upon Vacant Possession of the development, and the Handover of Keys.