So you’ve done your homework and research and decided that buying a house is for you? Congratulations! Now you get to enjoy the ride starting with looking for a place up to furnishing it and moving in. This article will talk about buying a house to occupy as your residence and not buying to invest. Although, a lot of the elements will be similar.
It has to be repeated that owning a house is not for everyone. You basically take on a lot of responsibility as well as shoulder everything that could potentially go wrong at any time. Nonetheless, being a homeowner is a great feeling of accomplishment (for me at least) and this does not need confirmation from our society.
Also, remember that only Bruneian citizens can own real estate as freehold i.e. owned indefinitely. Certain properties also have strata titles i.e. possible to be owned up to 99 years before needing to return it to the Government. Strata titles can be owned by Bruneian Permanent Residents and foreigners as well.
What you need to know about buying a house
Buying a house is pretty much the biggest purchase many will make in their lifetime. As such, you should do as much due diligence as possible every step of the way to prevent you from regretting it down the line. There will be a lot of money involved in this process and potentially even more if you decide to cut corners.
Steps to bear in mind are:
- Finding a house
- Confirming a house
- Securing a mortgage
- Professional fees
- Moving in
I think the steps are pretty straightforward. The problems come within these steps.
1. Finding a house
When you make the conscious decision to find a house, you become more aware about what you want. It’s easier to find what you are looking for when you break it down. Usually simplified to price and location, there are other checkboxes that can help you decide which house to go for.
First thing to do is to decide on a budget. Divide it into how much you are willing to spend on the house itself, renovations and furniture. Try to give at least a 15% extra allowance within your budget because more likely than not, you will blow it up and need more.
ii. Type and Needs
What kind of house are you looking for? Detached, semi-detached or terrace are common choices in Brunei.
Next, think about how many bedrooms you’re looking for. This can be derived from how many family members will be staying with you and any domestic helpers you plan to hire.
There’s an old saying that the 3 most important factor for real estate are “location, location, location”. This is pretty true when searching for a house. You should have certain areas in mind that would be ideal. It could be near to a school you want to send your kids to or maybe close to shopping areas for convenience. For me, it was necessary to find a place that wasn’t a traffic hell every morning and ease of access to commercial areas.
Make a list of where you want to be close to and go for a drive to the locations you fancy. You get a better idea of a residential area when you actually experience it.
Are you in a hurry to move? Or are you ok with waiting a year or more? If you’re not in a hurry, you have more options because you can browse projects still under development. While the advantage is cheaper prices, the main risk here is non-completion of the project. Additionally, you can make minor tweaks during construction so you don’t have to renovate later on!
Personally, I wanted to move ASAP because, like I mentioned earlier, traffic hell everyday was chipping away at my sanity. Therefore, I looked for completed houses. Still, it took over a year of scouting and viewing before I decided on one.
v. Agent vs Seller directly
Initially, I checked out houses listed with real estate agencies. When this was not meeting what I wanted or was flat out over my budget, I started going by contacts. Soon enough, a family friend introduced her friend who was looking to sell a house. And the rest just fell into place.
Agents make money through commissions usually and I haven’t met many agents so I can’t make any judgements on them. I’d assume the agent should at least guide you on what to do during the buying process. If you decide to deal directly with the seller, like I did, be ready to learn quickly and be hands-on for a lot of things.
2. Confirming a house
Before, I have always wondered how people decided on a house. Many times, even when a house checks a lot of boxes, it doesn’t feel right. It might sound a little like mumbo jumbo, but I pretty much confirmed when I entered the house and it just… feels right. A little bit of gut feeling was all it took for the “Yay or nay” decision. Regardless, pay attention to a few details on this step that helps make the decision easier.
i. Land Title
Check the land title (“garan” in Malay) of the property and confirm that it is indeed the one you want. Also check that this property is freehold (“kekal” in Malay) unless you don’t mind buying a strata land. By right, strata titled properties should be cheaper due to their obviously limited ownership timeframe.
Before you commit, be sure to inspect every part of the house and flag up any issues to the seller. More often than not, the seller will assist in rectifying these problems. Things to look out for include plumbing, wood work, tiles, plastering and especially foundation. Foundation is particularly important because your house literally sits and is supported on it. Any major problems with foundation now could mean bigger problems down the road.
