Selling a Subsale Property: A Know-How

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See also: Buying Property as a Foreigner in Malaysia 

Parting with a big-ticket item

Your home is a product of your blood, sweat and tears. So it should come as no surprise that selling it away can be a bittersweet affair. Plus, the journey to getting one is arduous, and the time it takes to foot your housing loan is no less easy either. Typically, most people expect their first homes to be their last, but sometimes that just isn’t the case.

Most people part with their homes for a number of reasons, with money being the biggest motivating factor. Some others with the intention to purchase a second home elsewhere or to relocate either in or out of Malaysia. Then you have the property players, who buy houses to build equity. These folks put no feelings whatsoever into their transaction.

Lastly, you have those who are selling their family homes. The place that they were raised in and formed long-lasting memories. Selling a family home is a heartbreaking moment because it involves saying goodbye to some of your fondest memories.

Either way, the decision of letting go a home is never easy, as is the process to sell it.

Setting the record straight

Let’s get one thing straight before we go on. Selling your home is known as selling a subsale property. What is a subsale property? Put simply, a subsale property is a property that is sold under an owner à owner fashion. In other words, it’s a second-hand property.

For obvious reasons, subsale property does not include properties purchased in a developer à owner manner. Additionally, the act of selling your home is known as liquidating your asset, which means turning your home into cash.

Additional factors

Selling your home is a straightforward but lengthy process, owing to the paperwork and additional costs that you will incur along the way, much like buying a home. Here are several costs that you should expect when parting with your home.

• Real Property Gains Tax (RPGT)
• Quit rent
• Parcel rent
• Assessment rates
• Legal fees
• Agent’s commission
• Miscellaneous costs
  • Personal advertisements
  • Upkeeping fees
  • Maintenance fees

RPGT

Real Property Gains Tax (RPGT) is a form of tax that applies to the seller if they have successfully sold off their property. It is also commonly termed disposal of property. Depending on the age of the property, sellers are taxed between a rate of 5 – 30%. Here’s a quick breakdown of that.

A rule of thumb is to realize that the newer your property, the higher the tax imposed. 

Quit rent

Quit rent is the basic form of land tax imposed by the state government to homeowners, and the price you’re expected to pay is determined through the following formula:

Rate imposed / The size of your home (measured in square meter)

Quit rent varies from one state to the other, with some state government segregating their houses into urban and rural areas. Additionally, their method of calculation may differ slightly too. You can learn about the rates imposed by your respective state government here.

A word of advice, quit rent is the most overlooked tax payment for homes. Most homeowners tend to commit the blunder of neglecting it to the point of overdue. At which point the state government starts imposing a penalty on the bill, eventually snowballing into a hefty amount that leaves many in dismay.

In short, before selling your home, be sure to check your quit rent and clear off any outstanding balance if you have any.

Parcel rent

The alternative to quit rent which was introduced by the government for stratified properties. Parcel rent is currently seeing use in Kuala Lumpur, Penang and Selangor where strata properties are the norm.

A little backstory. Quit rent applies to landed property only, as landed properties are seen as a standalone unit. However, strata properties concern condos, apartment and houses within a gated community that share common facilities.

This meant that the government had a hard time translating the effects of quit rent onto strata properties, as there were numerous owners under one building, which in turn affected certain individuals who seek to sell their homes under a stratified title.

This creates a tricky situation, in that if one person within a strata property does not pay up his or her quit rent, the rest of the parties would be penalized too.

To minimize the complications associated with quit rent and strata properties, the government replaced it with parcel rent. In this case, homeowners living in strata properties are seen as “part and parcel” of a property, hence its name.

Parcel rent charges a hefty amount compared to its sister rent, but it is beneficial for strata owners looking to sell off their homes in that the system does not unfairly punish them based on others’ mistake.

To summarize the talk about parcel rent, homeowners living in a strata property and looking to sell it will have fewer obstacles in doing so now that quit rent is replaced with parcel rent.  

Much like quit rent, parcel rent is calculated based on the size of your home plus the accessory parcels, meaning the facilities and amenities around you.

Assessment rate

Consider this the “maintenance fee” charged by your local councils. Assessment rate relates to the upkeeping of public infrastructures within your neighborhood. Think

•  Keeping the drains clean
• Collecting municipal wastes
• Maintaining public lamp posts
• Any other services associated with keeping the neighborhood sparkly clean

Typically, homeowners are charged a rate between 2 – 7% for assessment rate, and the amount incurred increases the bigger and fancier your property is. Meaning a homeowner living in a semi-detached home will pay more compared to someone residing in a condo.

Legal fees

Lawyers are responsible for drafting the Sales and Purchase Agreement (SPA) and the Letter of Offer, which will be presented to your prospective buyer. Furthermore, they also offer advice pertaining to any sales-related matters regarding your home from a legal standpoint.

