Case studies

Understand your housing loan repayment scheme… it’s not as straight forward as it seems

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Most if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan. (Banks in this context refers to commercial banks, Islamic banks and other financial institutions).

Unfair legal fees

When a borrower takes a housing loan, the borrower is required to execute a loan and other related agreements. This entails the borrower having to pay legal fees, the amount of which varies, depending on the loan amount – the higher the loan amount, the higher the legal fees although the complicity and level of work do not necessarily commensurate directly with the loan amount.

Although it is the borrower paying the loan lawyers’ fees, the said loan lawyer is actually acting for and on behalf of the bank. As such, the loan lawyer is not in the best position to advise the borrower if there are clauses in the loan agreement which are not in the best interest of the borrower.

In addition, in the event of any dispute between the borrower and the bank, the borrower cannot ask the loan lawyer for advice as the loan lawyer is acting for the banks.

If this is the case, then is it “fair or equitable” for the borrower to pay such legal fees when it is clear that the lawyer is actually acting for the banks? Obviously not. Hence, the bank should absorb the legal fees as the lawyers are clearly there to act for the bank and protect its interest.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by Bank Negara. It is disheartening to note that borrowers continue to be charged exorbitant fees which seem to have the explicit blessings and consent of Bank Negara. Instances of borrowers being charged unreasonable fees for copies of redemption statement, EPF statement letter etc are common.

Allocation of monthly repayment to principal and interest

This is a story about three friends who took a housing loan (HL) of RM500,000 ten years ago. They were offered the same HL interest rate of 4.2% (base lending rate of 6.60% less 2.40%) but took different loan tenures as follows:

Albert took a 20-year HL. Eric took a 25-year HL and Jamie took a 30-year HL.

After servicing their monthly loan instalments diligently for the past 10 years, they decided to fully settle their housing loan using a combination of their EPF monies and own savings. When they asked for a redemption statement to find out what was the principal sum outstanding, they received a shock of their lives.

Albert, Eric and Jamie were under the impression as they had served 50%, 40% and 33.3% of the loan tenure, their principal sum outstanding would be RM250,000, RM300,0000 and RM333,333 respectively.

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So, when their respective redemption statement showed that Albert, Eric and Jamie still owed respectively RM301,654, RM359,415 and RM396,652, they got a big shock.

So, why did they still owe so much more than what they had thought? The answer lies in the allocation of the monthly instalment towards covering the principal sum and interest charged by the bank.

In an equitable world, the monthly instalments would be allocated on a “straight line basis” to cover the principle and interest charged. Thus, a borrower who served 10 out of a 20-year HL would only owe 50% of the original loan amount.

However, the reality is that the borrower still owes 60.3% of the original loan amount.

The typical borrower will always be “penalised” for settling his loan before the maturity date. Even in the penultimate year of the original loan tenure, the actual amount outstanding is still higher than the theoretical amount, which should be the amount outstanding had the allocation of monthly instalments been done on a straight line basis.

Is it fair and equitable?

Most borrowers do not know or even understand how this allocation is calculated. Is such an allocation “fair and equitable” to the borrower? Under such circumstances, are borrowers supposed to accept that the bank’s own generated computer system has calculated the interest correctly and allocated the payments in the correct manner?

To the borrower, they have paid 10 out of a 20-year loan, he should only owe balance 50% and not 60.3%. Is this manner of allocation not just another unjust way for the bank to generate higher profits after all the bank did receive the payments on time and in full every month. It is the dream of every borrower to be debt-free as soon as possible and it is not fair to the borrower to be penalised in such a manner when he wants to settle his loan early.

That said, borrowers have no choice but to accept the calculation of the bank as correct and final. If the borrower were to reject and not pay the required sum, the loan will not be considered as repaid in full. The borrower could even be blacklisted and even have his property auctioned off by the bank to recover the remaining sum outstanding if the borrower refuses to pay up.

It would be more transparent and equitable if the monthly payments made by the borrower are allocated in a “straight line basis” to interest and principal equally over the

tenure of the housing loan. Short of that, borrowers are at the mercy of banks.

Some banks operate like a “cartel” and standardise their fees to be charged to customers. One wonders whether such unfair practices are condoned by the regulators like Bank Negara.