If the seller is not that trustworthy, I would suggest looking for another house unless you HAVE to get this particular one.
It’s up to the seller how much they want as deposit. Ours happily settled for BND10,000 and usually this is more or less a formality to seal your intent to buy the house. Get a proper and signed letter of receipt from the seller as well. The deposit will offset the final amount.
So now that you have decided on a particular property and booked it, the next step is get the payment documentation in order.
!!Important!! From this point onwards always, ALWAYS have copies of signed documents and receipts to prove agreements and payments. This practice will save you a lot of headaches down the road as well!
3. Securing a mortgage
Not many people can drop wads of cash when buying a house. More often than not, us normal folks need to apply for a mortgage. Making the effort to shop around will be wise. Check out our local banks and get quotes for the mortgage before committing. Pretty much all the banks I checked needed me to have my salary go into their accounts as well. So if you haven’t already have this in place, that’s an extra step you will need to do.
You should get quotes along the lines of:
How long do you want your mortgage to last? 20 years? The longer the duration, the less you pay monthly. But you pay way more in the long run because of interest. The opposite is true too: shorter loan duration means higher monthly payments but less interest paid in the end.
ii. Interest rates
Banks usually go around 4.5-5% interest. I had one local bank try to charge me nearly 6%. Now that’s extortionate!
iii. Extra money
My banker suggested I add BND10,000-12,000 into the loan for legal fees and insurance. Some people also add on more for furniture purchases and renovations down the line. This is optional even if you have the cash to cover additional expenses but it’s up to the bank to approve your loan or not.
Once you have decided on the bank, the banker will guide you through the process which will require you to submit some documents and sign others. Then you just need to wait and plan your next step.
4. Professional fees
I didn’t expect this in the beginning. In hindsight, of course there are charges. The banking and real estate market isn’t a charity! All proper documentation will benefit you in the end so don’t cut corners for these. So the extra $10k suggested by Mr. Bankman would be sunk into these:
i. Lawyer fees
Anyone can tell you lawyers aren’t cheap. And lawyers who assist in buying a house are no different. Regardless, you need to engage a law firm to help you prepare the necessary documents as well as submitting your request for transfer of land title to the government agencies. Again, shop around different law firms as their rates vary. The most important document they will draft for you is the:
Sales and Purchase Agreement
Often referred to as the S&P agreement, this is the final contract that you sign with the seller. All the clauses and terms will be spelt out for you. Read, understand and agree to all the terms before you sign.
ii. Banking Documents
Basically the agreement between you and the bank for taking up a loan.
iii. Processing fee
If I remember correctly, this includes charges by the government agencies.
iv. Mortgage Reducing Term Assurance (MRTA)
This is a life insurance policy you buy to reimburse the bank in case you kick the bucket before paying off your loan.
v. Fire Insurance
Fire insurance for your property; this purchase is only for the first year and you will need to renew it yearly.
vi. Valuation Report
The bank will engage surveyors to check out your property and use their report to assess the current value of the property. This directly affects the amount you are allowed to loan.
Wow, that’s a lot of work and money!
By now you might be having second thoughts about buying a house. But be warned: these fees are considered cheap if you haven’t factored in renovating and buying furnitures. Believe it or not, once you get the paperwork done, the easy part is over!
Many people have particular likings of how their home looks. And when buying a house, usually you will not find one which fits 100% to what you envisioned. So what can you do? Renovate! Before you break out your tools and get cracking, it’s usually much better that you leave major works to the professionals.
But alas, Brunei is lacking professional contractors who are reliable for these small jobs. The better ones will probably not entertain you and the cheaper ones usually have horrible quality. Up until now, I have yet to find trustworthy and consistently good contractors although I have experienced working with decent ones. While looking for your choice of contractors, you should plan ahead with regards to:
This is research-heavy on your end. No one knows what you want except you! We looked at lots of design books, websites, google images and I even followed a few home design accounts on Instagram. I even went as far as to draw out a rough sketch of what we wanted. The more you know what you want, the better you can explain to your contractor.
