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Buying an apartment Wiki
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| posted by hongkonger 900 days ago (edited 886 days ago) |
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hkbloke,
a wiki suggestion, I already emailed a computer shopping wiki but that is not published yet, so here is apartment buying wiki:
<font size="4">Buying an Apartment in Hong Kong </font>
This is not legal advice consult your lawyer.
There was a write up in the property post magazine last wednesday worth a read.
In principal the apartment buying process is similar to other countries, in brief the process (note that the terms used locally may be different to those you are familar with back home):
<ul>
<li>arrange pre-approved mortgage (normally takes a week or so)</li>
<li>contact an estate agent</li>
<li>find suitable property (could take a long time) </li>
<li>review land search (normally agent will give you a copy for free, otherwise pay $10 from govt. land dept.</li>
<li>make an offer (consult agent and generally I ignore his advice)</li>
<li>if offer accepted sign pre-sale agreement, state dates for further contract, and completion, & pay 3% deposit. Some agents want part payment of there fee at this stage too.</li>
<li>if owner backs out he must pay the full agents fee, and pay you double your original deposit. If you really want to lock down
the deal pay highest deposit possible - so the owners default cost would be expensive, and hence less likely.</li>
<li>notify your lawyer, send copy of pre-puchase agreement (should have details of other vendors lawyer) </li>
<li>legal process (land search/sign up mortgage/check owner debt/check ownership) </li>
<li>upto ten days later sign contract, pay further 7% deposit (thats a total of 10%)</li>
<li>deposit sufficent funds into your lawyer's client account to pay all fees, stamp duty, balance, bank fees, etc.</li>
<li>prior to completion approx 30 days after signing pre-sale agreement, inspect property day - report any problems to your laywer, check with BMO that fees are current. be preapared to pay extra to settle any pre-paid balance for water, rates, management fees, and the like. </li>
<li>exchange contract (completion) - your lawyer transfers full amount including mortgage if any delivered by bank, and payment to owners lawyer account, vendors lawyer returns paper, signed contract, deed and keys</li>
<li>collect keys</li>
</ul>
Estate Agents:
Whatever an estate agent states verbally is pretty much worthless, and is not legally binding.
Read the pre-sale (also know and PS) and sale contract, there is a clause that states the written contract contains the entire agreement. In english that means whatever was said is meaningless only what is on the contract in writing can be contested in court, the expection that proves the rule is whether or not the property is clean
Clean in this context does not refer to the state of the bathroom floors or the interior decoration. It's a local term, if a property is clean nobody has commited suicide, jumped off balcony, died in the premise, etc. If it is not clean banks (who have a list) are unlikely to provide a mortgage.
Estate Agents Commision
The estate agents commission is typically 1-3% of the purchase price.
However for a new development, the estate agent might say there is no commission by buyer, that’s because they are getting a huge commission direct from the developer to push a particular complex.
Agents try every trick in the book, demand a list of potential properties and prices before setting out and getting dragged over creation to see properties that don't suit your needs. If you can afford it you can hire some to do the legwork for you.
Newspaper adverts, like those incredible low cost flight deals, already sold before you arrived.
The larger estate agent firms have a little book, some carry a photocopy, detailing the last months transactions in that area - a useful check for market pricing.
For estate agent complaints go to Estate Agents Authority (http://www.eaaa.org.hk)
Owner Debt:
Ensure the owner has paid all outstanding debt before signing the sale contract, picking a good lawyer will also save later problems with due to hidden debt/management fees/unpaid rates/etc.
Older Buildings
The Government provides loans, incentives, and loan guarantee schemes to help owners renovate older buildings, check for any outstanding loans/charges that might be payable.
Although the land search should highlight any debt / recent modifications may not appear.
Building Management Companies sometimes post notices in the lobby of apartment complexes as a reminder of un-paid fees, etc.
Mortgages:
Hong Kong banks offer the basic repayment type mortgages on newer properties. Getting a mortgage on an old property is very difficult.
By law, banks can only offer mortgage upto 70% of the property value, the buyer will need to fund the 30% balance which could be a loan, cash, or combination of both. Banks have options to get around this limitation, providing personal financing so upto 95% is possible, although the terms and interest on the 25% portion might be a bit scary (read expensive).
Some people might qualify for help from the Hong Kong Mortgage Corporation Limited check their website: http://www.hkmc.com.hk
Developers sometimes offer "attractive" deals, providing 99% mortgages, etc. for their new top of line developments (but read the small print carefully).
Pre-approved Mortgage:
Since the time period for executing the sales contract is limited - a pre-approved mortgage is recomended it saves a lot of time and heartache.
A few banks offer pre-approved mortgages services, submit the usual financial data, bank statements, salary details, tax returns, etc.
Bank Valuation:
If you find an interesting property ask your bank for a valuation (should be free of charge). Even if you don't need a mortgage the bank valuation gives an idea of the market value, and you might be able to use it to bargain down the price.
All you need to provide is the basic property details, gross floor area, address, etc. For valuation of NT village house properties you also need to provide the DD and lot numbers.
Typically the bank will call you the next day with the valuation price, you can expect the bank would provide a mortgage upto 70% of their valuation (not the purchase price), and probably upto 60% for a NT village house.
Mortgage Interest Rates:
Mortgage Interest rates are variable, and are quoted in the P-2% format. At the time of writing Prime is about 8%, that means prime - 2%, would equate to approx. 6%
Visit your bank for more information; they normally have an English leaflet. Do ask for details of all bank charges / compulsory insurance, and other charges for the mortgage account. e.g. early repayment within the first 2 years typically attracts 1% - 2% of mortgage as penalty charge.
