A Subsale Or Brand New Property?
When it’s time to spread your wings and fly (to adulthood, of course!), you’d almost certainly want to find a home to call your own.
You’re already aware of what kind of home you want and where it should be, but herein lies a small question that can either make or break your home ownership decision:
“Should I buy a subsale or brand new property?”
To put it simply, subsale properties are properties that you’ll be purchasing from an existing owner.
A family may move out of their home and put it up for sale, hence, this would be classified as a subsale property.
On the other hand, a brand new property (sometimes known as under-construction or “under-con”) has not been owned/stayed in by anyone before, as it comes fresh off the developer’s construction site.
Now that you know the (basic) difference between a subsale and brand new property, here’s another question to consider:
“What’s your budget?” It may seem easy to say, “Oh, my budget is RM500,000 for my home.”
Does that RM500,000 already include your Sales and Purchase Agreement (SPA) fees, miscellaneous legal fees, agent’s fees, and possibly construction/renovation fees?
If not, it’s important for you to know just exactly WHAT you’re getting yourself into, BEFORE deciding on purchasing a subsale or brand new property!
Pros, Cons, And Costs Of A Subsale Property
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Pros |
Cons |
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Able to see and get a feel of what the property and what its neighbourhood is like, as you can physically visit the place and observe the environment. |
Information about the property may be hard to obtain if the property is quite old. Hence, you’ll need to enlist a really good agent to help you research and/or dig. |
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Situated in a matured and centralised location. |
The price is as it is without any discounts or leeways, and you can’t bargain with the seller to sell it to you at a cheaper price. |
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The neighbourhood is well-established and you can do thorough checks on the amenities or facilities nearby. |
Only particular units or locations are available. |
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View the property as it is and buy it as it is. Love a long driveway? Get one that has it or renovate it! |
The property may look a bit run-down and require some work sprucing up, which amounts to additional costs for painting, renovation, etc. |
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Inspect immediately for any wear and tear on the house, especially if it’s been around for years. |
If you move in and after a few months you find something faulty, you cannot charge the previous owners for repairs. |
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Know your neighbours before you purchase. |
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If the location is already very matured and has no more room for new developments, you can rest assured that there won’t be any new properties springing up that’ll affect your way of living. |
As for the costs of a subsale property, be prepared to fork out for the following:
1) Valuation Fees
Depends on the price of the property, usually borne by the seller but can be pushed to the buyer.
2) Property Agent’s Fees
They help to negotiate and assist the buyer and seller to come to an agreement.
3) Downpayment
Always 10% of the property price, but you also need a minimum of 20% cash in hand.
4) Sale and Purchase Agreement (SPA)
Based on a price tier depending on the price of the property.
5) Memorandum of Transfer
Transferring the deed from the buyer to the seller and stamp duty charges apply.
6) Legal Fees
Costs of preparing and handling the legal documentation and passing it to the appropriate authorities, includes stamp duty charges and follows a price tier of the property’s purchase price.
7) Miscellaneous Charges
MRTA/MLTA for mortgage assurance, fire/home insurance, loan installment, interest, deposits for utilities, repair/renovation, maintenance, etc.
Pros, Cons, And Costs Of A Brand New Property
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Pros |
Cons |
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Easy to find information about the project and view the showhouse. |
Long waiting time until the home is completed. |
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May have special rebates or discounts/offers to encourage and entice home buyers (legal fees borne by developer, stamp duty exemption, minimal downpayment, etc.) |
May run the risk of the construction of the building delayed due to external/internal issues or worse, the project being abandoned! |
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Attractive prices compared to current market prices. |
Doesn’t have the feeling of a proper neighbourhood so you and your neighbours will need to spend time to build the community. |
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New and never-used-before facilities that are in good condition. |
New or different projects may be built in the vicinity that are not in the township’s planning. |
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Flexibility in choosing the unit type, facing which direction, which floor plan, etc. |
If the property is still under construction, it may be harder to resell it and you may also experience negative cash flow. |
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Modern and unique design that can’t be replicated. |
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24 months defect liability period where the developer must fix any issues related to the home’s built. |
While a brand new property is what many of us dream of, don’t forget about the costs of one:
1) Downpayment
A minimum of 10% or however much the bank is willing to lend you. In certain cases, the developer will have a special programme that requires less than the 10%, or nothing at all until the development is completed.
2) Sales and Purchase Agreement (SPA)
Based on a price tier depending on the price of the property.
3) Legal Fees
Costs of preparing and handling the legal documentation and passing it to the appropriate authorities, includes 5% stamp duty charges, 6% government tax, and disbursement charges.
4) Memorandum Of Transfer
Transfers ownership of the property to the rightful owner 6 months after the completion of the property. Charged based on a tier price and 6% government tax and disbursement charges.
5) Miscellaneous Charges
MRTA/MLTA for mortgage assurance, fire/home insurance, loan installment, interest, deposits for utilities, repair/renovation, maintenance, etc.
But… Which Property Is The One For Me?
Property ownership is subjective as it’s truly to each person’s own, and how they decide to make the best out of what they have. Choose a property that’s within your budget and requirements.
If you’re looking for property for your own stay and use, a brand new property is good for peace of mind (in the first few years, anyway) and there are great rebates to encourage home ownership.
Nevertheless, if the new home you’re looking for is situated out of the way, a subsale property is a better choice as it’s located in a strategic and mature location.
As for investment purposes, new properties are appealing for their modern aesthetics, although there’s the risk of the project being abandoned or not completed on time.
Whereas subsale properties can be easily rented out as soon as you have ownership of it.
Now that you have a rough understanding of what you’re getting into when you purchase a subsale or brand new home, you can now start planning your budget accordingly.
But before that, you need to make sure your credit score is as healthy as can be, so your home loan application has a higher chance of approval!
Photo credit to www.inventory-planner.com
