How About NO? (A Home Buyer’s Conundrum)

ACHTUNG! Today we are shifting our focus to Malaysia property – since we are opening the Kuala Lumpur branch of Uptown Place Homes in 2015!

Foreclosure home.

Image source: SXC.HU

For many Malaysian home buyers, the real goal for every house hunt is not only to find the home they’ve always dreamed of. It’s also about buying a home or property in Malaysia that will suit the needs of his family. More importantly, will suit whatever budget the family has for mortgage. Home buying is hardly ever cheap, that is why short sales are a very popular choice among home buyers on a budget.

A short sale in real estate refers to selling a home that is bound for foreclosure (or “kena lelong” in Malay lexicon). And while that does not sound too enticing, there are tons of home buyers who actually scramble after foreclosure homes for sale mainly because the houses on short sale are downright cheap.

The Malaysian home owners need to sell them as quickly as possible in order for them to avoid foreclosure and so they allow for their homes to sell below its market value.

Reasons Why You Should SAY NO!

A foreclosure Malaysian home.

Image source: SXC.HU

But should you really buy a house on lelong? Doesn’t it come with actual risks? Here are five top reasons you should probably not buy a lelong home:

  1. Foreclosure homes are more likely to be in a bad shape. Homes have gone into foreclosure primarily because its homeowners have gotten into a financial rut that prevented them from affording their mortgage fees. And only logically, we should expect that if they cannot afford their mortgage fees, they would be less than likely to even afford a single repair on the house. And the fact that the sale is short and quick, there would be no time to make actual and significant works on the house.
  2. There might be more underlying problems on the house. Because the sale is supposed to be quick and the house being sold as is, there might not be time to get the house inspected. And because the Malaysian homeowner is in haste in trying to get the house sold, they may not fully disclose the real condition of the house. After all, they are  trying to sell it as quickly as possible.
  3. They may be selling the house without the mortgage lenders consent. Homeowners are bound by contract to obtain permission from the mortgage company to sell their house in the event of a looming foreclosure. However, not all homeowners get that ‘privilege’. Unless they prove that they truly are in a ‘hardship’ situation, that permission might be hard to come by. And should they proceed with the sale, and you end up buying the house, you might have to pay more for assuming the previous Malaysian homeowner’s existing and obviously indebted mortgage loan.
  4. The closing costs might be higher. No lender is ever happy with a short sale, and you might take the blunt of this ‘unhappiness’. Lenders hardly offer anything for short sale buyers as far as closing costs are concerned so you might have to pay that yourself; and with all the complexities – paper wise – of a foreclosure sale, you should end up paying for ore.
  5. Because it is complicated and it has tons of people and other things involved, you might have to wait longer than expected before the house becomes yours. The wait can be indefinite, boring and scary.

Get a lelong home, for all its worth, only if you are willing to put up with these risks.

So… this is my conclusion –