Mortgage brokers:
During the preparation of the sale contract you need to provide your lawyer with the details of the bank providing the Mortgage. However banks can take time to process your mortgage application - sooner is beeter for mortgage applications.
Even having pre-approved mortgages will still require a few weeks to process. If you run out of time, you might approach a mortgage broker to help. Much faster service, however, the interest rate offered are extreme.
NT Village House
If you are planning to buy a village house property, there are a few additional considerations:
Ensure that your lawyer has plenty of experience purchasing village house because the land/deed issues are more complex than buying into a typical high rise block.
Although you will have no management fees to worry about getting neighbours to share the cost for common area repairs, septic tank pumping, etc. can be a nightmare.
Don't expect your bank to shower you with cash, a bank might offer upto 60% mortgage for a village house apartment, and the maximum mortgage term will be lower than a the high rise blocks.
Almost every NT house has some type of illegal structure (offically called unauthorised building works) of some type. The sale contract typically includes a clause that states you are buying at your own risk - so no compensation from former owner or laywer will be forth coming if later the government demands it's removal.
For Ground floor apartments: garden areas check whether it is government land, deed land, or leased from government.
Leasing small garden area from government around a village house is not expensive it costs approx $270/sq. metre/per year. However, there is a one off $8k admin fee.
Gross Floor Area (GFA):
All property is general listed in GFA. The gross floor area is defined as the total useable floor area of the apartment, upto and including the ouer edge of the external wall, it also includes structural columns. In high rise blocks it also includes the total common area proportioned across every apartment in the building.
For example a 700 sq. ft. GFA village house apartment without any fancy facilities has a usable floor area of nearly 700 sq.ft. Whereas a 700 sq.ft. apartment within high rise block will have lifts, multiple staircases, sky gardens, rubbish handling area, gardens, gym, pool, lobby etc. These "shared" or common areas significantly lower useable floor area for the individual apartment.
Rent and Rates:
Owners need to pay government rent and rates, bills are issued quarterly by the rating and valuation dept. Ensure that your lawyer checks that the rates are paid.
Government stamp duty (tax)
When you buy a property you need to pay the government stamp duty, the charge depends on the property value (approx. 1-3%)
Property Insurance:
If you have a bank mortgage they will insist that their portion of the mortgage is insured, typically only their in-house policy is accepted (read the small print it is a condition of mortgage) and it really only provides basic cover. And strangely enough it will be more expensive than the free market rate,you are responsible for the balance.
As an owner (occupied or not) you have a much wider liability in case of an accident. Saving a few bucks on insurance is not worth the risk Also when property valuations are rising, it is wise to check your insurance coverage is adequate.
Signing the Sale and Pre-purchase Agreement:
To start the buying process you will sign the "standard" pre-sale agreement and hand over a deposit.
The pre-sale agreement is a simple but legally binding contract which needs to be signed by both parties Among other details the pre-sale agreement sets out the time period allowed for both parties to draw up, and execute the sale contract.
Typically the period is 30 days, however if you are buying a NT village house I'd recommend at least 45 days to allow time for the more extensive land grant / deed research, and verification by your lawyer.
Consider also that if you have not obtained a pre-approved mortgage, then you could find it difficult to get a mortgage approved and processed in time, which might drive you into the mortgage brokers (as above).
Once the pre-sale agreement (contract) is signed by both parties, you are 100% committed. Don’t think it is easy to escape, it is a legally binding contract. If for any reason you wish to cancel the sale, you will lose 2 x deposit, plus and the entire estate agent fee, and any fees charged by your lawyer. If the owner decides to cancel, the owner pays the estate agents entire fee, and your twice your deposit is payable to you.
It is worth noting that after the pre-sale agreement is signed by both parties - the estate agents commission is going to be paid whether or not the sale proceeds.
Drive for deposits:
If your are trying to bargain the price of an apartment the estate agent will often request a deposit cheque as an indication that you are sincere. In theory the estate agent will wave the cheque in front of the owner to show you will buy at a particular price point, indicating you are serious, and you are not just kicking the tyres.
If the owner accepts the cheque - it is a done deal and the estate agent fee is then secure. If either party withdraws after signing the contract, the defaulter will have to pay the entire agency fee.
Sale Contract Inspection:
The sale contract will be signed by you, and then it is sent to owner’s lawyer with the balance, for the owner signature. If the property has been built, one day before you sign the sale contract you are entitled to re-inspect the premises, to check everything is in order. If not advise your lawyer accordingly.
*************
We will consume 85 million barrels of oil today, what's going to be left for tomorrow?
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| Newbie |
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| posted by xyz 900 days ago |
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great WIKI.
how about a WIKI on Selling Your Apartment too
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| Junior Member |
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| 1797 Posts |
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| Hong Kong |
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| posted by hongkonger 898 days ago |
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^
We will consume 85 million barrels of oil today, what's going to be left for tomorrow?
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| Junior Member |
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| 1797 Posts |
| in |
| Hong Kong |
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| posted by hongkonger 888 days ago |
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hkbloke/server wikify ?
We will consume 85 million barrels of oil today, what's going to be left for tomorrow?
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| Junior Member |
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| 1797 Posts |
| in |
| Hong Kong |
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| posted by hongkonger 877 days ago |
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^
We will consume 85 million barrels of oil today, what's going to be left for tomorrow?
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