2025-05-06 28Hse Editor
In recent years, the property market has been on a continuous decline, leading some people to consider buying during this dip. However, buyers should be prepared for potential issues, such as properties being undervalued by banks. Deciding between purchasing a new property or a second-hand one can be challenging, as both differ significantly in terms of buying and handover procedures.
If you are buying a new property, the Residential Properties (First-hand Sales) Ordinance provides some protection. After taking possession, if the buyer identifies any defects or issues, they can submit a written notice to the developer within six months of the transaction date. This means submitting a list of repairs that need to be addressed. Once the repairs are completed, the buyer can officially move in.
For second-hand properties, there is no such protection after taking possession. Generally, second-hand properties are sold on an "as-is" basis. Once the contract is signed, the buyer agrees to purchase the property in its current condition. Both parties must agree on which furniture, appliances, and fixtures will be included, and this must be specified in the contract.
Unless the seller intentionally damages the property, the buyer cannot hold the seller responsible for any repair costs after the transaction. In short, once the contract is signed, any defects—such as water leaks or peeling walls—are the responsibility of the new owner. Therefore, it is crucial for buyers to inspect the property thoroughly before purchasing and ideally take photos for reference in case of future disputes.
In addition to "as-is" sales, some second-hand properties are sold with existing tenancy agreements. This means that tenants are still living in the property, which may prevent the buyer from inspecting it before signing the sale contract. This increases the risk for buyers, as they may not fully understand the property's condition.
It is also important to note that banks tend to be more cautious when approving mortgages for properties with existing tenants compared to vacant properties. Therefore, when purchasing such a property, buyers can request that the owner terminate the lease early to see if the property can be sold as vacant. This could reduce the initial costs and allow for a property inspection.
When signing the official sale and purchase agreement, buyers should pay attention to the contract terms explained by their lawyer. One important clause states that the buyer is entitled to two property inspections prior to completion, provided they are scheduled in advance and at a convenient time for both parties. This clause is intended to protect the buyer's interests.
How should these two inspections be used? Typically, one is used for the bank to arrange a valuation of the property. The second inspection usually takes place the day before completion, allowing the buyer to ensure the property is in the same condition as when the contract was signed. If the bank does not require an on-site valuation and the mortgage is approved, some buyers may use one of the inspections to bring in a contractor to take measurements for renovations.
If the seller is uncooperative and refuses to allow the buyer to inspect the property, which could affect the bank’s ability to conduct a valuation, what options does the buyer have? The buyer can try applying for a mortgage with a different bank that may not require an on-site valuation. Alternatively, under the terms of the contract, the buyer can issue a legal letter through their lawyer, and may have the right to cancel the transaction if the issue persists.
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