“I always say there is no such thing as a stupid question, but …  “

Just about 60 days  more and we can wave a glass of plonk and cheer: ‘Hooray, hooray, Happy New Year‘,  
• when in reality another year is gone, with probably many occasions where we could have made better decisions to make life even better as it was.  

However, one thing which is not disputed by anyone: The decision to create or improve on a beautiful home is one of the best ever, guaranteed to add to your quality of life. You have your own castle to be king or queen in, the family will enjoy the time there and come what may, your property sure  is worth more than increasingly risky electronic digits on your bank account.

Usually, when writing about life and issues around Ubud, I tend to wander off also talking about matters of the heart and soul. Not so today.
We just compiled many of our client‘s questions regarding selling and buying property.
Maybe one or the other answer is what you find useful. Here we go.

A. Frequently asked questions by Property Buyers.

How many properties to see before making a buying decision?

On first impulse we might say: ’as many as possible’. However, this may well have an effect which you want to avoid. You see, it could happen that you really like a specific villa very early on your inspection tour.  This becomes then usually a benchmark against which you measure all the following houses.

Now imagine that you looked at many places over time, none as perfect as this very early one you liked so much. You decide to buy. Because you liked it, chances are others fancied it too. "Sorry, Mister, it’s sold".  

There we have the answer – rather than risking such disappointment, be realistic. Check out, if there are indeed not significantly better deals in the marketplace to be had and decide when the heart says, ’this is the one, all feels right’.
Taking too long also carries the likelihood, that prices go up and you have to settle for something of less value, but paying the same price as at the start of your research.
Exception:
Pure investment.  Here we discard emotional factors and strictly compare commercial values.

The old adage: location, location… will always apply. This will mean different things for different buyers.
You may want to sell again, as soon as prices are up? Select a location near public conveniences.  If the use and design is for the elderly, near a hospital may be smart, and so on.
You want to stay long term and pass on to the kids? Investigate if the neighbourhood will not develop into an industrial estate or that a wealthy neighbour does not possibly equip the kids with cars as soon they are grown up, who then may invite friends for the evening sound system comparison. You never know what the future may hold, but it pays to read the writing on the wall,- if there is any.  
Fortunately, Balinese are in their vast majority considerate neighbors.

How to know if a price is justified, or even a rare and low priced opportunity to buy?

Ask a local reputable agent about realized prices for comparable properties in the last few months.

Check out the building structure. If needed, get help of a trades man or building inspector. (Damp walls, wood decay, poor quality roof tiles…)

Is the style too extreme and may become boring in its uniqueness? Sort of same as the outrageous pink chiffon blouse she was wearing on the wedding party which should have been put away years ago.

Are there structural elements, which need regular maintenance or replacement, such as a thatched roof, loose pool tiling…, cracked walls ("oh it’s nothing, just the plaster dried out", when in reality the foundations did not take the last earthquake too well).

Why does the vendor sell? Is there a hidden agenda or is there a valid reason for a sale or even a quick sale? In this case play your cards well, without over stretching the negotiation to the low end, in case the seller is offended and for pure emotional reasons steps back from a possible deal.

Evaluate the global and local economy. If there are obvious indicators for a negative change, this should be discussed with the vendor to come to a reasonable price.  If the economy is booming, - same, because all goes in cycles and if the vendor waits too long, the negative sentiments may come into play again.

Are the interest rates going down and the vendor can expect more buyers to come?  If rates are going up, can you risk the increase in repayments back home?  Maybe a harder bargain is the only way to compensate.

Wo is the vendor? Be aware of developments, where complex buy-back promises are made, or the capital of the developer may not be sufficient to guarantee finalization of the project and your already made payments may be lost. If the ‘small text’ is excessive, it indicates that the developer covered his interests excessively well with the help of astute lawyers – and unless you hire a specialist yourself, chances are you are set up to lose a potential battle.

In Bali, is there the option to rent and when wanting to purchase the same place, can the paid rent be used as a deposit?

Any agreement which is not illegal, is legal. Therefore, in theory can do. However, a vendor will assume that the prospective buyer is not that affluent, thus may not not negotiate on price, partly because of the potential risk that during the rental period he is blocking his property for other buyers.  In 10 years of operation and hundreds of property transactions, UbudProperty came only once upon such a willing vendor. Enough said.

What is better – renting or buying?

Ask your children. Naturally they’d like to think of an inheritance.
No children to take care of?   Then look at the likely number of years you’d like to stay in that place.  If it is only a few years, let’s say, up to 10, rent seems more reasonable, because you would not have to worry about maintenance and final sales aspects.

Leasing or buying, what suits me best?

The rule applies that even when leasing, the full amount for the entire lease period is due upon commencing the lease. Part payments over time are extremely seldom accepted by landlords.

