Since I sold my house lately (last year), I try to share the Sales and Purchase (S&P) agreement process here with you. This is only applicable in Malaysia. Hope this is going to be useful to many of you since I can't find this information else where in the internet.
Firstly, you need to get a lawyer. There are 2 scenarios:
- Buyer and seller use the same lawyer (First scenario)
- Buyer and seller have their own lawyer (Second scenario)
For the first scenario, the buyer is protected and the seller is not. That means the lawyer will stand on the buyer's perspective and only charge the seller's for the basic processing fee. The lawyer's fee for seller in this case will be very minimum (i.e.g ~80% less the second scenario).
For the second scenario, both buyer and seller are protected by their own lawyer. This also means the process will take slightly longer. For example, seller's lawyer drafts the S&P and the buyer's lawyer will review it and etc. There are a lot of back and forth "official" communication to basically make sure both parties interests are protected.
Which one is better? It is more on the seller's choice, the buyer is more or less the same. In short, you can choose first scenario if you trust and know the lawyer and you want to save cost and vice-verse. :) It sometimes also depends on what type of buyer that you have.
S&P Agreement Process
1. Letter Option to Purchase (2%)
This is a letter from seller to buyer. The buyer will need to pay the deposit (usually is 2% of the selling price - up to seller to decide) upon signing this letter. The payment is made directly to the seller. If you have agent, the agent will draft this letter for you. If you don't have an agent, get a lawyer to draft this letter for you.
Once this letter is signed, the S&P agreement must be signed within 15 days. Within this period, the buyer will try to get a bank loan unless he/she is buying with cash. If the buyer fails to get the bank loan, he/she can void this letter and get back the deposit. Of course the buyer needs to show proof.
2. S&P Agreement Signing (8%)
Upon signing this agreement (within 15 days), the buyer will need to pay the remaining 8% to the seller's lawyer. If the buyer fails to sign this S&P agreement for some reasons, the seller can then take the deposit and start looking for another buyer.
When the seller's lawyer receive the 8%, he/she will withhold the 2% for Real Property Gain Tax (RPGT), requirement by the law and gives the remaining 6% to the seller. From seller's perspective, you will get 8% (i.e. 2% + 6%) of the total selling price. The lawyer will take care of the seller's RPGT stuff with the income tax office.
3. S&P Agreement Completion (90%)
To complete the whole process, the buyer has 3 months period to basically pay the remaining 90% of the selling price to the seller. If the seller has loan, the buyer must settle the seller's loan within this 3 months. These all go through the lawyer as a middle person. However, after 3 months the buyer fails to make the 90% payment, the seller will charge the buyer for 6% interest. Buyer will want to avoid this from happening.
If you have agent, you will need to pay for agent fee. It depends on your agreement with your agent how much you need to pay or follows the standard in the state (cause different states in Malaysia do this differently). Most agent will want you to pay the agent upon signing the S&P buy I would suggest you to pay only until the whole process is complete which is after 3.5 months. You can negotiate this with your agent.
Hope this gives you an high-level of the entire process! Let me know if you have any comments or questions. Also, you don't necessary need an agent to buy or sell a property, but you need to have a trust-able lawyer to protect you. Good luck!