Is it possible to obtain higher loan than the purchase price for second hand house?

For example,
Valuation 250k but selling price is 200k. Obtained 250k loan.

Can be done and owner could marked up selling price? At the end how can I get back the extra 50k?

No way in hell any banks will let that happen. Banks will usually determine your loan amount based on the price reflected in the sale and purchase agreement and not the valuation report unless you borrowed the extra RM50k in another form and not for the finance of the purchase of the property (eg: renovation etc). Some banks still loans for renovation.

Owner can mark up the price but nowadays, not many solicitors will dare to do so as it amounts to cheating and recently, enforcement is rather tight... for who knows why. If done, usually the owner will execute a letter of rebate/discount addressed to the purchaser and deposit it with the solicitors to be utilized for the release upon completion.

Yes and no.

1. No based on the way you mentioned it.

2. Yes, but marking up the SPA to the valuation price, but have the SPA lawyer to not release the remaining money to the owner (owner must be agreeable too). Usually the money given to you will be in the form of a "rebate".

This is highly illegal though.

Developer can offer rebates legally, why cant individual sellers? What are the legal barriers if anyone knows?

Are you sure that what the developers are doing are above water with the banks?

For some banks and developments, when the EF banks know about the rebate, the starting margin gets reduced.

I see your point, but not all this is above water. In addition, the EF banks have interest in the development, it can't fail because they probably had provided a bridging loan too, which need to be passed to the purchasers as mortgages.