Stopping progressive payment to developer -- what are the consequences?

Does anyone know what the consequences are if we tell the Malaysian developer we are no longer interested in the residential unit we bought and will stop payment?

Is it just a case of the unit being repossessed by the developer and we lose whatever deposits/payments we have paid to them so far? Will there be other penalty levied on the buyer?

S&P and all the legal documents have been signed. Bank loan also applied already but so far no loan amount has been disbursed.

Hope the bros and sis can share your opinions here. Thanks.

sgcount said:

Does anyone know what the consequences are if we tell the Malaysian developer we are no longer interested in the residential unit we bought and will stop payment?

Is it just a case of the unit being repossessed by the developer and we lose whatever deposits/payments we have paid to them so far? Will there be other penalty levied on the buyer?

S&P and all the legal documents have been signed. Bank loan also applied already but so far no loan amount has been disbursed.

Hope the bros and sis can share your opinions here. Thanks.

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The S&P contract between the buyer and the developer is totally separated from the contract between the buyer and the financier.

You have to go through the Default Clause of your S & P and it is between you and the developer. You cannot just say "I stop payment and you can take back your house." You have to cancel it through your lawyers accordingly subjected to the terms and conditions as stated in the S&P. The developer built the house based on letter of undertaking by the bank that the funds are available. They can force you to continue otherwise you would have to pay compensation.

You also have to go through the paperwork between your bank and yourself as the borrower. There could be penalties for defaults as banks had earmarked the funds for you. You signed it with your bank lawyers and you have to cancel through them as well legally. You cannot just walk away. You need to close the file in the bank.

sgcount said:

Does anyone know what the consequences are if we tell the Malaysian developer we are no longer interested in the residential unit we bought and will stop payment?

Is it just a case of the unit being repossessed by the developer and we lose whatever deposits/payments we have paid to them so far? Will there be other penalty levied on the buyer?

S&P and all the legal documents have been signed. Bank loan also applied already but so far no loan amount has been disbursed.

Hope the bros and sis can share your opinions here. Thanks.

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It's a major decision. The deposits paid thus far will certainly be forfeited, but I think most developers wont be going so far to sue the buyer, but I believe technically they can (very very unlikely). Perhaps you would like to let us know the residential unit bought, and the bros and sis here can share their opinions. I am no JB property expert but there are a number here who are!

sgcount said:

Does anyone know what the consequences are if we tell the Malaysian developer we are no longer interested in the residential unit we bought and will stop payment?

Is it just a case of the unit being repossessed by the developer and we lose whatever deposits/payments we have paid to them so far? Will there be other penalty levied on the buyer?

S&P and all the legal documents have been signed. Bank loan also applied already but so far no loan amount has been disbursed.

Hope the bros and sis can share your opinions here. Thanks.

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I think it will be repossessed by your bank that you take the loan with if you stop your installment, since the contract is with your bank to disburse the loan to the developer. The developer just has to issue a request via its lawyer to draw down on the loan. So you will need to terminate your contract with your bank first, but it will involve a relatively small penalty by the bank. I suggest to sit through 2016 and 2017 before further decision, as the number of launches have come down sharply since 2014. The developer may simply terminate your SPA and re-sell the unit at higher profit margin.

FHBH12 said:

I think it will be repossessed by your bank that you take the loan with if you stop your installment, since the contract is with your bank to disburse the loan to the developer. The developer just has to issue a request via its lawyer to draw down on the loan. So you will need to terminate your contract with your bank first, but it will involve a relatively small penalty by the bank. I suggest to sit through 2016 and 2017 before further decision, as the number of launches have come down sharply since 2014. The developer may simply terminate your SPA and re-sell the unit at higher profit margin.

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Try as much as possible not to let the bank repossess your house. This is because, the bank would have to auction your house at forced sale value and many times it is way below the reserved value. The bank interests would be calculated until the date of the resale. Then the borrower would have to pay the difference between the borrowed amount + interests and the eventual sale value. On top of it, you would be black listed and show up on those CCRIS credit referencing system. You won't even get your new credit card.

Funniman said:

Try as much as possible not to let the bank repossess your house. This is because, the bank would have to auction your house at forced sale value and many times it is way below the reserved value. The bank interests would be calculated until the date of the resale. Then the borrower would have to pay the difference between the borrowed amount + interests and the eventual sale value. On top of it, you would be black listed and show up on those CCRIS credit referencing system. You won't even get your new credit card.

