Purchasing a lelong (auction) property in Malaysia can offer significant savings compared to buying on the secondary market. However, the hammer price at auction is not the only cost you need to prepare for. Depending on whether you’re self-financing or applying for a loan, there are additional costs that you must consider to avoid any financial surprises. These costs are on top of the initial deposit and can significantly impact your overall budget.
You should be extremely alert on what costs that involved or might arise when buying Lelong property to avoid forfeit of your deposit.
Here’s a detailed breakdown of the additional costs involved in buying a lelong property in Malaysia, along with examples for better understanding.
1. Remaining 10% Balance Between Reserve Price and Successful Bid Price
After winning the auction, you must pay the remaining balance between the reserve price and the successful bid price. If there were other bidders, the final bid price might exceed the reserve price, requiring you to top up the difference.
Example:
- Reserve Price: RM500,000
- Initial Deposit (10%): RM50,000
- Successful Bid Price: RM600,000
- New 10% (of Successful Bid Price): RM60,000
In this case, you need to top up an additional RM10,000 to meet the new 10% requirement.
2. Sales and Purchase Agreement (SPA) Legal Fees
Just like buying a property on the secondary market, purchasing an auction property requires you to appoint a lawyer to prepare the Sales and Purchase Agreement (SPA). The legal fees are based on the property’s value and include some miscellaneous charges.
Example:
- Property Value: RM600,000
- Legal Fees Breakdown:
- First RM500,000: 1.25% = RM6,250
- Next RM100,000: 1% = RM1,000
- Total Legal Fees: RM7,250
Additionally, miscellaneous charges may add up to RM1,000, bringing the total to around RM8,250 or 1.375% of the purchase price.
3. Memorandum of Transfer (MOT) Costs
The Memorandum of Transfer (MOT) is required to transfer the property title to your name. This cost is determined by the property’s value and whether it’s under a master title or an individual title.
Example for Individual Title (Non-LACA):
- Property Value: RM600,000
- MOT Stamp Duty Breakdown:
- First RM100,000: 1% = RM1,000
- Next RM400,000: 2% = RM8,000
- Next RM100,000: 3% = RM3,000
- Total MOT Stamp Duty: RM12,000
This MOT cost is around 2% of the purchase price.
Example for Master Title (LACA Cases):
- Direct Transfer with Admin Charges: Up to 1% of the first SPA price (e.g., RM6,000)
- Title Issued (One-Time MOT): RM12,000
- Indirect Transfer (Double MOT): RM24,000
Depending on the case, MOT charges can range from 1% to 4% of your purchase price.
4. Loan Legal Fees & Stamp Duty
If you’re financing the property with a loan, you’ll incur additional legal fees and stamp duty charges for the loan agreement. These costs depend on the loan amount and the margin of finance.
Example:
- Property Value: RM600,000
- Loan Amount (90% Margin of Finance): RM540,000
- Loan Agreement Legal Fees Breakdown:
- First RM500,000: 1.25% = RM6,250
- Next RM40,000: 1% = RM400
- Total Loan Legal Fees: RM6,650
- Loan Stamp Duty: 0.5% of Loan Amount = RM2,700
- Total Loan-Related Costs: RM9,350
This is approximately 1.56% of your total purchase price.
| Formula | Rate | Total |
|---|---|---|
| First RM500,000 | 1.25% | RM6,250 |
| Next RM7,000,000 | 1% | RM4,00 |
| Subsequent Purchase Price | Max 1% | – |
| Total Legal Fees | RM6,650 |
5. Outstanding Charges of the Property
When buying a lelong property, you may inherit the previous owner’s outstanding charges, such as quit rent, assessment, maintenance fees, sinking fund, water bill, and Indah Water charges. These costs can vary depending on whether the property is a LACA (Loan Agreement cum Assignment) or non-LACA case.
Example:
For a LACA case:
- Covered by Bank: Maintenance Fees, Sinking Fund (up to 6 years before auction)
- Not Covered: Water Bills, Indah Water
For a non-LACA case:
- Covered: Quit Rent, Assessment
- Not Covered: Maintenance Fees, Sinking Fund, Water Bills, Indah Water
You may need to pay these outstanding charges upfront and then claim reimbursement from the bank (for LACA cases).
6. Extension of Time Penalty
If there are delays in completing the purchase, you might need to request an extension of time, which could incur penalties. The maximum penalty is typically 8% per year of the remaining balance.
Example:
- Remaining Balance: RM540,000
- Penalty Rate: 8% per year
- Monthly Penalty: (RM540,000 * 8%) / 12 = RM3,600
For each month of delay, you would be penalized RM3,600 by the bank.
Total Estimated Costs Involved for a Lelong (Auction) Property @ RM600,000
- 10% deposit: RM60,000
- SPA Legal Fees & Miscellaneous: RM8,250
- MOT Stamp Duty: RM12,000
- Loan Legal Fees & Stamp Duty: RM9,350
- Outstanding Charges: RM2,000 (assumed)
- Time Penalty: RM0 (assumed no delay)
Total Cash Required: RM91,600
Most of the time, if you are buying Condo Property at Lelong, the outstanding maintenance fee / utilities fee can easily add up another RM20K. Be sure to visit the relevant utility offices, including Tenaga Nasional Berhad, Syabas, and the property management office, with a copy of the Proclamation of Sale (POS) to verify any outstanding bills.
Forfeiture of Deposit
For Non-LACA auctions, the required bid deposit would be 10% of the auction property reserved price. If you managed to win the bidding but end up decided to not buying the property, you will lose your deposit. There are other circumstances that could cause forfeiture of deposit:
- Balance not settled within the stipulated settlement period of 90 days or 120 days
- Loan rejected by bank.
Thus, it is very important for you to check your loan eligibility before going in any auction. Your deposit will not be refunded if the loan is not approved.
Final Thoughts
When buying a lelong property in Malaysia, it’s essential to prepare for the additional costs that come with the purchase. These costs can range from legal fees to outstanding charges and penalties, adding up to an estimated 7–10% on top of your purchase price. Understanding and budgeting for these expenses will help ensure a smooth transaction and prevent any financial surprises along the way.
Other than these hidden costs, you should also be cleared about what risks that might arise with buying an auction property. Make sure that you are aware and have solution for each of the risks before bidding for the property,
