HOUSE OWNERSHIP

There are four types of house ownership that require expenditure of financial commitment on the part of house owner. House ownership in the form of gift is not included and discussed in this topic.

1. Direct Purchase From Housing Developer

Purchasing a house directly from the housing developer is not notably the most common practice of house ownership.

Unless purchasing a completed house, ownership of a house under construction can take much longer time.

The prices of houses very among different housing developments, as the price is predominantly determined by the land costs. Location of land such as within urban precinct and free hold land tenure may result in high land price. Site preparation cost and authorities’ charges would also add to the price of land subsequently.

Other cost that contribute towards the high development cost include design and project management fees, construction costs, finance charges, and marketing costs.

House ownership by means of purchasing it from the developer certainly cannot be cheap. The house owner pays the land price and as well as the building price. In fact the house owner pays outside his own expense the profits purportedly charged by the developer of the cost of land, statutory contributions, design and management, site preparation, construction, and project finance.

2. Indirect Purchase Through Estate Agent or Broker

It is the second most familiar way of house ownership whereby a house owner purchase a house by engaging the service of real estate agent or broker.

This method is considered the speediest because it normally deals with completed property transaction.

The agent or broker might have a selection of houses for house owner to choose from to suit the house owner’s budget but the main drawback remains the price regime.

Purchasing properties via estate agents or brokers is not cheap. The agent usually survives on commission fee that he receives from the land lord at a certain percentage from the selling price and there is tendency that the agent raises the selling price for higher commission. Unless the land lord determines the selling price of house from the outset, the agent in practice recommends the market price.

Agent might recommends higher selling price to house buyers in cases where the house is located at an established neighbourhood or precinct especially where basic or essential facilities are available such as a school, shop, a place of worship, etc.

3. Building A House on House Owner’s Own Land

The concept is the house owner build a house on his land. It is the cheapest means of house ownership from the financial point of view.

For a house owner with land, he can save between 25 to 40% if he chooses to build a house on his land. While, for a house owner without land but chooses to buy a bungalow lord not exceeding RM 10,000 he can save between 25 to 30% if he chooses to build a house on that bungalow lot.

This method is considered tedious at times in the sense that it involves laws and approvals from the authorities. The development period including both the approval process from the authorities and construction time may take from six to twelve months.

In majority of cases, the house owner engages designers such as architect and structural engineer to prepare the house design and obtain approvals from the authorities on behalf of the house owner.

The house owner then employs a contractor or builder for the construction of the house on price agreed by both parties. The house owner may appoint a contractor by traditional open tender method or negotiated package deal procurement.

Employer-led or open tender procurement is more expensive and time consuming than the package deal the fact it involves different separate parties such as an architect, a structure engineer, a quantity surveyor, a main contractor, and specialist contractors.

Package deal contract is time saving and cheaper as it undertakes most of the work normally performed by parties in the traditional employer-led contract. In package deal procurement the contractor prepares the project design, makes application for approval from the authority, and undertakes the construction work. The contractor is paid under a single fee basic.

4. Trade-in of House

This type of house owner is suited for existing home owner in pursuit of acquiring better home. It may fall to the category of people living in a simple terrace house that some time in their life which to live in a bungalow.

This concept of house ownership has yet to be implemented. Its mechanism is similar to that of conventional trade-in business. The house owner trades in his present house to the builder and the builder in return substituting it with a new house (bungalow).

The surplus money or differential amount of the trade-in house between the owner’s purchase price and the current price becomes a down payment for the new house construction cost. The house owner has to bear the cost of the construction of the new house or bungalow by seeking a new or fresh financing.

It is the duty of the builder to sell the trade-in house to relief the house owner’s earlier debt obligation to the lender.