Additional Cost You Should Know Of When Buying A Lelong Property In Malaysia
Table of Contents
Buying a lelong property in Malaysia is very similar to buying a property on the secondary market. You will have a certain cost that you have to prepare for, rather than just the final bidding price. Of course, the cost differs from case to case, depending on whether you’re self-financing the purchase (cash purchase) or applying for a loan.
These additional costs are the extra charges you may face on top of the 5/10% deposit to enter the bid if you have won the bid.
Summary Of Additional Cost To Prepare When Buying A Lelong Property
- Remaining 10% Balance Between Reserve Price and Successful Bid Price
- Loan Sales and Purchase Agreement (SPA)
- Memorandum of Transfer (MOT)
- Loan Sales and Purchase Agreement (SPA)
- Loan Stamp Duty
- Unit Outstanding Charges
- Extension of Time Penalty
The total is estimated to be around 7–10% on top of your purchase price.
Remaining Balance Between Reserve Price And Successful Bid Price
After you have won the auction, if you are not the single bidder, it would mean that there are other bidders competing with you. Thus, your initial 10% deposit will be lower than the new 10% of the successful bid price.
For example, if the lelong property has a reserve price of RM900,000, you will have placed a deposit of RM90,000. If you win the auction at RM1,000,000, the new 10% will be calculated at that price. This would mean that your 10% will have to be RM100,000 (10% of RM1,000,000).
You will have to top up the remaining balance of RM10,000 to make it 10%.
Sales and Purchase Legal Fees
Buying an auction property in Malaysia is similar to buying a property off the secondary market (subsales). You will have to appoint a lawyer to prepare the Sales and Purchase Agreement (SPA) for your purchase. Please note that the legal fees may have some miscellaneous costs, which you will have to prepare.
If you win an auction bid at RM1,000,000, these are the legal and stamp duty costs that you have to prepare in advance: –
| Formula | Rate | Total |
|---|---|---|
| First RM500,000 | 1.25% | RM6,250 |
| Next RM7,000,000 | 1% | RM5,000 |
| Subsequent Purchase Price | Max 1% | - |
| Total Legal Fees | RM11,250 |
SPA Legal Fees Calculator (RM1,000,000)
Winning an auction with property valued at RM1,000,000, your legal fee estimation is around RM11,250 for the sales and purchase agreement. There are other miscellaneous charges as well, up to RM1,000.
RM11,250 + miscellaneous can be estimated to be around 1.3% of your property purchase price.
Memorandum Of Transfer (MOT) Or Admin Charges
Memorandum of Transfer charges occur when the property transfers from one name to another. Depending on the case, the property may still be under a master title.
If the property title has been issued to an individual (non-LACA cases),
- One-time MOT stamp duty charge from the defaulter’s name to your name
Below is the calculation of stamp duty charges for a memorandum of transfer for a property valued at RM1,000,000.
| Formula | Rate | Total |
|---|---|---|
| First RM100,000 | 1% | RM1,000 |
| Next RM400,000 | 2% | RM8,000 |
| Next RM500,000 | 3% | RM15,000 |
| Thereafter | 4% | - |
| Total Stamp Duty Charges | RM24,000 |
Memorandum Of Transfer (MOT) Stamp Duty Charges (RM1,000,000)
The memorandum of transfer (MOT) charges to acquire an auction property; one MOT charge valued at RM1,000,000 will cost you around RM24,000. This is around 2.4% of the purchase price.
If the property is under a master title (LACA cases), the developer can either:
- Direct Transfer with admin charges (8/10 times of LACA cases)
- Title has been issued (one-time MOT) (1/10 of LACA cases).
- Indirect transfer (Double MOT) (1/10 of LACA cases)
| Direct Transfer With Admin Charges | Up to 1% Of First SPA Price | Max RM13,000 |
| Title Has Been Issued (One Time MOT) | Follow Rate From SPA MOT Stamp Duty Charges | RM24,000 |
| Indirect Transfer (Double MOT) | Follow Rate From SPA MOT Stamp Duty Charges X 2 | RM48,000 |
LACA Cases Memorandum Of Transfer (MOT) Charges (RM1,000,000)
Buying LACA lelong properties will incur additional charges of up to RM48,000 for the Memorandum of Transfer. This would be around 1% to 4.8% of your purchase price.
Loan Legal Fees & Stamp Duty
If you are planning to take a loan for your purchase, then you will have additional legal fees and stamp duty charges for the loan agreement.
For this example, we will take RM1,000,000 as an example with a margin of finance of 90% (RM900,000).
| Formula | Rate | Total |
|---|---|---|
| First RM500,000 | 1.25% | RM6,250 |
| Next RM7,000,000 | 1% | RM4,000 |
| Subsequent Purchase Price | Max 1% | - |
| Total Legal Fees | RM10,250 |
Loan Agreement Legal Fees Calculator (RM900,000)
| Formula | Rate | Total |
|---|---|---|
| Loan Sum | 0.5% | RM4,500 |
| Total Stamp Duty Charges | RM4,500 |
Loan Stamp Duty Charges Calculator (RM900,000)
Based on the calculation, if you are purchasing an auction property for RM1,000,000, your loan legal fee charges (RM10,250) and stamp duty charges (RM4,500) will total up to RM14,750.
RM14,750 will be around 1.5% of your total purchase price.
Outstanding Charges Of The Property
When buying a lelong property in Malaysia, you may incur additional costs for the defaulter’s outstanding charges. Outstanding charges may include the following:
- Quit Rent
- Assessment
- Maintenance Fees
- Sinking Fund
- Water Bill
- Indah Water
For LACA cases (Bank Lelong), most cases will cover all of the items above (6 years before the auction date) except the water bill and indah water. However, you do need to prepare additional funds as you will have to pay the outstanding first, then claim back from the bank.
For non-LACA cases (high court), only quit rent and assessment will be covered. The rest will be borne by the purchaser. Please keep a note of this to avoid having a large sum to pay without preparing for it!
| Item | LACA | High Court (Non-LACA) |
|---|---|---|
| Quit Rent | Covered (Most Banks) | Covered |
| Assessment | Covered (Most Banks) | Covered |
| Maintenance Fees | Covered | Not Covered |
| Sinking Fund | Not Covered | Not Covered |
| Utilities | Not Covered | Not Covered |
| Indah Water | Not Covered | Not Covered |
Differences Of LACA and Non-LACA Cases
Please note that most cases follow the table above, and every case is different. Some cases may be LACA, but the bank refuses to cover any outgoings.
Extension Of Time Penalty
Although most lelong cases can be completed within the stipulated time given, some cases require an extension of time as there may be a delay in the process. Every bank gives a different rate for the extension of time penalty, but the maximum that can be given for the penalty is 8% per year of the remaining balance.
If your remaining balance is RM900,000, the maximum penalty that can be charged per month will be (RM900,000*8%)/12, totaling RM6,000.
This would mean that for every month of extension, you will be penalized a sum of RM6,000 by the bank.
Conclusion
These are the additional costs that you should prepare for when buying an auction property in Malaysia. All the costs are not finalized and differ from case to case. It is important to check through the Proclaimation of Sale (POS) and check with relevant parties for all the additional costs that may occur.
By working with us, you don’t have to worry about all of these, as we will help you check everything from A to Z. Choose your desired auction unit and get in touch with our customer service!
