Since I sold my house lately (last year), I try to share the Sales and Purchase (S&P) agreement process here with you. This is only applicable in Malaysia. Hope this is going to be useful to many of you since I can't find this information else where in the internet.
Firstly, you need to get a lawyer. There are 2 scenarios:
- Buyer and seller use the same lawyer (First scenario)
- Buyer and seller have their own lawyer (Second scenario)
For the first scenario, the buyer is protected and the seller is not. That means the lawyer will stand on the buyer's perspective and only charge the seller's for the basic processing fee. The lawyer's fee for seller in this case will be very minimum (i.e.g ~80% less the second scenario).
For the second scenario, both buyer and seller are protected by their own lawyer. This also means the process will take slightly longer. For example, seller's lawyer drafts the S&P and the buyer's lawyer will review it and etc. There are a lot of back and forth "official" communication to basically make sure both parties interests are protected.
Which one is better? It is more on the seller's choice, the buyer is more or less the same. In short, you can choose first scenario if you trust and know the lawyer and you want to save cost and vice-verse. :) It sometimes also depends on what type of buyer that you have.
S&P Agreement Process
1. Letter Option to Purchase (2%)
This is a letter from seller to buyer. The buyer will need to pay the deposit (usually is 2% of the selling price - up to seller to decide) upon signing this letter. The payment is made directly to the seller. If you have agent, the agent will draft this letter for you. If you don't have an agent, get a lawyer to draft this letter for you.
Once this letter is signed, the S&P agreement must be signed within 15 days. Within this period, the buyer will try to get a bank loan unless he/she is buying with cash. If the buyer fails to get the bank loan, he/she can void this letter and get back the deposit. Of course the buyer needs to show proof.
2. S&P Agreement Signing (8%)
Upon signing this agreement (within 15 days), the buyer will need to pay the remaining 8% to the seller's lawyer. If the buyer fails to sign this S&P agreement for some reasons, the seller can then take the deposit and start looking for another buyer.
When the seller's lawyer receive the 8%, he/she will withhold the 2% for Real Property Gain Tax (RPGT), requirement by the law and gives the remaining 6% to the seller. From seller's perspective, you will get 8% (i.e. 2% + 6%) of the total selling price. The lawyer will take care of the seller's RPGT stuff with the income tax office.
3. S&P Agreement Completion (90%)
To complete the whole process, the buyer has 3 months period to basically pay the remaining 90% of the selling price to the seller. If the seller has loan, the buyer must settle the seller's loan within this 3 months. These all go through the lawyer as a middle person. However, after 3 months the buyer fails to make the 90% payment, the seller will charge the buyer for 6% interest. Buyer will want to avoid this from happening.
Final Notes
If you have agent, you will need to pay for agent fee. It depends on your agreement with your agent how much you need to pay or follows the standard in the state (cause different states in Malaysia do this differently). Most agent will want you to pay the agent upon signing the S&P buy I would suggest you to pay only until the whole process is complete which is after 3.5 months. You can negotiate this with your agent.
Hope this gives you an high-level of the entire process! Let me know if you have any comments or questions. Also, you don't necessary need an agent to buy or sell a property, but you need to have a trust-able lawyer to protect you. Good luck!
13 Comments:
Hi there! Thank you for sharing. Do you have a sample of the spa? Thanks.
I think you should able to get it from your lawyer.
Hi,I would like to check is that appropriate for buyer to use seller lawyer, will this caused buyer in disadvantage position? thanks.
The advantage of it is the lawyer fee will be a lot cheaper but I can't remember how much cheaper. The disadvantage is your lawyer could be siding the seller and not explain everything to you clearly in the contract. So it is definitely in the disadvantage position. It is a matter of trust - how familiar are you with this lawyer.
If you don't know anything about this lawyer, I would recommend NOT to use the same lawyer. Get your own lawyer and pay a little bit more.
Hi, i have a problem here. Hoping that you could share some advice on this matter. A letter of option to purchase beneficial interest in estate of a bungalow lot which the deed is still under the deceased name, the intend puchaser is a conpany which the seller have interest on, how can i go about this, as i myself owned 14/80 of the same bungalow. Thank you
When/which stage the original title deed handover to seller lawyer? After SPA signed or full payment by buyer?
The title needs to be transferred to the buyer prior the completion (before the full payment).
@Liza Azman, sorry for the late reply and I don't think I can help much here. I think it is better to get an official advice from a solicitor.
What happen if the buyer refuse to pay the balance 8% deposit stating bank will pay coz he mark up the purchase price
It really depends on the letter option to purchase agreement. Usually if the purchase price is changed, the letter option to purchase agreement should be void.
We are using the buyer's lawyer to handle our end. The redemption for our bank loan is completed. We are now waiting for the lawyer to pay us the balance. He seems to be taking his time. Any advise on this?
How long does it take? If it is too long, you can call the buyer's directly and get him to push his lawyer.
How long does the bank takes to release the balance 90% ? The lawyer had furnished them all the relevant documents.
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