Buying a property is an important decision for many people. You are advised to pay attention to the following information and tips to have a good preparation.
To Search For a Property
You can find a place on your own or with the help of an appointed property agent. If you have decided to use an agent, you must appoint licensed agents and sign an estate agency agreement with them. Please pay attention to the points below when you are signing the estate agency agreement with the appointed agents:
- Validity period of the agreement;
- Amount of commission and time of payment;
- Whether the agent acts only for you or acts for both you and the vendor (i.e. dual agency). In the case of dual agency, the agent needs to inform both parties of this relationship and disclose the amount of commission he/she charges the other party.
To View a Place
When viewing a place, you should pay attention to the followings:
- Inspect electrical wiring, switches, water pipes, toilets, etc. to see whether they work properly.
- Look for any water stain on the ceiling, bay windows and walls to see if there have been water leakages.
- Check if there are any illegal alterations to the property and seek advice from a surveyor’s if necessary.
- Enquire whether the property is occupying any common area.
- Enquire whether furniture, electrical appliances and decoration are included in the sale of property; if yes, specify the inclusion in the agreement of sale and purchase.
- Check who is in occupation of the property and enquire what their capacities are and whether they hold any interest in the property.
If there is any slope near the building, check the maintenance responsibility.
Vendor’s Title & Encumbrances
When you have found a suitable property, you are advised not to rush in signing any contract. Please make sure you are well-informed of the vendor’s title and encumbrances against the property.
- Confirm with the vendor whether he/she is selling the property in the capacity of the owner or in any other capacity.
- Confirm whether any approval/consent from the Government or other authorities are required before the vendor can sign an agreement to sell the property and whether any premium needs to be paid (For instance, properties that are under the Home Ownership Scheme, owners must pay a premium to the Hong Kong Housing Authority for removal of the alienation restrictions before they can sell the properties in the open market).
- Confirm with the vendor whether there are any subsisting mortgage, charge, government order, tenancy agreement, etc. relating to the property.
- Obtain a warranty from the vendor that neither the property has any illegal structure nor has it been altered.
- Make sure the vendor is able to repay all outstanding liabilities, e.g. mortgage, management fees, Government rent and rates, before the completion of the transaction.
- Ask the management company whether the Incorporated Owners of the building or all the co-owners are involved in any litigation.
You can ask the property agent to provide a land register of the property which lists out all the vendor’s encumbrances against the property. You can also search online for more information or seek assistance from a lawyer.
Provisional & Formal Agreement
When you and the vendor agree on the deal, both parties will enter into a provisional sale and purchase agreement. It is a legally binding contract which must be fully obeyed by the involved parties. If the formal Sale and Purchase Agreement cannot be signed, the parties can rely on the provisional agreement to proceed with the deal or to sue for compensation.
The provisional agreement must include some information such as the address and price of the flat, amount of initial and further deposit, when to sign the formal agreement, the completion day, etc.
A formal Sale and Purchase Agreement should be drafted by a solicitor based on the provisional agreement. It contains terms that are more detailed and is intended to replace the provisional agreement. You can include any special conditions you want as long as they do not violate any relevant ordinances or contradict the terms of the provisional sale and purchase agreement.
Stamp Duty is imposed on the agreement for sale of residential property. The rates vary with the amount or the value of the consideration.
To Finance Your Property
When choosing a bank or financial institution for loans, the followings should be considered:
- property valuation and mortgage amount offered;
- repayment terms;
- interest rates;
- date for implementing interest rate adjustments;
- early redemption penalties and notice period;
- handling fees, legal fees and insurance fees, etc.
The Hong Kong Mortgage Corporation Limited (HKMC) provides the Mortgage Insurance Programme (MIP) which helps alleviate the down payment burden of potential homebuyers in the property purchase. Through the MIP, the HKMC provides insurance coverage to MIP participating banks for an amount up to 20% of the appraised value of the property (subject to the insurance eligibility criteria of different MIP products), enabling the banks to extend mortgage loans of up to 80% of the appraised value of the property.
Date for Delivery of Possession
You should note that the provisional agreement for sale and purchase should specify:
- the date of completion of the sale and purchase of the property; and
- whether vacant possession of the property shall be delivered on completion.