Real Estate Matters | Clarifying Costs For Buyers

Juliet Risdon

Juliet Risdon is a Director of JML Property and a property investor.
Having established the company in 1994, JML Property offers Investment Property & Homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.

Investing in a property involves not only the purchase price of the property itself, but also the associated costs of the purchase.
In this 3 part series, we break the cost of purchasing a property into 3 categories, and have outlined the details in each one.
However, be warned that these costs do fluctuate, and whilst the figures themselves may change, you will at least know what you are looking for.
The categories are;
Purchase Costs – The cost of the property itself
Legal & Administration Costs – Taxes, notary, registration fees etc
Property Costs – Renovation, improvements and furnishing
Property prices in Macau are in HKD, so for the sake of consistency please assume that all prices here are in HKD.
For the purpose of this article, we are going to look at a property that is purchased for HKD 6,000,000.

Purchase Costs
The purchase cost is the price of the property itself, and the amount of cash you will need to buy the property.
Initial Deposit – $100,000
The initial deposit is a token amount that is paid upon the signing of the ‘Provisional’ Sales & Purchase Agreement.
This amount can vary, but is usually between $100,000 to $500,000.

Second Deposit – $500,000
The second deposit is paid upon the signing of the ‘Promissory’ Sales & Purchase Agreement, the agreement put together by the lawyers and signed in the lawyers office, normally within 30 days of signing the original document.
This deposit can vary, but is usually the amount required to bring the total deposit paid to 10% of the purchase price.
In this example, since the purchase price is $6,000,000, then 10% is $600,000.
As we have already paid an initial deposit of $100,000 then there is a remaining balance to pay of $500,000.
Balance – $5,400,000
The balance is paid upon the signing of the ‘Sales & Purchase Agreement’ during the final part of the process, and is conducted in the presence of a Public Notary usually within 60-90 days of signing the original agreement.
The balance will usually consist of a Bank Loan plus the additional cash required.
In this case we are going to assume that the bank loan represents 70% of the purchase price ($4,200,000), and the total cash required represents the remaining 30% ($1,800,000).
As we have already paid $600,000 and the bank will pay $4,200,000 then the remaining balance payable at the signing is $1,200,000.
This balance is usually paid with a cashier order.

So the breakdown of our Purchase Costs looks like this;
Cash Required – $1,800,000
Bank Loan – $4,200,000

Next Week: Part 2 – Legal & Administration Costs

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