Step by Step Guide To Buying A House – The Agreement
This is the long awaited sequel to the Step by Step Guide to Buying A House. In our previous article, I have discussed the pre-purchase steps which a buyer of a house should take. In this article, I will share with you what are the common understanding between the vendor and the buyer which are reduced into writing in the form of a Sale and Purchase Agreement.
A Sale and Purchase Agreement (SPA) will contain salient information like the vendor and the buyer’s personal details as well as a detailed description of the house being sold. It will also stipulate the total purchase price which is made up of the deposit payable and balance purchase price. The timeline for payment of the total purchase price is also stated in the SPA and it is not uncommon for the timeline to be based on 3 months plus an extension of a further 1 month.
Apart from the identities of the parties, description of property, pricing and timeline, the SPA will also include the rights and obligations of both parties during the course of the SPA. There are many things which the parties may need to do. Taking our earlier example wherein the house is currently charged (mortgaged) to a bank, the vendor will be obliged to obtain a Redemption Statement cum Undertaking from his bank in favour of the Purchaser or the Purchaser’s Bank. This Redemption Statement will indicate the amount which is payable to redeem the property by reason of the loan taken by the Vendor. The SPA will also include various warranties by the Vendor eg, that the property is not subject to any acquisition by the relevant authorities, that the quit rent and assessment has been duly paid and that the Vendors are not undischarged bankrupts.
With so many terms and conditions present on the SPA, it is highly advisable that each party appoint his own solicitor to look after his interests. As explained in one of my earlier articles on the scale legal fees for sale and purchase of properties, a solicitor may not act for both vendor and purchaser in the same transaction.
After the vendor and buyer are satisfied with the terms of the SPA, the SPA is then executed by the parties and subsequently stamped at the Stamp Office. Time begins to run and the parties would be guided by the SPA on what they need to do before the property is ultimately registered in favour of the buyer’s name and keys are passed.
Step by Step Guide To Buying A House – Part 1
Buying a house is probably one of the biggest investments a person makes in his lifetime. Not only does it cause a dent in the buyer’s pocket, the whole process of buying a house can be down right daunting and intimidating as the buyer has to deal with various parties for instance, the property agent, banker, lawyer and utility companies. I hope this series on step by step guide to buying a house will assist you in your hunt for a home.
To start off, some matters need to be mentioned. The house in question is a double-storey terrace house which is currently charged to a bank by the Vendor. It is situated on freehold land and individual title has been issued by the Land Office. The house is marketed for sale by a property agent and upon viewing the house, negotiation takes place on the purchase price. The buyer should insist on having a copy of the title or at least the title particulars so that a search can be conducted on the title at the Land Office to ascertain the identity of the current owner of the house and the existing encumbrances on the house.
Once the buyer is satisfied with the condition of the house and the purchase price, a booking fee is paid to secure the sale of the house. In this connection, the usual booking fee imposed in Klang Valley is 2% of the purchase price. Payment is made in favour of the property agent’s firm and a simple agreement is executed by both the vendor and the buyer on the important terms of the sale.
The agreement would usually include the names of the vendor and buyer, their correspondence addresses, subject property for sale, purchase price, period for payment of balance purchase price, default and dateline for signing of the formal sale and purchase agreement.
The buyer is given a receipt by the property agent for his booking fee and a copy of the simple agreement. Thereafter, the buyer has to appoint a lawyer to begin preparation of the formal sale and purchase agreement and to protect his interest throughout the transaction. In this instance, the minimal documents which the buyer is required to forward to his lawyer would be a copy of his identity card, copy of booking receipt, copy of the simple agreement, particulars of the vendor’s lawyers, buyer’s income tax number and submission branch, copy of title to the house and copy of vendor’s loan agreement. If the buyer does not have some of the documents, especially the documents which are in the vendor’s possession eg. the loan agreement, the buyer’s lawyers would write to the vendor’s lawyers for a copy of the same.
To be continued in Part 2. If you don’t want to miss Part 2, subscribe to this site’s feed for free so that you can be updated automatically.