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Yup. Dun let Bank Negara Malaya blacklisted you. :o

malpaso said:

simple answer. bank will eventually auction off your property. any shortfall you will still be liable to the bank. any monies you have paid is obviously gone.
so the end result is no property, all money paid gone, and bank sue you for any legal cost, auction cost and shortfall btw what u owe and what the property managed to fetch at the auction (legal proceeding lodged against you in m'sia). and you'd probly be blacklisted so no more possibility of getting a financial loan in m'sia in future.

of course, you can just fk it and stay in singapore. not sure what happens after that. unless one is in dire dire straits, don't do it

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But so far, the loan has not even been disbursed yet. Not sure if the bank will be so silly to wait for the full completion in 3 years time and absorb the risk of an auction in 3 years time. Most probably, like Funniman said, the buyer has to pay the bank a penalty for early termination. He will then have to negotiate with the developer on any potential compensation amount in excess of the deposit paid, or prepare to be sued?

It would really be very crazy to back out now, over a few media/analyst reports, unless one really has no money to service loan.

RedsYNWA said:

But so far, the loan has not even been disbursed yet. Not sure if the bank will be so silly to wait for the full completion in 3 years time and absorb the risk of an auction in 3 years time. Most probably, like Funniman said, the buyer has to pay the bank a penalty for early termination. He will then have to negotiate with the developer on any potential compensation amount in excess of the deposit paid, or prepare to be sued?

It would really be very crazy to back out now, over a few media/analyst reports, unless one really has no money to service loan.

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Money not disbursed yet is not an issue. The fact is once the agreement is signed and stamped, it is effective. The letter of undertaking is already in progress. Best option is to go to the developer and ask for mutual termination consent. Beg, borrow or steal, you need that letter. Then go to the bank and present your case. I am sure banks lend out money do not want legal wranglings. They would want to settle asap.

Talking about Progress Payments, I just received a request to pay 10% progress payment for KSL Residences@Daya. The good thing is that the agent told me can ignore it because this and the next 10% will be covered by developer rebate.

malpaso said:

what i'm curious is - what happens if defaulter then "disappear" forever ie leave the country never to return. it is a civil suit, so no polis warrant, right?

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No problems. You can live like a king on a tropical island surrounded by hula girls. Just don't apply for any credit cards and don't think you can renew your passport as a bankrupt cannot travel. Banks are very transparent these days and they are all connected worldwide on credit referencing.

Frodo said:

Talking about Progress Payments, I just received a request to pay 10% progress payment for KSL Residences@Daya. The good thing is that the agent told me can ignore it because this and the next 10% will be covered by developer rebate.

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Make sure you have a letter from the developer that states you have that rebate. Agents tend to come and go, in the end it is the records that count.

Funniman said:

Make sure you have a letter from the developer that states you have that rebate. Agents tend to come and go, in the end it is the records that count.

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Wah, don't scared me leh!

Oh...just looked at that letter again... Sorry pai seh I also never read properly:p, it actually reads 10% payable immediately upon signing of Agreement. I already signed months ago liao. This letter was dated 1 Dec 2014 but it just came in the mail yesterday after 4 months plus..

Frodo said:

Wah, don't scared me leh!

Oh...just looked at that letter again... Sorry pai seh I also never read properly:p, it actually reads 10% payable immediately upon signing of Agreement. I already signed months ago liao. This letter was dated 1 Dec 2014 but it just came in the mail yesterday after 4 months plus..

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Wah..u got so good deal. Buy house also no need to pay first 10%...how come never tell earlier?

Funniman said:

Wah..u got so good deal. Buy house also no need to pay first 10%...how come never tell earlier?

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I thought I did so leh...somewhere....:p

Anyway, that was last year around July...was jalaning in KSL City mall when came upon their "permanent" road show, advertise big big 20% rebate, fully furnished, free SPA, State Consent, legal fees, DIBS, etc. Only RM5000 booking fee to be refunded later and only need to pay MOT fees and start paying when when collecting keys in 2018. I saw it as a nice way to own another property without committing too much cash up front (which I don't have much anyway! LOL!) but it was wife who was very keen on it as she like the whole concept and KSL thingy, even more excited than me! LOL! Anyway so was thinking..."well, what's the risk....just submit bank loan application and see how lor....if fail to get bank loan just collect back booking fee, brush brush backside and move on...." Lo and behold got one loan appproved at 80%. So wifey and I happy lor....now hoping that quick quick finish it so we can use the facilities. Now the problem with our landed house is no clubhouse no swimming pool no gym.:p

sgcount said:

Does anyone know what the consequences are if we tell the Malaysian developer we are no longer interested in the residential unit we bought and will stop payment?

Is it just a case of the unit being repossessed by the developer and we lose whatever deposits/payments we have paid to them so far? Will there be other penalty levied on the buyer?

S&P and all the legal documents have been signed. Bank loan also applied already but so far no loan amount has been disbursed.

Hope the bros and sis can share your opinions here. Thanks.

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If as you have said, no loan amount had been disbursed, it should means the purchase should be very recent.
But you must have at least paid the down payment of a certain amount already to the developer.
In this instance, you are opting out of the deal.
There will still be a penalty from the bank but since no loan had been disbursed, the penalty should not be too high, usually as the amount charged for early redemption of loan as specified in loan agreement plus admin charges.
But you will lose all your down payment to the developer, all legal fees paid and penalty payment to bank for loan premature withdrawal.
As its not loan default, you may not be blacklisted.