It is also interesting to note that banks are exempted by the Malaysia Competition Commission allowing banks to agree and collude on unfair fees, penalties and practices to be charged to borrowers.

Unnecessary expenses

Loan agreement “printing charges” – sold between RM150 and RM350. The banks’ solicitors need to purchase a standard loan agreement from the bank (via soft copy) and adds the borrowers’ details in order to complete the loan agreement. The banks charge the lawyer and the lawyer charges the borrowers.

Standard loan agreements are now downloaded from the bank’s website or from the soft copy. The bank no longer needs to print them and should not charge for such documents. Alas, this has been continuing till to date.

Lopsided terms and conditions

Lopsided terms and “add-on” products are aplenty if the borrower wants to identify with them. It would be good practice to remove or qualify the banks’ arbitrary powers.

Conclusion

The National House Buyers Association (HBA) had on Sept 4, 2014 made representation to the Finance Ministry (MOF), Bank Negara. Housing and Local Government Ministry in the presence of Association of Banks Malaysia and Islamic Banks of Malaysia in the form of slides presentation on some observations and unethical practices of some banks.

HBA is looking to work closely with MOF, Bank Negar and all related stakeholders to level the playing field for housing loan borrowers in the long-term interest of the banking industry. We had proposed to set up a working committee to resolve all unfair practices. MOF and Bank Negara have a legitimate interest in the final shape of the banking industry into operating a principled and towards a “customer friendly arena”.


Article picked from http://www.penangproperytalk.com

Source: StarProperty.my

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Another unfortunate incident

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Yesterday was supposed to be a productive morning where a buyer from the North came down to KL for viewing. Not having units from my own listing, I got a few co-agents’ contacts earlier and looked for co-broke. However, not sure if the market is really good or they just don’t feel like co-broking, only one decided to respond to my request.

Since it was Tuesday when we had the conversation and Wednesday was a public holiday (Deepavali), we left the conversation with a confirmation of viewing on Thursday morning at 10:30am. He even asked me for a co-broke letter and my business card to make sure I’m no dodgy agents lurking. I’m more than happy to provide these.

Come Wednesday evening, I sent another Whatsapp message (normally to track the conversation and as evidence leading to viewings) to remind him of the appointment. Noticed the message was read and I did not think much about it later.

I was up early Thursday morning and headed out to the condominium which was 20 minutes away from my place. I reached the place early and went about my breakfast while waiting for the co-agent and my buyer.

Sent out a message at 9:00am reminding him the appointment and noticed that he was last online at 1:20am. I thought he lives nearby and will only make his way to read messages later. At 9:30am, he was still offline and I’m beginning to feel a little uneasy.  I called but couldn’t get through. The phone was switched off. I called again around 15minutes later and the same thing. I knew something is not right.

Finally, at 10:10am, he finally called and told me he totally forgot about the viewing and based on his tone, he was actually trying to accuse me of not confirming the viewing on Tuesday and it’s too late now to arrange with the owners. He said I should write something ‘confirmed viewing on Thursday 10:30am’ in the message to make it clear. Like what??!! Seriously?? After all the reminders??

I told him it’s fine and I would look for others to cover this bulls****. I was very disappointed indeed and in such a short time, I don’t know how to pull this off. The buyer called and I had to walk up to him and told him that I couldn’t get any units for him to view that morning but asked if anything in the afternoon would do. Luckily, and I was lucky for most of the time with buyers and tenants, I was given a second chance.

Immediately I went around sourcing for other agents and finally got 1. Well better than nothing. We went ahead with the viewing and believe it or not, I was told the earlier co-agent was a crafty and dodgy agent around that area and a similar incident happened to him as well. Not sure about the dodgy agent’s motives but heck, I’ll just stay away from these unheard or sleazy agencies from now on.

Lesson learnt. Estate agents like us should really be hardworking and kept looking for quality and personal listing whenever possible. This is where you gain control of situations. When needed to co-broke, make sure it’s with a respectable agent/agency to ensure a good outcome.

Happy hunting guys!

Special mention to Oscar for helping me out. Cool bro!

A hectic but satisfying day!

