Buying a Domestic Property
Buying a home is a big decision for many people. Doing more preparation will definitely pay off in the long run. This article provides you with handy information and tips.
Looking for a Flat
You can find a place on your own or through an appointed estate agent. If you decide to use an agent, remember to appoint only licensed agents and sign an estate agency agreement with them. Pay attention to the following points when signing the agreement:
- 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.
Viewing a Place
Searching for a right place is not easy. You may want to explore as many options as possible. You can use the bilingual search engine provided by the Property Information Online (PIO) to locate a property record easily and to obtain essential information held by the Government, such as saleable area, age and permitted occupation purposes.Property Information Online
When viewing a place, you should pay attention to the following:
- Look for any water stain on the ceiling, bay windows and walls to see if there have been water leakages.
- Inspect electrical wiring, switches, water pipes, toilets, etc. to see if they work properly.
- Check if there are any illegal alterations to the property and seek a surveyor’s advice 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 are in occupation of the property and enquire what their capacities are and whether they hold any interest in the property.
Know the surroundings of the building. If there is any slope, check the maintenance responsibility.Slope Maintenance Responsibility Information System
Vendor’s Title & Encumbrances
When you have found a suitable property, don’t rush to sign any contract. Make sure you are well informed of the vendor’s title and encumbrances against the property.
- Ascertain from the vendor whether he/she is selling the property in the capacity of the owner or in any other capacity.
- Ascertain 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 has to be paid (e.g. for flats 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 flats in the open market).
- Ascertain from 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.
- Ensure that the vendor is able to repay all outstanding liabilities, e.g. mortgage, management fees, Government rent and rates, before 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 estate agent to provide you a land register of the property which lists out all the vendor’s encumbrances against the property. You can also make a search online or seek assistance from a lawyer.Search Land RegisterFrequently asked questions about land search services
If you want to buy a first-hand residential property, there are certain things that you have to pay attention to. Browse the links below for more information.Things to know about first-hand residential property
Provisional & Formal Agreement
Provisional Sale and Purchase agreement is signed initially after you and the vendor both agree on the deal. It is a legally binding contract that must be fully observed and performed by the parties involved. You should seek legal advice whenever you are in doubt. For the usual items that must be included in a provisional agreement and other useful information, you can refer to the link below.More about provisional sale and purchase agreement
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.More about formal sale and purchase agreementConsequences of breaching the 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. Access the links below for more details about stamp duty.Stamp Duty ComputationStamp Duty RatesTime limit for stampingPersons liable for stampingSpecial Stamp Duty
Financing Your Property
When choosing a bank or financial institution for loans, consider the following:
- 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 purchase of a property. 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. Click the link below for more information.Mortgage Insurance Programme by HKMC
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.
Note: This article serves as a general guide only. In case of doubt, please refer to the relevant regulations or seek advice from the legal profession.