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ESSENTIAL CHECKS TO VERIFY A MALAYSIAN REAL ESTATE AGENT’S LICENSE

When you are buying or selling property, it is important to partner with agents who are credible and officially licensed. Conducting a due diligence check to verify a real estate agent’s license in Malaysia is crucial in safeguarding your property investment is transacted in a secure and legal manner.

BOVAEP Registration Confirmation

The Board of Valuers, Appraisers, Estate Agents, and Property Managers (BOVAEP) is the governing body of real estate agents in Malaysia. The main function of BOVAEP is to regulate the professional conduct of those registered by the Board including Valuers, Property Managers and Estate Agents.

You can verify an agent’s or firm’s registration by checking the BOVAEP website (lppeh.gov.my) or contacting them directly. This is crucial to ensure that you are dealing with an officially recognized professional.

In Malaysia, real estate transactions will involve the Real Estate Agents (REA) and Real Estate Negotiators (REN).

Who is Real Estate Agent (REA)?

A real estate agent (REA) is a fully licensed professionals who oversee the buying, selling, or renting of properties.  An estate agent can operate his/ her own Real estate firm, providing real estate services in selling, leasing properties or finding a property for the clients.

Who is Real Estate Negotiator (REN)?

A Real Estate Negotiator (REN) is an individual who is employed by a REA. They must attain the following requirements to be employed by the Real Estate firm: –

  • •
    They must attend a full two days course on real estate and will be issued a certificate of attendance.
  • •
    With the certificate they seek employment either on a contract of service or contract for service with a real estate firm.
  • •
    The real estate firm then, will apply for the REN tag with the BOVAEP.

 

BOVAEP will then certify and designate a REN number and issue a tag to the REN, only then the REN can be employed by the firm, and to represent sellers, landlords, buyers and tenants in the sale and marketing of properties.

 

Authority Card / ID Tag Verification

REN Tag is an identification tag issued to a Real Estate Negotiator (REN). Always ask to see this ID tag as your first line of verification. It contains all the information including their name, photo, IC no, REN no, firm name, firm registration no, quick respond code (QR) and security features.  It is mandatory for all negotiators to REN to wear the REN tag at all times during their conduct of business and cannot be replaced with any company name tag.

How to check or verify whether the REN is certified by the BOVAEP?

The Quick Respond (QR) code can be verified using a smartphone. It contains all the negotiators’ information including their photographs. If in doubt, conduct a search at www.lppeh.gov.my or www.propertyagent.gov.my website under Negotiator Search. Alternatively, call BOVAEP during the office hours at 603-22876666.

How do I know whether the REN tag is a fake one?

Genuine REN Tag contains watermark security features. When you scan the Quick Respond (QR code) using a smartphone, it will feature the negotiator information.

 

If a REN does not have a REN tag, then he is not an authorized broker.  Stop dealing with him and report him to the police immediately with full information.

IMPORTANCE OF A CONTRACT

A contract is a legally binding agreement between two or more parties. It can be written or verbal, although written contracts are generally preferred as they provide more certainty and can be used as evidence in court.

 

Whether simple or complex, a contract is considered legally enforceable when it incorporates five essential elements: Offer, Acceptance, Consideration, Capacity and Legality. Any missing element can render a contract invalid and unenforceable.

Below are reasons why you should always put a contract in place in your transactions:

  • Protection of business interests

Contracts are essential in protecting the interests of businesses. They outline the rights and obligations of each party, ensuring that everyone understands their responsibilities.   If either party fails to fulfil their obligations, the contract can be used to enforce these obligations and protect the interests of the other party.

 

  • Avoidance of disputes

Contracts can help to avoid disputes by ensuring that both parties have a clear understanding of their obligations. By outlining the terms of the agreement, a contract can help to prevent misunderstandings or disagreements that could arise in the absence of clear terms. This can save time and money in resolving disputes.