It was Friday 1:00pm and I’m rushing to Fraser’s Place KLCC to fetch my client for viewings in Mont’ Kiara. There were about 5 units to show and as soon I got him onboard the car, we headed straight to the first viewing. It was Kenny Heights Villa @ Sri Hartamas.

These villas are situated right behind Plaza Damas and part of Kenny Heights Estates. These are freehold units that were completed about 7 years ago.  There are only 49 units in a gated and guarded vicinity. The linked bungalows are really nice and the unit we viewed came fully furnished with a RM11,000 p/m price tag. It was a pretty good deal as the unit comes with modern fittings and furniture with a private pool on the top floor. Overall, the tenant liked it and took some pictures for further review. They could somewhat do better with some signboards leading to the estate as one may get confused around the area though.

Next stop, Sunway Vivaldi. This is one condominium around Mont’ Kiara that I’m more familiar with as I have a friend staying here and often frequent the place whenever there’s a gathering. However, I have no luck getting a to-let unit here so I have to get one of my closer agent friend to arrange one for us.  This is also a fully furnished unit with a RM 11,000k p/m price tag. It is a nice unit with the pool view. The tenant loved the condominium and quite impressed with the multi-tiered security. He shortlisted this immediately.

Next, we head to MK 11. This is a fairly new luxurious condominium around Mont’ Kiara. It’s only 6 years old and billed as one of the top-notch property in Mont’ Kiara. The sight of the building and its pool is definitely engaging. I’ve never really seen such pool design and it’s pretty eye catching I must say. The unit is priced at RM 15,000 p/m which is a little steep for a fully furnished. But, with everything in place and a unit with almost a 100sqft balcony, that’s what we need to pay I think.  However, the downside of this unit is, of course, the price and also, the owner is around and is currently occupied. Most of the stuff is there and it made the place looked stuffed. The tenant is somewhat unimpressed.

We headed to Lumina Mont Kiara which is about 1 min drive away – that shows just how many condominiums there are around the area. This is a penthouse and possibly one of the best looking units I’ve come across in recent visits. The asking price is at RM 12,000 p/m which personally, I think is quite reasonable. With all the high-quality furniture that comes with it, it’s a steal really. And it’s still negotiable. I was told the owner is quite a prominent figure too. The tenant is very impressed with the unit nonetheless. However, the facility and the walkways are quite a let down though.

Finally, we head to the last stop of the viewings – Mont’ Kiara Damai Resort.  I’ve always loved this place ever since my first visit here. It really does feel like a resort with its 8.7acres land and boasts one of the lowest dense residential with only 230 units. Although a little dated (completed 13 years ago), the place is undoubtedly one of the more quiet and peaceful locations around Mont’ Kiara, away from the highway and retails. However, the tenant doesn’t really fancy the resort type condo and we left after a great tour around the place by the enthusiastic owner. Great job!

After we said goodbye, it’s the most challenging time of the day… Friday evening + rain+heading back to KL = super jam! It took us an hour to reach Fraser’s Place! Gosh! It was my bad. The viewings went a little longer than expected.

But hey, he found what he wanted and I’ve done my part showing some nice units. Just wanna say thanks to all the owners and Donavan for arranging the viewings for us that day! You guys rock!

 

An agent that sounded like a loan shark…

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My morning started well with a nice breakfast and follow-ups of my current estate requests. While updating my listing, I received a message from my fellow agent requesting for a place to rent in KLCC for his tenants. So I replied his message saying that I may have something for him.

I quickly went to my listing and search for it. Since that one was taken a couple of weeks back, I decided to try looking for another on the internet (to remain anonymous). I came across an agent disguising as the owner of the unit. However, he voice messaged me and told me he is an agent and would like to co-broke with me on this one.

I would have no issue co-broking. The problem is, my fellow agent, don’t fancy a 3-way co-broke (for whatever reason), therefore, I politely declined the offer.  I thought I’d go elsewhere and look for another one when another voice message came in.

“老板,你不要,很多人要。这个世界,不仅你是地产代理。你觉得钱腥。不必这样。你不想要,很多人要。我也是地产代理。一个经验丰富的一个.”