Let’s look first at the land option:  A buyer wants to build later on the land he/she is leasing.
If the budget is tight, but in the end there should be a house or villa on the block, leasing is a good idea, - provided in the lease agreement is a clause that the lease can be extended, once the initial term has expired.

For example, for a 25-year lease term you would pay about the same amount as 50% of the buying price when purchasing the same place outright.  Thus, the 50% saved can be used for construction.
Once the lease has ended, the lessee (person leasing) has to forfeit all which has been built on the property and is permanently connected to the land, such as fences, buildings, pool, etc.  Constructions which are regarded as temporary, such as knock-down houses or joglo’s can be removed at any time during the lease by the lessee.

Some people are not comfortable with leasing, although leasing is a fully legalized option for foreigners.  
Strictly speaking, a lease is also a purchase. You buy the lease or usage rights for the agreed period.  Should you want to leave before the time is up, the remaining lease period can be sold, unless it is only a few years, which then may be less attractive.
However, many people like to say:  ’This is mine, I own the place!’.  
Then by all means, buy.  There are legal ways for foreigners to purchase. However, frequently buyers also choose to hold the property through local nominees.  Whilst not endorsed by the Government and Land Department in Indonesia, those purchases via a nominee are for already decades common practice.
All options to buy and how to secure the buyer’s interest are explained in UbudProperty’s web-site under the heading "Buying in Ubud".    

For a house/villa the same applies, it is a matter of when the main payment needs to be paid or is available to the buyer.  The buyer may be expecting a major payment, let’s say in 20 years, then it makes sense to lease and extend the contract, paying for the next term at the time.  If the initial contract contains a clause, which ties the price for the lease extension already in this first agreement, for example by saying: " I kg rice is today 25.ooo IDR. The increase in percent, when the contact is ended, will determine the new lease price". 
As example, after 25 years a kg rice is costing 75.ooo IDR, then a 300% increase in the lease price will apply.  (Can agree on gold or other commodities too).

If the lessor (house owner) accepts and it becomes a part of the lease agreement, the lessee can sub-lease the property or even sell the remaining term of the lease.

On a purely philosophical background, even the watch which you are wearing right now is only leased to you.  Upon our expiry date, others will likely use it.  It is a highly personal matter to decide if you want to have worked for your heirs and invest more through purchasing, so they can have more, or you lease a higher value property and live yourself on a comparatively higher level of luxury.
Pro’s and con’s to be found on both sides of the argument.

Is it advisable to use a Real Estate Agent when looking for property?

Is it advisable to check the depth of the lake, before sending the kids for a bath?   
…and in addition – it is not the buyer who pays the fee/ commission when purchasing. It is the vendor, so why on earth would anyone risk to investigate a property purchase without valuable advice?

The emphasis is here on valuable.  Should you go to a reputable and established agent, you sure receive a whole bunch of valuable information, which is not available when property-hunting with the front office staff of your hotel, or a taxi driver.
It all starts with the local knowledge of the specific area of your search. Naturally, because UbudProperty specializes in Ubud property only, our Company can open a treasure trove full of knowledge regarding the individual local rules and customs.
Local authorities have been given a fairly high level of authority and accordingly their rules, fees and customs vary widely.  To the extent that some brave lone buyers said to us: ’if I only would have known before . . .’
For this alone, please, pretty please, see a local real estate expert.  It is your life, your money your dream coming or not coming true.
If you would choose for example UbudProperty, you will, now doubt, feel this is not about selling you something, your visit is about jointly finding out what you really want, can afford and should consider before going out to look at which properties our staff are suggesting for you.
There are countless issues a buyer might want to know before reaching for the pen to sign.
What will be my bills for staff / electricity / other utilities / local donations / can you help find a decent tradesperson to fix things (yes, we can) / annual land tax / arrange for town water or well / safety in the area / distance to schools, medical facilities, even the orientation to the prevailing winds, so that in the rainy season there is no unwanted water added to your morning coffee on the veranda - and the list goes on with similar matters...

In a small township like Ubud you have another aspect working in your favour. Even if you are of the highly suspicious kind, just remember that Ubud is a small community. Anything wrong, spreads like a wildfire and the reputation of the agent goes into ashes.  However, if for 15 years there are only positive to glowing comments, you may be on to a good Realtor. Just ask around.

How can I arrange for inspection to see one or several of UbudProperty’s listings?

It is advisable to see us in the office first. You need to get the right feeling for your contacts here and we’d like to make sure we fully understand what you want.
Then it is just a matter of giving us your contact details so that we can follow up with more specifics on the inspected properties. For our records you would also acknowledge, that you have been here on the day for inspections … and off we go.
If a villa is rented out, there may be a day delay before going there, because we will contact the tenants, ask for permission to inspect and arrange for the best time for everyone.

