Bali Property Market Glossary of Terms
Do You Need a Crash Course on Real Estate Terms Used in the Bali Property Market? This Glossary Will Get You Started.
We thought that we would start the New Year off with a little primer on some of the language that we use in our market here which may not be part of your typical property market conversations. In Bali, our use of certain terms may not mean the exact same thing as it does in your home country, so we have included in this list some terms you’ve heard a thousand times,; we would like to make sure that you know how these terms are applied here. Practices, structures and basic terms in the Bali Property Market may be a little bit different from those that were in vogue when you bought your last property, whether it was here in Indonesia or back home. This lexicon of real estate terms and acronyms will help you understand some of the differences between our market here in Bali and yours back home and give you a clearer path towards towards your investment goals.
Akta: translates to “deed”. You will sign one when you purchase a property here.
Appraisal: An informed, impartial and well-documented opinion of the value of a home, prepared by a licensed and certified agent and based on data about comparable homes in the area, as well as the appraiser’s own walkthrough. The value of an experienced agent’s opinion on your appraisal can not be underestimated.
Buyers Market: Market conditions that exist when homes for sale outnumber buyers. Homes sit on the market for a long time, and prices drop. Bali has been a constant buyers market since I first got into the business in 2006.
Closing: (Settlement) A one-to-two-hour meeting during which ownership of a property is transferred from seller to buyer. A closing is usually attended by the buyer, the seller and the real estate agents and takes place in the office of the buyer-appointed notary.
Closing costs: Fees associated with the purchase of Bali properties that are due at the end of the sales transaction. Fees may include the notary’s fees, agent fees, translation fees and transfer taxes. Buyers should budget for an amount that is 1% of the villa’s purchase price for a leasehold transfer. For a Hak Milik transfer the buyer pays 2.5% tax and the seller pays 5% tax.
Comparative market analysis (CMA): An in-depth analysis, prepared by a real estate agent, that determines the estimated value of a villa based on recently sold villas of similar condition, size, features and age that are located in the same area. However, this is something nearly impossible to achieve in the Bali property market as property transactions do not become part of the public record.
Comps: Or comparable sales, are villas in a given area that have sold within the past six months that a real estate agent uses to determine a home’s value. An experienced agent has got the historical understanding of rising and falling land prices to go along with the recent sales history in the area because they are proactive in working with vendors to achieve prompt and profitable sell-through.
Contingencies: Conditions written into a property purchase contract that protect the buyer should issues arise with financing, the home inspection, licenses, etc.
Down payment: (Deposit) A certain portion of the property’s purchase price that a buyer must pay to secure the transaction. Held in trust by the notary while the due diligence on the property is conducted. A minimum requirement is often 10% of the purchase price.
”Freehold”: The market has come to understand that the ownership structure reserved for Indonesian citizens (Hak Milik) is as close to its understanding of freehold structure as anything on offer in Bali. This is true, but not entirely so. Ownership structure here in Bali is simply different than what it is in Australia, Singapore, The UK or the US. It is best to speak with a licensed agent to get the clearest understanding possible of the new regulations and trends to derive maximum benefit from your investment. Learn More.
Guaranteed replacement coverage: Homeowners insurance that covers what it would cost to replace property based on today’s prices, not the original purchase price, should damage occur. HIGHLY RECOMMENDED.
Hak Milik: Right to Own; for Indonesian citizens only (often called ‘freehold’)
Hak Pakai: The Right to Use; the structure under which a foreigner/Indonesian can acquire a property that is being marketed as Hak Milik
Hak Sewa: Leasehold
Home inspection: A nondestructive visual look at the systems in a building. Inspection occurs when the villa is under contract.
Homeowners insurance: A policy that protects the structure of the home, its contents, injury to others and living expenses should damage occur. HIGHLY RECOMMENDED.
IMB: Your Building Permit
Leasehold: Hak Sewa. The most common way a foreigner enters the Bali property market. Lease terms are generally 25 years, but both longer and shorter leases are available as well.
Listing price: The price of a villa, as set by the seller. Also known as Market Price.
Multiple listing service (MLS): A database where real estate agents list properties for sale. Not very often used in the southern hemisphere anymore with the onset of public real estate portals.
Pondok Wisata: Your Villa Rental License. You’re going to need one of these if you want to play by the rules.
Sellers market: Market conditions that exist when buyers outnumber homes for sale. Bidding wars are common. Does not ever happen in the Bali property market.
Transfer taxes: Fees imposed by the government on transfer of title.
Under contract: A period of time (30 days more or less) after a buyer has made an offer on a property and the seller has accepted. During this time, the villa is inspected and appraised, and the title is searched for liens and due diligence is conducted.
Walkthrough: A buyer’s final inspection of a home before closing. DO NOT IGNORE THIS FINAL STEP.
2020 is already off to an amazing start for Bali Nirmana Property and we are grateful to our supporters – buyers and sellers alike. Our loyal client base has enjoyed some wonderful decisions made in the last couple of years and we look forward to doing our part to continue to connect investors with the right properties to fulfill their Bali Property dreams, whatever they may be. Keep an eye on this spot for more and more ideas about how to best actualize your vision with us!