Basically, it translates to:

Boss, you don’t want, a lot of people want. In this world, you are not the only estate agent. You think money stinks. Don’t have to be like that. You don’t want, a lot of people want. I am also an estate agent. A seasoned one too.

Wow. Just wow. Are you on weed or something? Why so butthurt bro.

There will always be a reason why certain things don’t work out and this is one of the instances where a decision doesn’t necessarily lie with that particular agent. Money is essential to all of us and if situation permits, anything goes.

Again and again, I do think that an agent is just a person bridging a customer with a property, nothing more. But a professional agent is accountable to what he does and how he does it. Ethics, manners, integrity and professionalism are only acquired when you represent a reputable and accomplished agency that coaches you to present yourself at the highest order and also learn to treat your counterparts like how you treat your clients.

I’m still learning every day and this definitely a lesson I would take seriously. I’m blown away by the attitude of the agent and how he managed the whole affair.  A seasoned estate agent reacting this way? Why?

To be fair, this is my side of the story and told exactly how and what happened. Just want to share this with everyone that no one, absolutely no one should behave such way and going around the market behaving like this. We work together, all for the better. Stay cool agents!

No to African and Middle Eastern tenants? Why..??

Recently, while I was around town talking to one of my clients, we spontaneously brought up the issue about renting out to Africans, China Chinese, and Middle Easterns. Not that this is new or even something we want to talk about but recently, there seemed to be this spark from residents, especially condominiums’ about the refusal of renting out to specific races, especially the Africans. She was quite insistent on not having her unit rented out to the above categories. I’m not too particular about this but having her asking me what is my view on this is a little awkward.

To be honest, a tenant is a tenant. As long as they entered the country officially and legally and most importantly, able to pay the rentals on time, who are we to turn them away? I would usually request for some background details before proposing the potential tenant to my client. Although not much we can get from these profiling work, at least some due-diligence was executed nonetheless.

Yes, we (estate agents) have encountered or somewhat heard from our counterparts about how some of these tenants wrecked the place, lousy paymasters and sometimes, even disappeared after awhile running away with some of the items from the house/condominium. But this happens even with local tenants. Why are we looking at the black dot on the whiteboard rather than acknowledging the white spaces around it that more or less represent a healthy rental market from these categories of people?  We can’t generalize the entire nation just because one or few of them behave that way.

I have really good Middle Eastern tenants and they can be the nicest and most flexible tenants to work with. They also pay their rentals on time too. Well, about wrecking the place, it’s a 50/50 thing. After a few years staying in the same place, especially more than 2 years, using the same items and utilizing every space available, it is fair to say that the wear and tear usually turn out slightly worse than those after a year. Some are born more ‘heavy handed’ (more careless and reckless) hence a little rough in handling the appliances and such. Therefore, nothing much you can do about it but to dig into the Tenancy Agreement and re-highlight the T&Cs which would trigger the security deposits.

And to be honest, yes, I’ve heard and seen that the locals are terrified when they are in close proximity with the Africans. They are pretty imposing at times and the stuff we heard about some of them do make the case. But generally, they are friendly people. At least they greet the people they meet in the lift.

But demanding the owners to refuse renting to these races by the resident committee or the condominium management at certain extent is really out of place in Malaysia. It’s a blatant act of racism if you ask me. Maybe I don’t know what happened between these folks and the Africans, but it doesn’t warrant them to issue a blanket order as pictured above. Coupled with 2017 KPI of 0% rentals to the Africans some more… that’s is a little absurd. Really people?? Seriously?

Take a look at the following video. You sort of feel for the African guy looking for a place.

Is there racism in the Malaysian property rental market? Three R.AGE journalists of different races called the same 30 listings to find out

https://m.facebook.com/story.php?story_fbid=10156301014844741&id=95743749740

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Then again, I’ve come across owners and landlords that are very accommodating too. They acknowledged the current soft market and think nothing more than to be able to rent out their units asap. Yes, they do have concerns about the type of tenants tenanting their place but if they try to be picky and discriminating as what we discussed earlier, it would only eat into their pockets and making life difficult for themselves.

Agents like us play an important part in profiling these potential tenants to the owners. Commission aside. We are the bridge for the tenants and the landlords. We have a job to do besides just introducing the units and getting the deal over the line. The good sense of responsibility and accountability separates a good agent and those fly-by-nights.