This situation had happened in SG so many times before when prices start to dip after purchase and usually affected are the flippers.
They figure out that there is no point holding on with prices going further south and worse, units on sale are already much cheaper, selling without a massive loss is not possible anymore.
Those already into progressive payment will probably go on default and let the bank seize and auction off.
Bank seizure are the worse kind leaving you with absolute nothing left (and maybe even kena a law suit) and got blacklisted in the country.

https://sg.finance.yahoo.com/news/properties-lose-big-auctions-024653569--sector.html

malpaso said:

i'm talking about a foreigner (say an englishman) who bought a property in m'sia, secure loan, then just decided to go back to UK forever and don't pay. what recourse does the malaysian bank have? will an arrest warrant be issued in malaysia? interpol alerted? probably not. he may not even be made bankrupt back in UK?

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It all depends on amount. If it is a small amount, the legal fees is not justified. But if it is a large sum, then it is a different matter. Malaysia has a repatriation agreement with many countries.
Will an arrest warrant be issued. Nope as it is a civil case. But an undischarge bankrupt will attact its creditors to apply to the courts to sieze his assets even if he is in UK.

malpaso said:

i'm talking about a foreigner (say an englishman) who bought a property in m'sia, secure loan, then just decided to go back to UK forever and don't pay. what recourse does the malaysian bank have? will an arrest warrant be issued in malaysia? interpol alerted? probably not. he may not even be made bankrupt back in UK?

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Banks are more stringent when it comes to loans to foreigners. To my understanding they would have to pledge some form of collateral before the bank will sign off the loan. This could be in the form of time deposits or guarantor. It's not as simplified as people buying n running off without paying if it really happens there will be a recourse for banks to minimize their losses.

No need to be so pessimistic, be patience and wait for the concrete plans of the RTS and HSR. By then, You will see this space flying with optimism and hate yourself for not going in earlier and buy more.
This is actually the best time to go choose your choice units, take your time and be showered with all the attention of the sales and get a good deal, all at the same time.

I'm glad so many of you chipped in to contribute your thoughts. I've read each and every single one of your posts. They are very useful. Too many names to thank but I've noted all of your kind advice!

I've given much thought about the matter. Even talked for some time with a friend in the property line.

I think the sum I have to lose now if I back out is simply not worth it. I guess I got too emotional with all the unfavourable policies/rules of the Msian government, delays and uncertainty of the HSR, lack of buyer interest in Iskandar in 2014/15, and of course, the recent bad report from Maybank.

I did my own search and found that just prior to the notorious Maybank report, there were a handful of good reviews about Iskandar. So the sudden change in mood is suspicious.

While it is true Iskandar is facing an oversupply of units now, I think the writer from Maybank was trying to create a lot of noise... maybe there's some ulterior motive. Or given the huge number of borrowers wanting to apply loans for their Iskandar homes, the bank is afraid there will be many defaulters who can't afford to pay next time? So perhaps the bad news is a wakeup call for developers to slow down, and also for potential buyers to step back and let things cool down first.

I can still afford the progressive payments but just hope the ghost town phenomenon, if it really happens, won't last too long. Nothing can be worse than to see the money splurged on a property does not generate any value or return.

The difficult part for me is that, unlike some of you, I feel very comfortable with my SG home and have no incentive to want to live in Iskandar while I am still actively working in SG. The time to travel to and fro everyday will be too tiring and disruptive. I am buying more for capital gain and investment, which I realised too late that it could be an obstacle. My own fault for not doing sufficient homework back then.

The Msian government really got to work hard to get things going. Well..... hopefully more infrastructure and work come to Iskandar. It won't be soon but I have to tell myself not to be affected by all the "noise"! Long term perseverance is important.....

Sgcount, i think property outlook in Medini / PH is very different from JB city. The report from Maybank is focussed more on the glut of Chinese condos over in JB City. There could be a slowdown but the number of FDIs in Medini side is very high. It take about 2 years time to kick off. Just like I was talking to University of Reading at Educity. It would be completed in September 2015 and a full operational campus in jan 2016. Eco World is developing an industrialpark as well as Ascendas Industrial park will be there. Not to forget the Temasek wellness Center which is fully sold out. PH/ Medini WILL NOT be a ghost town. It will be up and running in 3 years time.

If there's anyone who worry why they buy a property in Iskandar, I think I should be the one. I don't even know why I buy there and I have no idea what to do with it. But, I am happy with the purchase. I can see the potential. No worries, if you bought Medini / PH. But if you bought JB city, just take it as a structured investment which has 5 years maturity. There's always sunshine every other day.