Sunday, April 12, 2009

House Purchase: 2005

After renting for nine years, we jumped at the chance to buy a house that was in a very central location and close to:
  • work
  • the beach
  • the park
  • the city center
and yet is on a dead-end road, thus, eliminating drive-through traffic. To top it off, the house was in a neighborhood reminiscent of a Malay kampung; in fact, there is a kampung next door full of the stilt-style wooden houses. Indeed, my Malay neighbors think of our neighborhood as their kampung-in-the-city and have planted fruit trees and vegetable bushes in the strip of land just outside their compound fences.

We had been looking for houses by using a Chinese realtor. She seemed to think that we were rich expats on an expat package when in fact I have always been on the local salary scheme. After looking at houses that were over-priced and with under-whelming quality, we decided to take a break from the hunting.
(2005 Photo)

One of my wife's friends told her about this abandoned house close to her apartment and we hustled over to take a look. Sure enough, we found a house missing both front and back doors. We did a walk-through and saw much rubbish, and a place in dire need of cleaning! But, there was no FOR SALE sign, and the next-door neighbor said that they owner lived far away and was probably NOT interested in selling. ("If he was interested," said the neighbor, "I would buy it.") I passed my phone number on to the neighbor, but it didn't seem possible that he would make contact with the owner.

Several months later, we were showing a prospective retiree couple around at houses and decided to show them what we might consider buying, if it was available. To our surprise, the house appeared to have been cleaned, with new doors, and there was a FOR SALE sign on the gate. The very next day, we contacted the realtor and after a 5-minute walk-through the minimally-remodelled house, we negotiated a purchase price with the realtor, and gave him a cheque of RM3,000 to show our earnestness. The seller came back with an approval, and we signed a Sales & Purchase agreement in June 2005. Little did we know then, but it would take over a year for the S&P to close.

Our S&P agreement had to approved by three different governmental bodies: the Foreign Investment Committee (FIC), the Malaysian Land Office (MLO), and the Governor's Office (Menteri Besar). The first two took only two months each, and were handled by our Malay lawyer. We ended up paying the lawyer around RM6,000 for all of the work including the S&P agreement, and the issue with the governmental bodies. In the end, the lawyer's fee was 3-4% of the total purchase price.

The Office of the Mentari Besar took much longer: nine months in our case. This was required for the house that we purchased has the following Restriction-in-interest: "Tanah ini tidak boleh dipindahmilik, dipajak, digadai melainkan dengan kebenaran bertulis daripada YAB Menteri Besar Pahang." (This land cannot be transferred, leased, or mortgaged without the written permission of the Mentari Besar of Pahang state.) I was told that it was to protect older Malays from being cheated out of their land and, in fact, one of my younger Malay colleagues told me that she and her husband also had to get permission from the Mentari Besar's office when they made a house purchase.

The house is on lease-hold land, with 99 years of permission, and we have around 70 years remaining. Some neighbors think that the government will eventually turn the lease-hold land into free-hold, especially since the neighborhood is nearly all Malay owned and occupied, especially by retirees.

One major benefit that Malaysia has over some of its Southeast Asian neighbors is that as foreigners, we can own property in our own name.
(2009 Photo)

1 comment:

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