 

  • Legal compliance

Contracts are often used to ensure compliance with legal requirements.  Contracts can include clauses that require the parties to comply with to ensure that they meet their legal obligations.

Breach of Contract and Remedies

A “remedy” is a court-ordered resolution or compensation to one party’s breach of contract. The goal is to enable the non-breaching party to seek justice and be compensated for the harm they have suffered.  This could be in the form of money, property, or some other form of relief.

Below are some common form of remedies if a contract is breached: –

a) Damages

 

This refers to monetary compensation granted to the non-breaching party. Below are the two types of damages available in Malaysia: –

 

  • •
    Special damages: monetary compensation sought for losses incurred because of breach or wrongful act by another party, where the amount of loss can be quantified.
  • •
    General damages: intangible losses that cannot be precisely quantified in monetary terms, e.g. pain and suffering, loss of reputation, loss of amenities and more.

 

 

b) Specific performance

 

This is a discretionary remedy issued by the court (after taking into consideration the various factors such as nature of contract, feasibility of enforcing etc.)  to order the party at fault to perform and carry out their obligations as stipulated in the contract.  This is usually cases involving unique services or items that cannot be easily compensated with damages.

 

 

c) Rescission

 

This is also known as termination of contract.  In Malaysia, rescission is categorized into ‘rescission for breach’ (termination) and ‘rescission ab initio’ (true rescission). In order to rescind, the rescission must be communicated and exercised within a reasonable time.

In case of a breach of contract, it is advisable to consult with your legal counsel for guidance and assistance.

OPR – HOW IT AFFECTS YOU?

To many, owning a home or property is often considered as one of the key components in life. If you are planning to buy your new home or property, understanding the banks’ Overnight Policy Rate (OPR) is important as you will be better equipped to find the right deal.

What is OPR?

OPR is the overnight interest rate set by the central bank of Malaysia, Bank Negara Malaysia (BNM). This interest rate is the rate at which a borrower bank has to pay to a lending bank for the funds borrowed.

 

This is a common practice among banks in borrowing and lending money to each other for a very short period, typically for one night. This is to ensure that they have enough money to:

  • 1.
    Meet the Statutory Reserve Requirement (SRR) set by BNM; and
  • 2.
    manage their liquidity to meet short term financial obligations such as lease payments, salaries etc.

OPR is an important part of Malaysia’s monetary policy. It can impact a wide range of important financial measures which include deposit rates, lending rates, foreign exchange rates, home loan interest rates and more.

How OPR affects home loan rates?

When BNM increases the OPR, it is a measure to reduce the amount of money in circulation and control inflation.  As a result, banks will increase the interest rate they charge on loans.  Hence, the monthly instalments of home loans will increase.

On the other hand, when BNM decreases the OPR, it is an approach to stimulate economic growth by increasing the amount of money and loans in circulation. In this development, banks will then lower the monthly instalments of home loans or reduce the repayment period to encourage loans take up.

How OPR Affects The Approval of Your Home Loan Application?

When OPR increases: –

  • 1.
    Banks will tighten lending criteria such as higher down payment, better credit score, or a lower debt-to-income ratio. Hence, harder to get a home loan approved.
  • 2.
    Banks interest rates will increase accordingly, so it will become more expensive to get a loan.
  • 3.
    Monthly loan repayments will increase, borrowers will have to pay additional in total for interest payments.
  • 4.
    Loan tenure will increase -this will happen if the old monthly instalment sum is maintained, the repayment period will become longer as the interest rate has increased.
  • 5.
    Fixed deposit rates will increase

 

When OPR decreases: –

  • 1.
    It becomes cheaper to borrow money
  • 2.
    Banks are less cautious about lending, easier to secure home financing.
  • 3.
    Banks may also increase the maximum loan amount to borrowers, making it easier to finance the purchase of a more expensive home.

If you are considering a variable interest rate home loan, it is important to be aware of the current OPR rates, its trends and how the highs and lows will affect your home loan instalment amount.

