What if the redemption sum is larger than the 30% of the transaction amount?
Take for example, you bought a property from John at RM500,000. Your loan is 70%, ie RM350,000. And you need to pay cash 30% - RM150,000. However, John has his own loan at RM400,000. How then is money be paid?
For redemption sum of RM400,000 the Vendor's bank will not discharge the property until it is paid off. Hence, this can become a real problem. Although it seems very easy mathematics, in real life, the case can be complicated. You pay him RM150,000 (30%) and he uses the money to repay the bank RM50,000 so that the loan becomes RM350,000. Then the banks can contra the difference. Correct?
In theory, yes. But, how are you certain that the RM150,000 you paid won't be used for other things? If it is NOT paid to the Vendor's bank for the redemption? Therefore, the conveyancing lawyer must retain RM50,000 to directly pay to the Vendor's bank. Then the credit facility is dispersed to the Vendor's bank to completely settle the loan: 50K + 350K = 400K. The title document be discharged from the Vendor's bank and subsequently charged to the Purchaser's bank. Thereafter, all expenses be claimed before the remaining amount is paid to the Vendor.