As such, it should come as no surprise that legal fees will be involved. Here are the rates you can expect yourself to fork out when consulting a lawyer.

Agent’s Commision

Assuming you have enlisted the help of an agent to sell your property, you would be charged with a static rate of 3% upon successfully selling off your property. In fact, most property agents provide a one-package-fits-all promotion too, meaning they’ll advertise your home and take over any house viewing affairs for you.

Miscellaneous costs

Miscellaneous costs in this context refers to the expenditures incurred by the seller that are irrelevant to any government or legal matters.

• Advertising Fees

Although property agents do provide advertising services on behalf of their clients, some sellers would still personally advertise their property from time to time. Alternatively, some sellers would personally advertise them online because they do not rely on property agents for any sales-related assistance. Commonly known portals to advertise your property include iProperty and Mudah.my.

• Upkeeping fees

Maintaining the appeal of your house is crucial in increasing its attraction factor to interested buyers as well as to keep its value afloat. It is also one the ways to build equity.

Common upkeeping practices include renovation works, furnishings and maintenance works. All which naturally incurs additional money.

• Maintenance fees

Maintenance fees are the sum that you pay for the general maintenance conducted by the management on a monthly basis i.e., safeguarding your property or keeping the facilities running as intended.

Generally, maintenance fees are more prominent for stratified owners, less so for those who own a landed property.

The process

Now that we’ve talked about the additional costs, it’s time to put our plans into motion.

To be fair, there is no hard and fast way to sell your home. Some might start off by appraising their homes first, before getting the property agent to do the selling. Others may simply do their own research, do the advertising on their own and enlist the help of a lawyer to draft a SPA. Although those who generally take matters into their own hands to sell are far and few in between.

Overall, selling your home can be a fluid process, so long as you tick the basics off the checklist. However, if you are new to selling your home and don’t know where to start, here’s a simple list to get you going.

1. Clearing off any existing debts
2. Fix any faults at home
3. Researching the market
4. Seeking the right professionals
5. Prettying up the place
6. Negotiation
7. Formalizing the deal
8. Sealing the deal

Clearing off any existing debts

It goes without saying that you should ensure that all debts associated with your home are cleared off before anything else. From quit rents to maintenance fees, these outstanding amounts can easily derail your plans of letting go of your home, particularly quit rents for the reason we’ve talked about above.

The only exception to debts are housing loans, which allow you to build equity over time and turn that into a monetary advantage. Say your house currently costs RM500,000, and you’ve made a 10% payment which is RM50,000. You also receive a 90% mortgage from the bank, which brings the outstanding amount to RM450,000.

Let’s assume you’ve paid off RM200,000 over the years, which brings the total amount paid to RM250,000. That amount will now be your home equity. With home equity, you can do two things.

• Get RM250,000 richer
• Convert the amount into a home equity loan

Beware however, as home equity loan is still a new concept that is hardly practiced in Malaysia. And the banks that happen to do so are few.

To summarize, be sure to clear off all outstanding amounts before selling your home.

Fixing any faults at home

Defects and faults in old homes are pretty prominent in aged homes and most times, the wear and tear shows. If your house is showing some defects, it may be wise for you to spend a sum of money to patch the broken bits.

A house’s value can appreciate or depreciate over time for various reasons, but faulty homes are guaranteed to lower that value by a huge margin.

It’s pointless hiding or covering up faults with a quick band-aid solution, as they will merely be uncovered sooner or later down the road, which will lead to bigger problems or losses i.e., placing your housing price below the market price or getting entangled in a legal/property lawsuit.

Researching the market

Having prior knowledge of the market prices is rudimentary in determining a price for your home, but a majority of Malaysians selling their homes still fail to realize the importance of doing so.

What more, Malaysia has seen a serious case of property overhang in the past years, which means there’s more supply than demand for houses out there. It doesn’t help that we live in a time of Covid-19 either, where people adopt a prudent mindset when purchasing big-ticket items.

In turn, this has shifted the property market to a buyers-oriented one, meaning buyers hold a larger bargaining chip and have more power in swaying the property prices.

Put simply, having prior knowledge about the property scene will give you an edge in selling your home, instead of blindly slapping a price and shooting in the dark in the hope of landing a sale.

Seeking the right professionals

There are two parts to this section – One, getting a property agent to do the selling. Two, consulting a lawyer.

• Property agents

First off, there are two types of property agents that you will encounter in the market – Real Estate Agents (REA) and Real Estate Negotiators (REN). Both roles are unique and hold different responsibilities. Traditionally, you are bound to encounter more RENs than REAs, given a REA can employ up to 50 RENs under their belt.

Enlisting the help of a reputable and credible property firm is crucial to selling your home, as it ensures that your property falls under good hands and prevents any potential property frauds from happening.

We have an entire article dedicated to discussing the professional difference between a REA vs. REN. If you are interested in learning more about the two, consider giving this article a read.

