The wife and I have been trying to sell our property for the last month or so and we've seen enough potential buyers to last us a couple of lifetimes.
On the upside, we've had quite a number of good offers but on the downside, each of them were first time buyers and were not prepared for the commitment, especially in terms of initial capital.
The first thing to remember, especially for a property in high demand, is that banks are conservative, and are under increasing regulation and scrutiny (especially recently). This means that the bank valuation for the property is, more often than not, going to lower than the price the current demand is buying for.
At the same time, if you're a first time buyer, you can get up to 90% loan approved on the bank valuation...which is not necessarily the purchased price. So let's say you wanted to purchase a property for RM 200,000 and the bank valuation placed it at RM 170,000, your 90% loan would only be RM 153,000. The initial capital needed goes up to RM 47,000 instead of your initially expected RM 20,000.
Next, there are legal fees and stamp duties which many buyers underestimate as well. Depending on the price of the property, these fees go up correspondingly and for a RM 200,000 property, it would be prudent to set aside around RM 8,000 for these fees, and miscellaneous expenses, or even more.
Suddenly, the capital needed goes up to RM 55,000 whereas you had only set aside RM 20,000 for the 10% loan and maybe RM 5,000 for the legal fees. And maybe that extra RM 10,000 you had stashed up to beautify the home added in is still insufficient to facilitate the purchase; you're still short RM 20,000.
So far, each buyer who met our asking price willingly has had the deal fall through because of the above so I thought I'd share for all the first time buyers out there to gain some knowledge.
Hope it helps and happy house hunting!
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