This time I put budget second because when it comes to house design and renovations, people become irrational. In my head I know my budget but the sense of wanting to “do it once and get it over with” is extremely tempting. The thought of not needing a second major renovation was convincing enough. Nonetheless. having a budget in mind, you can get quotes from multiple contractors.
This is one of the most important processes in your renovation. Without a quotation, you won’t know what you’re paying for. The quote is usually referred to as the “Bill of Quantity”. Contractors can do quotations in 2 ways: Lump sum and Break down.
a. Lump sum
I dislike this method of quotes the same reason contractors love to do it: items are charged in one big amount and you have no way of knowing how much subsections of work cost. If you’re ok with this, no problem, but I would prefer the alternative as that is more transparent and clear for both sides.
b. Break down
This is my go-to quote method for anything. I want to know how much individual jobs are. This makes it easier for you to eliminate certain parts of the project at a later time if you feel that you don’t need it. The transparency of pricing also stops unexpected surprises when certain things are changed or added.
Contractors in Brunei are notorious for dragging projects over the initial agreed time. Sometimes it’s the fault of the owner who changes his mind about things every other week. Regardless, I recommend you get the contractor to agree to what’s called the “Liquidated and Ascertained Damages” or LAD. Any contractor worth their salt should agree to it.
Basically, the LAD is like a penalty for late delivery or project completion. Bear in mind that if you have additions and deletions to the project, you should be more flexible with the LAD as well.
v. Site visit
During renovations, you should do your best to visit the site often. This allows you to catch things the contractors do wrong and rectify it quickly. They will get some small things wrong from time to time and sometimes due to miscommunication. The earlier you catch mistakes, the easier it is to fix. Things I caught, for example, are:
- Preparing to install a doorway at the wrong end.
- Pipe blockage causing water to overflow.
- Horrid paint jobs.
- Plastering problems.
- Workers smoking indoors.
I visited the site everyday initially; only to reduce to every 2 days after a month or two. It is super tiring to do this but it gives the best results on quality. Additionally you’re psychologically hounding them to get the work done.
You should not wait until after your renovations’ eventual completion before you start looking for furniture. You should have a rough idea of what you want your house’s interior to look like. With that in mind, it’s simply sticking to yet another budget and going shopping.
As much as I love to support local, we bought complete bedroom sets in our neighbouring city, Miri. Price comparison was simply too overwhelming to pass up considering something similar in Brunei cost at least double and their quality was pretty good. There are also a handful of local furniture stores to choose from to suit your price and tastes, though.
Regardless where you buy from, like renovations, this is also a budget buster if you’re not careful. The plus side is you don’t have to buy everything in one shot. You can save up for that nice couch down the road; all you need are the necessities like beds and so on.
7. Moving in
The final step of buying a house is, of course, moving in! Packing up your old place is like the final 1km of a marathon. You’re almost there but it feels like it’s so far away! A lot of effort goes into putting everything you want in a way that you can take them out easier.
Plus you have to think of all the things you want or not. If you do not want the items, usually we toss them in the trash. Alternatively, usable items can be sold during a garage sale or donated.
There are quite a lot of movers with pickup trucks that can help you move heavy furniture and the like. Usually we go by recommendations and referrals by people who have used their services before. So don’t be shy to ask around!
Congratulations! By now you should be in your cosy home. Well maybe a few months later, perhaps. As you can see, buying a house is big in twofolds: your wallet and your responsibilities. While I can vouch that chilling in a house of your own is a great feeling, owning one is definitely not for everyone. Because all the money you injected into your dream home? That’s not the end of it. There are more payments to come; some slower than others but surely there are more. There’s also the responsibility of maintaining the house; you wouldn’t want it to become decrepit after a few years, right?
What I have listed in this article is just a snapshot of what I went through when buying a house. There are many things omitted such as scouting for fittings (like lights) and also the physical and psychological stress that goes into this. I was also lucky I didn’t have to go at it alone; my wife, family, friends and acquaintances all helped make the project possible and a journey I can share with you.
A man travels the world over in search of what he needs and returns home to find it.
– George A. Moore
Side note: Aussie owner-builders can check out intellichoice.com.au for mortgage options.