Can I be sure that a property is legally obtainable and all rights relating to the property can be transferred to me?

Already before listing, UbudProperty through their own in-house legal Department, make a due diligence check. The property documents are checked if complete and in order and relating issues, for example the right for a road access, are clarified. Only then the property will be accepted for listing.
In the process of the actual transaction another and official due diligence check is done by the Notary. Once the Notary is satisfied that all is complete, e.g. outstanding land rates are fully paid, the transaction will be finalized.

Which fees and Government charges are payable by me?
1. Leasehold Notary fee 1%
2. Sworn Translator, approx IDR 5 million or USD 355 per agreement (One property may consist of several land lease agreements)

3. In the course of negotiation maybe a buyer may agree to pay half of the lease tax depending on the negotiation (which by law is to 100% the responsibility of the seller)
2. Freehold
The standard expenses for a regular Hak Milik transaction are as follows:- buyer’s tax 5% + verification cost of property value IDR 3 million- notary fee 1% of property value
BPN (Land Department cost for zoning & ownership transfer fee) IDR 10 million - land survey by BPN officers (depending on the land size), but reasonably low. - Tax mutation (transfer of Tax subject into new owner’s name) IDR 1,250.000
Depending on the method of property ownership or – control, the above may vary.  Details are best discussed with your property agent.

How do I make an offer to purchase a property?

It Is highly advisable for a buyer to discuss his offer with the Realtor, who then will pass the offer on to the vendor. Usually the real estate agent knows about the history of the object and can advise if an offer has a chance to be accepted. The agent also will often present the offer including a market analysis, so that the vendor can evaluate if he should accept or respond with a counter offer.

What happens to my down payment? – How to continue?

To show your serious interest in a property and so that the agent stops marketing to potential other buyers, usually a 1% booking fee is paid and transferred to the Notary’s escrow account.  The MOU draft will be at this time reviewed by buyer and seller.
The actual down payment, usually 30% of the buying price and according to the MOU is also made to the Notary’s escrow account, once the MOU is signed by both parties and the Notary has confirmed that the transaction is safe to proceed. Both payments are fully refundable, if through no fault of the buyer a sales transaction cannot be completed.

What happens if I cannot or do not wish to continue with the contract?
If a buyer fails to fulfill the agreed terms and conditions as determined on the signed MOU contract, the deposit becomes the vendor’s asset. Depending on the circumstances, some agents may raise a charge for effort and expenses involved in the sales process.  However, this is not practised at UbudProperty.

B. Frequently asked questions by property vendors

What is the best time for selling my villa?

As early as possible, once the decision to sell is made and there is time to prepare the house for inspections. In Bali the end of the rainy season shows better results as the end of the dry season.
Reasons are that the gardens are lush and there is an overall expecting atmosphere, when the rains are slowly coming to an end. If you are not in a hurry with the sale, set your price at a reasonable level, which allows for a few buyers to hesitate, because the price is just not according to market conditions. However, when the emotional side of the buyer has caught fire, you may be able to sell at a premium.
Should you despite a number of reasonable offers not agree to a sale, there is the risk that your agent becomes uncertain and may not suggest your place to any and all prospective buyers.

How to determine my propertys value?

Upon listing a good agent makes an evaluation of the property to be able to assist with answering this question. Should you want to go alone, in order to save on agent’s commission, you may consider that a good agent will be able to point out several positive aspects of your property, which may not be obvious from your side, because you are already used to your place.
In many cases you rather save this way, instead of selling too cheap.

A widely used common method to determine the value of a property is by completing a comparative market analysis. This is an in-depth evaluation of recently sold "comparable" villas in the past Year.
A comparative market analysis, also known as a "CMA," isn’t acrystal ball that determines what a home will sell for. However, if performed by a top Realtor, it should greatly narrow the sale price range.
UbudProperty invites all property owners to have a value evaluation done, even if a sale is not planned.
This gives the owner food for thought, often leading to an improvement in their housing situation.

Main factors for a general evaluation:
1. Size of land in are and living area of the house in sqm
2. Number of bedrooms
3. Number of bathrooms / en-suite?
4. Quality of used building materials / craftmanship  
5. Upgrades to kitchen
6. Roof type / tiles, hardwood shingles, alang- alang grass, etc.
7. Wall and foundation quality
8. Location - distance to Ubud center, noise level, view
9. Style of residence
10. Garden and pool setting
11. Access owned or right to use
12. Neighborhood. Level of style and ambiance.
The important thing to keep in mind is, that in the end the price is determined by what a buyer is willing to pay under the present market conditions. If there is reason to believe that this may vary greatly from the property evaluation, it pays to move closer to the market price. This is in order not to have the property on the market too long, or having to amend the price several times. The message then would be: no one wants this land / house, why should I buy it?

