The upfront costs involved in buying a subsale home

In the secondary market, buyers avoid the risk of delay, non-completion, or misaligned expectations.

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Purchasing a subsale property is the safer option for both homebuyers and investors.

In the secondary market, buyers avoid the risk of delay, non-completion, or misaligned expectations that come with the purchase of new projects. Investors, meanwhile, can easily check transacted prices, rental yield, and the capital growth of subsale properties online.

That said, buyers of new properties enjoy a lower barrier to entry as discounts and rebates offered by developers make home ownership much easier.

In contrast, the purchase of a subsale property involves high upfront costs.

Down payment

A down payment amounting to 10% of the property’s purchase price is required. However, a higher down payment may be required for commercial properties such as small office, flexible office (SoFo) and small office, versatile office (SoVo) units.

About 2-3% will usually be collected upfront as an earnest deposit, and the remaining 7-8% will be paid upon signing of the sale and purchase agreement (SPA).

The purchase of a RM400,000, for example, would require RM40,000 in down payment. Fortunately, first home buyers may apply for a full loan under various financing incentives such as the My First Home Scheme if they meet eligibility criteria.

Legal fees

Home buyers are legally required to hire lawyers for the preparation of documents for real estate transactions. Below is a scale of fees for drawing up a SPA:

A similar scale of legal fees is charged separately for the loan agreement. Here, then, are the estimated legal fees for a property worth RM600,000:

• SPA legal fees

First RM500,000: RM500,000 x 0.01 = RM5,000
Next RM100,000: RM100,000 x 0.008 = RM800

• Loan agreement legal fees

First RM500,000: RM500,000 x 0.01 = RM5,000
Next RM500,000: RM100,000 x 0.008 = RM800

Additional disbursement fees may be charged for adjudication, land search, registration with the state land office, winding up and bankruptcy searches, or travel and printing allowances.

Stamp duty

Stamp duty – a tax on legal documents such as the SPA and instruments of transfer – is payable upon purchase of a property. It is charged based on a tiered structure as a percentage of the property price:

The stamp duty on the SPA and memorandum of transfer for a RM600,000 property can, thus, be calculated as follows:

• First RM100,000: RM100,000 x 0.01 = RM1,000
• RM101,000 to RM500,000: RM400,000 x 0.02 = RM8,000
• Next RM100,000: RM100,000 x 0.03 = RM3,000
• Total: RM12,000

The stamp duty on a loan agreement is a flat 0.5% fee applied on the full value of the loan. Where a typical 90% loan for a RM600,000 property would amount to RM540,000, the 0.5% stamp duty would, therefore, come up to RM2,700.

First home buyers are exempted from stamp duty on the SPA and loan agreements for residential properties below RM500,000. This applies to Malaysians with any SPA completed between Jan 1, 2021 and Dec 31, 2025.

Service and processing fees

Property valuation, also known as real estate appraisal, is used by mortgage companies and banks to determine how much they can loan to a potential home buyer for a property.

Appraisals can only be done by professional valuers and are required by the bank if a property is purchased with a loan. The fees and calculations for a RM600,000 home are:

• First RM100,000 = 0.25%
• Next residue up to RM2 million = 0.2%


• First RM100,000 = RM100,000 x 0.0025 = RM250
• Residue of RM500,000 = RM500,000 x 0.002% = RM1,000

Banks would also charge a negligible processing fee of typically a few hundred ringgit for the processing of loan applications.

The costs of hiring a property agent is excluded from this article as their fees are to be borne by the seller of the property.

Furnishing, repair and renovation costs

When buying a new property, home buyers typically enjoy a warranty known as the “defect liability period” for 24 months, applicable to properties under the Housing Development Act.

But no such warranties are provided for purchases in the secondary market. Subsale properties are either sold as-is, or the buyer may request certain terms for specific repairs to be done by the seller before vacant possession.

The onus, as such, is on the buyer to thoroughly inspect the property for any major flaws and request for the seller to fix them as a condition of the sale. Otherwise the buyer themselves bears the costs of repairs after the sale has concluded.

To be safe, home buyers should budget for renovation and repairs when purchasing a home. This also applies to unfurnished units – it is wise to budget beforehand for essential furnishings to make the property livable.

And don’t forget: bare units will require buyers to fork out on lighting, fans, air-conditioning, kitchen cabinets and other such fixtures, which can quickly eat up savings.

This article was written by Vigneswar Rajasurian of Property Advisor, Malaysia’s most comprehensive source of property data, property analytics and insights.

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