Oh no! Is the property developer actually legit? Are you risking your money?

You would have wondered hard and long. Is the property you are looking at going to be built on time? Is it going to look like what the agent showed you in the showroom?

These thoughts would have definitely tucked at your mind constantly. After all, buying a house is a lifelong investment for you. It puts a roof over your head, protects you from the elements, and most importantly, allows you to build a family.

Is there a way to make sure the property developer you are buying a house from is legit and won’t run away with your money? These 5 ways could help you in researching them and make one of the most important decisions in your life!

#1: Check the Website of the Developer, and Give Them a Call

This should be the first step that you take when you step foot into a showroom or found the property that you wanted online. It sounds very basic and rudimentary but sometimes the most obvious way is the most efficient one too.

Most developers who are legit would probably have a website equipped with all the information about their past developments and projects. From there, you can cross check their project details and images either through a search on Google Maps or a physical visit to them.

Get the phone number and address of the headquarters, and give them a call or visit. This is a good way to make sure there are actually people working in the company, and not a shell company.

A sure way of ensuring that the property developer is legit is to check whether they are a publicly-listed company. A publicly-listed company has a bit more credibility as they are audited and regulated by the authorities such as Securities Commission.

#2: Cross-Check the Developer through Jabatan Perumahan Negara’s “Blacklist”

Jabatan Perumahan Negara (JPN) is the government agency responsible for housing in Malaysia and thus, regulates property developers. It has a couple of blacklists that you can check out which includes:

  1. List of Developers Without a License
  2. List of Developers Involved with Abandoned Projects
  3. List of Developers in Default of Home Buyer Claims Tribunal Awards
  4. List of Developer who Failed to Pay Compound

If the developer falls under any of these lists, you should probably exercise some caution and look around for other properties. Pay close attention to the first 2 lists of developers without license and involved with abandoned projects.

Developers without licenses normally do not have the necessary expertise to deliver a high-quality home, and even then, might not be able to certify that the property you bought is legal in the eyes of the government. Many a times, it’s hard to tell whether the developer you are buying from even has a license and not many people actually ask for them to produce their business registration.

Developers involved with abandoned projects are harder to deal with. Most of the time, these developers will register a new name with the authorities to start another development and repeat the process of abandoning them after getting enough money from homebuyers. It’s important to actually ask the agent who is selling the property to tell you what is the name of their founder and to do a quick search with the authorities whether they are legitimate.

#3: Obtain and Analyse the Financials of the Developer

If the property developer is a publicly listed company, these will be relatively easy to obtain. Just get to the main website, and go to the section called “Investor Relations”. Download the annual and quarterly reports of the company. All publicly listed companies have to published their financials every quarter.

However, if the developer is a private company (meaning they are not obligated to publish their accounts), have no fear. You can just go to the website of Suruhanjaya Syarikat Malaysia and buy the reports of the companies that you are interested in. The report will consists of the financial statement and profit and loss account which will be useful to you. Just be aware that these reports cost money so make sure you are choosing the developers that you want to analyse carefully.

Now, this is the interesting part. For many of you, analysing the financials of a company is considered time-consuming and requires the person to be familiar with investment and finance principles. You don’t have to do analyse it to that degree. What’s important is that you need to confirm the following facts from the financials of the company:

  1. The developer has been in operation for more than 5 years. This is important because building houses normally take around 3 to 5 years.
  2. It has made profits for at least 70% of the time it has been in operation. Consistent profits is important as it ensures that the developer is here for the long-term.
  3. It has cash in its accounts. You can do this by looking at the item called “Cash & Short-Term Investments” in the account called “Balance Sheet”. Ensure that it is adequate. A developer that has only RM10,000 in its account is probably having difficulty paying its contractors.

#4: Arrange and Make a Visit to the Developer’s Past Projects

A track record is invaluable. Property developers who are legit and has “skin in the game” will not hesitate to allow you to visit one of their past projects. Take this opportunity to ask them or their agents to arrange for one.

If they are not willing to, be a bit skeptical. You can then arrange a house viewing with an agent (just say you are a potential homebuyer) on one of their past projects to see the quality of the homes they have built in the past. Inspect every small little details of these developments:

  1. Is the property’s condition still ok for its age?
  2. Are the lifts working and in order?
  3. Is the security good?
  4. Has the surrounding environment deteriorated?
  5. Are the facilities still good?
  6. What defects complaints are common among the units?

If you are unhappy with how its past projects are holding up, you are better off looking for other properties. Some developers deliver just enough to prevent themselves from getting into trouble with the authorities and these are the ones you should avoid.

Conclusion

Buying and owning a house is not easy. The location needs to be good. The price needs to be affordable. And most importantly, you and your family need to like it. Taking a step back and assessing whether the property developer is legit saves you a lot of trouble and stress in the long-term as being stuck with a bad property developer or worse, a scammer, could set you back financially for a long time. Take the time and research the developer with these 4 ways to make your decision a bit easier and more informed.

 

Let us know in the comments below what are you looking for in a property developer!

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