Scrutinise the small print
25/05/2002 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

Property fairs are a good place to search for a house, but you have to look past the gimmicks and read between the lines before making the final decision, says the House Buyers Association.

Of late, the marketing of real estate properties has taken on a new dimension. Committee members of the House Buyers Association were at the recently concluded Property and Investment Deal (PAID) 2002, Home Ownership Campaign 2002 and the Malaysia Property Expo 2002 housing fairs held respectively at Subang Parade, Putra World Trade Centre and Mid-Valley Exhibition Centre.

Never before has the marketing of real estate properties been done on such a scale as at these events.

From our observations at the property fairs, we find that the marketing skills exhibited have improved substantially. This applies to both the sale of property as well as the available financing options.

The booths were set up attractively and were extremely customer-friendly. The presentations of the properties available were interesting and eye-catching, many incorporating the latest state-of-the-art technology. In fact, many were too attractive for our liking!

The mock-ups and model presentations of housing project layouts created a mini fairyland in the exhibition venues. Even the standard of scaled-down house models with comely presenters left very little room for further imagination. How we wish that the actual houses built would be of similar standards! But that's another topic for another day.

The marketing segment of the real estate industry is seen to be both aggressive and fast developing. As we viewed these progressive methods of selling, we had mixed feelings.

Our reservations were related to the substance of such marketing methods and tools rather than the forms. We made observations on the claims and offers made to potential house buyers and some of the eye-catching slogans that were presented really made us squirm. And this is where we'd like to advice buyers to be more discerning about what they read.

As a potential buyer, you have to be particularly wary of the fine print on the myriad brochures and billboards thrust at them at these affairs.

One of the favourite gimmicks is the asterisk mark (*), which, in most cases, is accompanied by the statement "conditions apply." However, we found that are to apply are rarely stated!

The reason why sales people are not hesitant about putting up such misleading and sometimes false promises is that they are not bound by anything other than the Sale and Purchase Agreement (SPA). They see billboards and brochures as marketing tools to entice buyers into making up their minds to buy their products.

Once you have signed on the dotted line nothing else matters to them. Although we hear of so many complaints against developers for deviating from their obligations, we hardly hear of any house buyer taking a developer to court for misleading advertisements.

We have selected a few examples of such advertisements here:

1. Some of the diagrams/layout plans we saw showed "proposed highways". These may remain in the "proposed" state forever and not materialise in the buyer's lifetime! We would advise you therefore to check with the highway authority on whether the highway will actually materialise.

2. Another is the claim of "growth potential". Who is in a position to assure house buyers of any growth potential? We have received complaints from shoplot buyers who bought their properties based on this claim. It did not materialise and they ended up with two rows of property in the midst of a satellite ghost town.

3. "Guaranteed returns" is another popular claim. We have also received numerous complaints from purchasers who did not receive these returns as promised. However, there is always the fine print that says "conditions apply", "provided always" and "subjected to" and other phrases attached to the claims. Get to the bottom of it and you may see the ridiculous conditions.

4. Piggy-back riding on existing well established upmarket areas is another gimmick. The actual locations may not be related in any way to the existing luxury locations but similar-sounding names coupled with other misleading claims give them the impression of being so.

5. The claim of "free legal fees' is becoming a standard practice now. This is where you have to be extremely cautious. For all intents and purposes, the so-called "free" service of lawyers is actually not free. These lawyers are actually paid by the developers and will end up looking after the latter's interest and not yours should a dispute arise. It is therefore worthwhile to engage your own lawyer as it would make a real difference if you would ever run into problems with the developer.

6. Some of the brochures claim to have fencing and other security features. Who would not be tempted to live in areas where security measures are provided? The truth is that there is no such thing as a free lunch. Everything comes with a price (perhaps fresh air and sunshine excluded!). Could the cost for all these additions be built into the house price?

7. When you buy a property that comes with common facilities such as security, swimming pools and so on, you most likely have to sign a Deed of Mutual Covenant together with the SPA. This is where as the house buyer, you are committed to whatever you and the developer have mutually agreed on. It would invariably involve the payment of maintenance and other do's and don'ts. And the part that house buyers should be particularly cautious about is the open-ended undertaking to pay maintenance. Although it is usually stated that the developer would charge a reasonable sum to provide the services, the more relevant question is, "who decides what is reasonable or otherwise?"

Besides what you read in the advertisements, there's another thing you have to be wary of - don't be taken in by what you see.

Houses, apartments and condominiums are often sold before they are built. It takes great imagination to visualise what the completed unit will be like based on two-dimensional drawings alone, so be careful when you make a buying decision based on that wonderful depiction on canvas of your future home. Another thing is not to be tempted into signing on the dotted line by the long queues of eager buyers at the sales office or booth of any developer.

Presentations in all manners are just that. They are the impressions that artist have created to present to you the yet-to-be-built homes in the most attractive manner. Unlike cars, you will have no chance for a test drive. Their main intention is to attract you to sign on the dotted lines. Of all the booths that we saw, not one had a sample SPA for potential buyers to peruse. It is vital that you know what the SPA and Deed of Mutual Covenant are all about if you have to sign them because they are the only legally binding documents that matter.

Having said all that we would still encourage potential house buyers to visit such real estate exhibitions. Where else can you get such an array of properties all laid out in air-conditioned comfort for you to pick and choose from, not to mention a variety of loans from eager lenders.

Our advice for you is to capitalise on the opportunity such exhibitions present but be cautious before you sign on the dotted line. Don't forget how often you have been tempted to make an impulsive purchase while window-shopping, only to regret it later.