Purchasing a Heritage Property as a Foreigner

Purchasing a home as a foreigner in Malaysia can be a rather confusing process, but in the end, it is actually less complex than you might expect. At the time of this posting, there are two ways for foreigners to own a home in Malaysia.

1. Malaysia My Second Home Program (MM2H) – This program allows foreigners to both purchase a home and obtain a 10-year re-entry visa. This program has a number of restrictions, including that a certain amount of money be deposited in a local bank among others.
2. Foreign Purchase – Foreigners are recently restricted to purchasing homes worth at least RM 500K (about USD ___). They are not permitted to sell the home within 3 years of purchase. These restrictions were put into place to prevent foreign capital and speculators from affecting the local housing market.

In both programs loans are widely available for qualified applicants from a number of international and local banks in Malaysia. Citizens of Singapore, Japan, UK, U.S., etcetera, might find it rather easy to qualify for a loan due to the advantageous exchanges rates. However, keep in mind that most banks will not finance more than 70% of the purchase price for foreign buyers.

We researched a number of both international and local banks before finally deciding on one. Those included OCBC and HSBC on the international side, and Public Bank and Maybank on the Malaysian side. During our search, we discovered that international banks would not finance properties older than 50 years. This meant we could not finance a heritage property through an international bank. If you are paying in cash, this issue is moot.

Shophouse For Rent

3 Story Shophouse

Summary of the purchase process:

• Research banks to determine your qualification. You will also want to obtain a list of approved lawyers who are approved by the bank, which will ensure the transaction proceeds smoothly. These lawyers will be with you every step of the way, including writing up your Sales and Purchase Agreement and ensuring the transaction is completed.
• Locate a property you are interested in and determine its value. You can search for listing on a realtor’s website or if you are in the vicinity of the city, walk around your favorite areas and you will see for sale signs with a number to call. A helpful website is www.rayloo.com. We worked with the listing agent, Raymond, and he provided adequate and helpful service. Please note that the listing agent will require a 1% of the final sales price from both the purchaser and the seller.
• You will want to talk with the bank about how they value a specific property so that you will know how large your loan will be. Once you contact a bank to indicate interest, they will send out a surveyor to the site for assessment.
• Meet with the seller to negotiate the price and come to an agreement on which lawyers you will work with.
• Lawyers will draft up the Sales and Purchase Agreement based on the information you provide. If you are financing the property, they will also work with the bank to make sure all the paperwork is handled. Your lawyers will also do a title search on the property to ensure everything is clear before proceeding.
• Sign the Sales and Purchase agreement, which outlines everything about the transaction, including, the price, down payment, date of vacant occupancy, the contents of the home upon vacant occupancy and etcetera. You may sign your loan documents during the same meeting.
• Caveat is filed with the land office (optional). This prevents the seller from selling the property to anyone else during the transaction period.
• Application filed with the state of Penang for foreign purchase. Your lawyer should be well versed with the rules in advance. Therefore, unless there is an unforeseen reason, the approval should be a given within a specific timeline. Some of the rules are that the property must be more than RM 500K and you cannot own more than 2 properties in Malaysia.
• Stamp Duty fee is submitted to lawyers and must be paid. Refer to table below for what to expect to pay in stamp duty fees.
• Purchase price is fully released to vendor
• Vacant possession is delivered.
• Remaining purchase price is delivered to the seller.
• Title is sent to local authority for final name change.

Shophouse with Red Window

Decent Condition

Overall, we were content with our transaction. Everyone involved worked together to ensure the process was completed in an aggressive timeframe. This is what we mean by an aggressive timeframe: we made an offer on a Friday, worked with the bank on Saturday for financing, spoke with the newly acquired lawyers on Monday, met with them on Tuesday to review the arrangements with the seller, and then met them again on Thursday (with the seller) to sign the Sales & Purchase Agreement as well as the loan documents. That means we completed the entire process in less than a week. We obtained vacant occupancy of the property a few months later per our agreement with the seller.

This table outlines what you might expect to pay in stamp duty fees.

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