• A lawyer

As previously mentioned, you will require the services of a lawyer to assist you with any legal paperwork. Additionally, they will be in charge of presenting all legal documents to your prospective buyer to seal the deal.

Prettying up the place

You might be selling a home and getting bogged down with all the necessary paperwork, but don’t forget to make your place look fine and dandy for house viewing purposes.

Prettying up isn’t necessarily adorning your place with a plethora of furniture. It can be as minimal as fixing any defects ahead of time or tidying the place. In fact, vacating the place counts as one too.

Either way, you want to ensure that your home is presented in the best light possible when a buyer shows up, lest be they leave with a bitter taste in their mouth and turn their backs on your home.

Negotiation

Say someone has taken a liking to your place and is mentally running some calculations in their head now. Good for you. This means they are potentially interested in owning the place and would like to talk about the price.

Negotiation is a necessary evil in any transaction, including buying a home and you should be well prepared to put up with the back and forth from a buyer sometimes. This is where your prior research will come in handy. Knowing your stuff allows you to negotiate with the buyers effectively, in the events they try to lowball you.

Unfortunately, negotiation itself is in art. You may be talked into letting go of your home at a lower price or you will stand your ground and defend your price. Either way, the key here is to be patient.

Formalizing the deal

If the buyer has agreed to your asking price, the next step would be to contact your lawyer and get them to come up with the relevant documents. Your lawyers will proceed to draft the Letter of Offer for the buyer.

Additionally, the buyer is required to make 2-3% upfront payment too, known as an earnest deposit. The amount paid will contribute to the 10% down payment on their end.

When reviewing your Letter of Offer, it’s important that you scan for the following:

• The seller and buyer’s name
• The property’s address
• Agreed price
• Earnest deposit required
• Latest date to sign and return the SPA
• Terms and condition pertaining to the earnest deposit
• Inclusion of any furniture or fittings (if any)

Included with the Letter of Offer will be the SPA, which is the legal document to officiate and formalize the transfer of ownership from seller à buyer.

Sealing the deal

Congratulations! You have successfully sold your property. All that’s left is for you to tie up the loose strings on your end and you can finally close the chapter to your book.

This is the point where you will have to pay a portion of your cut to the government under RPGT. As for payments, you can expect anywhere between 90 days – 24 months for the banks to transfer the money to you. Generally, most property sales require a 90-day processing to be finalized, though the timeline may vary depending on whether your property is freehold or leasehold.

Final words

Parting with your home is already difficult enough as it is. If you have trouble letting go of your place still, here are some words of wisdom to stick by.

Never get emotional

It’s easy to allow your feelings to get the best of you. After all, this is your very first home we’re talking about. Things can even get harder if it’s your family home. The key thing to remember here is to detach yourself from any sense of sentimentality to your home the moment you’ve decided to sell it.

You are now an entrepreneur. Focus on the financial gains and downplay the emotional aspects that come along with it. Your goal is to sell off the house and get the money that comes along with it. Stick to your goal and you’ll have an easier time being objective.

Don’t highball your price

Just as buyers should never lowball your asking price, you should never highball your asking price either. There’s a fine line between setting a slightly higher price vs. highballing. And things rarely end well for an overpriced home.

It’s always better to consider a buyer who lowballs, and slowly work your way towards a negotiation that both parties can settle for. This doesn’t happen if you highball your price, as people are more inclined to turn away without even negotiating at all.

Be patient

Selling a home isn’t the same as selling pre-loved clothes. Big-ticket items usually take time and in most cases they don’t happen overnight. Unless you’re extremely strapped for cash, it takes a while to locate a promising buyer.

As the saying goes, willing buyer willing seller. If you’re certain about the price that you want, stick to your guns and wait patiently because good things come to those who wait.

Skimping on listing photos

Visual cues are everything. Apart from furnishings, spend time taking presentable pictures of your home too. Having a good set of photos that present your home in its most attractive light will help set your home apart from the rest, which means more attention and prospective buyers.

If you’re not a good photographer, fret not, there are tons of resources out there that teach you ways to snap a good shot of your place. It’s all about the angle, lighting and positioning.

Accommodating to your buyers

Be it a buyers or sellers’ market, or the fact that you or your property agent is the one in charge of handling any house viewing, you should always strive to accommodate to your buyer’s schedule and preferences if possible.

Yes, things can sometimes get demanding but it is fundamentally a part of the customer service, which would go a long way in making an impression for your buyers. Remember, your goal is to sell the property and get the money that comes along with it.

Summary

Selling a property is a once in a lifetime experience for many. It is exhilarating, heartbreaking and unforgettable altogether at the same time.

The process can at times be frustrating, and you may be inclined to back out of the deal for emotional reasons. But if you can stick to your guns and remain impartial all the way through, you’ll find that a rewarding experience awaits you at the very end of the finishing line, waiting for you to savor it.