I am more curious if the banner of requesting the owners not to rent to the Africans, if at all legal and law abiding? Who sanctioned the move and did they seek the proper authority for execution before they do so? What would the impact be for the owners, the agents, the tenants and the nations?

Racists and racism is a strong word. We would avoid it at all cost if we could. There is no room for that everywhere. Think about our actions and what we can do to mitigate the issues before going down the path of branding ourselves as racists. And for the agents, please, even if you are representing an owner who doesn’t want to be associated with such tenants, at least, be more tactful when declining the offer. We all have emotions and feelings too.

Our latest open house at Selekoh Tunku, Bukit Tunku last weekend

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What a weekend. We just had our latest open house at Bukit Tunku over the weekend and what an experience.  Weeks of preparations and arrangements finally paid off with a successful event. We would like to thank the office for the support, especially the Boss, Nieyko, Stephanie (our newbie support), Naz for your ‘cheerleading’ and all who came-by pre and during the open house.. Thank you so much!

And of course, the main figure here is Ms.Billie, my partner for this open house. Thank you for this opportunity, for me to experience my first Bukit Tunku open house.

We were all very excited leading to the day. Flyers, signboards, newspaper ads, and invitations. For me at least, it is not common to have open house around this area and open to all to look at one of Kenny Hills’ (before it was renamed to Bukit Tunku) classic bungalows. So, it is both a marketing and exposure experience for us.

The Selekoh Tunku address has some prominent residents lining up the street too. It would make a great neighborhood and furthermore, this is pretty close to the Jalan Langgak Tunku area – the happening place in Bukit Tunku. Fancy having a nice breakfast at the Kenny Hills Baker or having your lunch at the sumptuous Kenny Hills Bistro or just simply hop over to Sids at night for a quick alcohol fix? It’s just 1 min away.

Over the past 2 days, we had not many visitors or buyers. However, the quality of the visitors supersedes the lack in numbers. Most of them, when asked, came to know about the open house via the sign boards around Bukit Tunku. The interesting thing is, we do have keen individuals and some offers to bring back to the owner.  In fact, there was one who came back 3 times to view the unit! Talk about loving it. But of course, the negotiation is still in its early stage. We just hope for the best.

We ended the open house on Sunday afternoon and we have a total of 2 offers to be brought back to the owner. What an eventful 2 days and we got away with it even though we had it on a King’s birthday. Heh.

There you go. Our next chapter is already in the works and after today’s meeting with the team, boy, do we have a BIG one coming your way to Bukit Tunku very soon! So, stay close to this blog/facebook update and get to know more about what’s going to happen.

Ciao!

Good to know who is who and their roles…

Was a little busy for the past few months.  Been following up few low-hanging listing and would like to close these before my deserved trip to the North next week. Things have been kind to me lately and hopefully after our Bukit Tunku open house this weekend, it gets better!

Been running around collecting listing and meeting with owners recently and noticed that some if not all, are still a little fuzzy about the agents that are representing them. And to top it off, some agents (possibly newer ones) are also somewhat unclear about their roles. It is a good time to learn together now and I have just the infographic here to illustrate that nicely. Take a look, guys.

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So, just to summarize, a listing agent is the one representing the owner of the house/unit. If he gets a buyer and closes the deal by himself, he/she gets the full (2% commission – that’s our fee) from the sale price. And if a buyer’s agent is in the mix, the 2% get shared equally between the two. We call this a ‘co-broking or co-agent’ deal.

If a non-agent (means he/she is not officially registered as a REN/REA) is representing a homeowner and wishes to get something out of it, he/she is only entitled to a referral fee. Usually, these are the relatives or friends of the owner. Normally it’s a 10% of the total commission received by the buyer’s agent – although it may vary for different agencies. So in this case, the buyer’s agent somewhat act as a listing agent too.

Now, let’s go out and tell our owners, buyers and fellow agents what we can achieve together! If you wanna go fast, do it alone… if you wanna go far, do it together!


Infographic courtesy of http://www.Forbes.com | http://www.Redfin.com | PHA Realty