THINGS TO NOTE WHEN SELLING A PROPERTY IN MALAYSIA

At times, homeowners might find selling their properties can be surprisingly time-consuming and emotionally challenging. Apart from feeling like an invasion of privacy, they must go through a series of processes before closing the deals.

 

One thing to bear in mind are the various costs involved with the sale of their properties which include property agent fees, legal fees, Real Property Gains Tax (RPGT), valuation fees and renovation fees.

Property Agent Fees

Prospective buyers often find it reassuring and convenient to engage property agents when purchasing real estate. Acting as intermediaries between buyers and sellers, property agents play a crucial role in the transaction process. They assist sellers by screening potential buyers, arranging property viewings, negotiating prices, handling bookings, and more. Additionally, they provide valuable advice to buyers on loan eligibility, financing options, and other pertinent details.

 

For the sale of properties, property agents typically charge a professional fee or commission ranging from 2% to 3% of the selling price. In the case of property rentals, fees can amount to 1 to 1.25 months’ rent for a lease term of up to three years.

 

It’s important to note that an 8% Sales and Services Tax (SST), mandated by the Government, applies to the sum paid to the agency for their services.

 

This structured explanation clarifies the role of property agents and outlines the associated costs involved in property transactions in Malaysia.

Legal Fees

Once a buyer has secured a property, it is necessary to engage a lawyer to handle legal aspects such as drafting the Sales and Purchase Agreement (SPA), preparing the letter of offer, and other required documents for the transfer. Legal fees are typically calculated based on the selling price of the property.

 

In addition to legal fees for the SPA, other legal expenses may include fees for the loan facility, loan stamp duty, Memorandum of Transfer (MOT), and stamp duty involved in the sale or transfer of the property. These fees are essential components of the legal process and are determined based on the specifics of the transaction and prevailing regulations.

 

This explanation provides a clear overview of the legal fees associated with property transactions, emphasizing their importance in ensuring a smooth and legally compliant transfer of ownership.

Real Property Gains Tax (RPGT)

The Real Property Gains Tax Act 1976, administered by the Inland Revenue Board of Malaysia (LHDN), aims to deter property speculation by imposing a capital gains tax.

 

RPGT applies to anyone selling properties in Malaysia, irrespective of their citizenship status. It is levied on the profit realized from the sale of land or real property, where the resale price exceeds the purchase price.

 

RPGT is generally categorized into three tiers:

 

1. Individuals (Citizens & Permanent Residents):
This category applies to Malaysian citizens and permanent residents.

2. Individuals (Non-Citizens/Foreigners):
Foreign individuals selling properties in Malaysia fall under this category.

3. Companies:
Companies selling properties are subject to RPGT as well.

 

The tax rate and exemptions may vary depending on the category and holding period of the property. Understanding RPGT regulations is crucial for property sellers to comply with tax obligations and plan their investments effectively.

Below are the new RPGT rates effective from January 2022: –

 

RPGT Rates Individuals – Malaysian Citizens & PRs Individuals –

Non- Citizens & Foreigners

 Companies
Disposal in 1st year 30% 30% 30%
Disposal in 2nd year 30% 30% 30%
Disposal in 3rd year 30% 30% 30%
Disposal in 4th year 20% 30% 20%
Disposal in 5th year 15% 30% 15%
Disposal in 6th year & beyond 0% (Reduced from 5%) 10% 10%

Beginning 1 January 2022, RPGT rates from the 6th year onwards will be abolished for Individuals including Malaysian citizens and permanent residents.

Renovation Fees

Investing in minor renovations can significantly enhance the appeal and value of your property. While extensive remodeling may not always be necessary, allocating funds towards essential repairs—such as replacing broken tiles or addressing cracks—can greatly improve the property’s aesthetic appeal. Even a simple update like applying a fresh coat of paint can make the property more attractive to potential buyers, potentially leading to a quicker sale at a higher price.

By prioritizing these renovations, property owners can effectively enhance their property’s marketability and increase its potential resale value.