Last week, a client came to us and wanted to do a refinance home loan.
Little did she knows that her case is complicated and going to cost her more.
For the story’s sake, let call her Ms. Alice, which is not her real name. (We respect our client privacy)
Ms. Alice has a house and is paying her home loan with Bank B for almost six years.
Recently, she realized she needs more money, and the only way to get such money in a short period is by refinancing her home to other banks.
After six years, her house has increased in value, which means it is a good move for her to refinance.
Besides, the home loan interest rates are attractive and low, and no way she will walk past that.
So, she started doing her research online and stumbled upon our website www.malaysiahousingloan.com.
Quickly, she reached out to us through WhatsApp.
After replying to her, we decide to continue the conversation through the phone, which is the most effective.
We understand that she needs to do a refinancing from the conversation, and the property is still under a master title.
When we asked her about the property title’s status, like, “Is this a master title or strata title?”
She paused for a while.
“Hmm… I think master title. And I heard the developer is bankrupt,” she said.
Okay, so she has a master title property, and the developer is bankrupt.
When we hear this, we know this is not a good thing.
Why?
Let me explain.
THE DOWNSIDE
A few things will happen in this situation; it will incur additional steps, extra cost, and more time than a standard case.
The first one is a bank has less interest to finance a master title property and bankrupt developer.
For them, this is not the target segment, and also, with the complication that involved, they rather not finance the property in the first place.
WHICH ONE WOULD YOU CHOOSE?
For example,
If you are a bank and you have the authority to invest RM500k in the following property, which one will you choose?
A.Prime area, freehold, individual title issued. Good property value.
B.Prime area, freehold, master title, developer bankrupt. Due to the property circumstances, the property value can flop in the future.
I believe most of us will choose “A.”
Because it is a straightforward case, more manageable and the investment return is more prudent.
The same goes for the bank; they will choose A.
LIQUIDATOR TAKE OVER DEVELOPER WORKS
Secondly, when a developer is bankrupt, a liquidator company will take over.
Liquidator company is an independent company that will take over the developer’s role but at a huge price to pay.
For instance, if the state government issues the property title, the Liquidator will make the necessary arrangement.
For example, if the cost of completing Perfection of transfer is RM1500, and the Perfection of charge cost is RM1200.
In a standard case, you are required to pay RM2700 only.
But, since Liquidator takes over the property, the Liquidator company will charge a certain fee.
So instead of only has to pay RM1500+RM1200= RM2700.
You are required to pay also Liquidator Fees.
Suppose the Liquidator fee is RM3000. Then in total, you’ll need to pay RM5700.
Do you get the picture?
Another example.
Let said you want to sell your house to another buyer.
You will be required to pay legal fees to the SPA lawyer and the Liquidator fee to the Liquidator.
For every transaction you do, you will require to pay a liquidator fee to the Liquidator.
Do you get it?
LIQUIDATOR FEES
That’s what I mean by extra cost because standard houses or property doesn’t need to pay this liquidator fee.
In most cases, Liquidators will quickly charge 2% fees from the original price or transaction price without hesitation.
On top of that, there is GST 6%, vetting fees, title fees, blanket consent fees, and others.
However, it still depends on the Liquidator company. Every Liquidator company has a different framework.
So, who knows, you might be lucky if they charge you less!
Truthfully, we wouldn’t know the exact price until the lawyer has written to the Liquidator company.
We have a client in the past who paid about RM5000 to the liquidator company alone. That yet to include other fees like lawyer fees, stamp duty, valuation fees, etc.
So, if you think this is such an inconvenience. Wait until you meet with a Liquidator Company that works at a slower pace.
A simple reply might take 1-2 months.
It’s truly dreadful!
BEING HONEST TO ALICE
In the end, we have to be honest with Alice.
We told Alice the truth. The situation she is in with a master title house and a bankrupt developer.
We advise her to go back to her existing bank and request a top-up instead.
If the existing bank approved her loan, it would be a much easier process than re-do a new refinance home loan.
And we do hope she will get the new top-up loan.
CONCLUSION
To sum up everything, if you are looking for a house to buy and the house happens to be still under the master title and the developer is bankrupt – Please stay away! Go and find another house, preferable with strata or individual title issued.
If you are looking for refinancing, and your house is under the master title and bankrupt developer, try to take a top-up loan with your existing bank and request a lower interest rate.
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See you in my next article!
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