How do you intend to market my property?
UbudProperty is holding regular sales staff meetings to introduce new listings and discuss the merit for sale of your property. Then a marketing strategy is decided upon.
With the evolution and the impact the internet has had on the real estate industry, it’s critical that not only is your home marketed through “traditional” avenues, but it must also get maximum exposure online.
A successful Realtor should have a quality website, quality real estate blog, and a strong social media presence. The importance of where their website ranks in search results is critical since over 90% of buyer’s are beginning their home search online! By sheer luck (and a little bit of foresight) UbudProperty chose its Company name just right and we know that our website attracts close to 90% of all interested parties.

How much is the commission?
The standard commission rate is 5%, although in Bali this can vary from 2.5 to 8%. For properties over the sales price of 1.5 Million USD a reduced rate may be agreed. Although commission is legally not tied to a certain percentage as part of the listing contract, the agent has expenses to cover to keep the business in service. If a suggested commission rate is too low, the agent may not be able to apply all of the available marketing tools. The vendor loses time and possibly out on an early sale.
Just think of this too- If an agent is offering to market at a low commission rate it is the same as if the supermarket puts a SPECIAL SALE on. There are not enough customers. This is why. You really want to choose such an agent?

By how much should I increase my price above what I indeed want, to leave room for negotiation?
This frequently asked question often leads to a mistake made by several vendors. Sellers may believe they should price their home much higher than what their agent suggests to leave room for negotiations. A well priced property will sell faster and close to the listing price. There is no need to leave excessive room for negotiation, as almost all of today’s buyers are, thanks to the internet, well educated.
How long may it take to sell my place?
There are many market indicators that a professional real estate agency can share with you to help explain the condition of the local real estate market. One of the most important indicators on market conditions is average time on the market. As a very general rule, if it takes longer than 6 month’ to sell, or if after a few weeks on the market no inquiries come in, the vendor and agent have to get together again to evaluate the situation and rethink strategy and terms. UbudProperty is usually informing vendors after inspections to their property about the client’s comments and/ or makes suggestions on how to improve the attraction of the villa. As a very broad rule – our properties are sold after about 6 month, some the next week, some after much longer and sensitive adjustment in pricing.

How do I prepare my house for listing and inspections?
A home purchase is clearly also an emotional experience. With this in mind you have part of the answer. Make it looking great on first sight. There is no second chance to make a good first impression.
There are many articles written about all the things which will improve the appearance and how to decorate. (If I remember correctly, you may find a comprehensive one in one of our monthly newsletters).

It may be sufficient, if you try to look at your home with the eyes of a new visitor and pick up all which needs to be cleaned up, de-cluttered or re-done. Almost always you do not only recover the expenses involved, but through a better negotiation position, because the appeal has been so well, you will receive more money.
Labor here is low cost. A new coat of paint is working well. You may add flowering plants to the garden, cleaning windows and eaves, not to mention the small repairs in order to fix what had not been repaired over time. If the villa was used to rent out as a home stay or B&B, you need to prepare the books, showing the net income from the business and proof of taxes paid (if any)

Should I disclose serious faults to the agent or buyer?
If a buyer finds a serious fault after having taken possession, he would have the legal avenue to sue. Same here in Indonesia. However, in many cases the vendor has left the Country, which could be why they sold. Let’s face it, we are well advised to stay away from the legal system, if any possible.  The outcome of many court cases is subject to the judge’s interpretation and sometimes his wife’s need for a better car.
The answer here is a question of morality. It is the right thing to say," well, it is the dry season, but before the rains come, better have the roof checked". And better again, "the roof has just been fixed and you will be fine in the wet month to come…"
The agent is often asked, if he or she knows anything about the houses condition which is not apparent on inspection. If we know, we must and will answer honestly and to the point.  If the agent knows, but has not been asked this question and is it about a serious default, we refer to a building inspector, because we also cannot risk that our observation is not based on professional analysis of the problem. After all, the agent is there to assist everyone involved in the transaction.

What to do when an unreasonable low offer was given?
Although it is your home and emotions are attached, the sale is in itself just a business transaction. Try to not feel offended and reject the buyer and his offer. Ask the agent to pass on your lowest acceptable price to stay in the negotiation phase. Often a buyer hopes for a silly success, but is already much attracted to your house so that in the end still a deal is struck.
All questions above are reasonable and in fact, there is no unreasonable question at all. Buying and selling a home is not on our daily to-do list. How then can we know everything there is to consider? No one should be shy or feel too inexperienced to ask us any other question which comes to mind.

What else are we here for?

Next time, when the rain has arrived, we again pick a subject not quite as dry and closer to the blessings of life in Ubud.

Until then and with kind regards,

Ray for the Team of UbudProperty