Planning to buy a resale private property? Then congratulations, you’ve made it in life, at least according to the Singaporean barometer!
Here’s a step-by-step guide that will take you from browsing property ads to enjoying your new pad in no time.
1) Find your home and negotiate prices
Before you know what you want to buy, you’ve got to check out what’s on the market.
So browse property ads, whether online or off, to find suitable properties within your budget. When you’ve found something you like, make an appointment to view the property.
You can also use an agent to locate suitable properties for you, although you should check first if you are required to pay a commission.
Inspect the property
Resale private property needs to be inspected very thoroughly before you decide to buy it. You want to check for defects and maintenance problems, and grill the seller on any issues you have detected.
This is especially important when it comes to landed property, which can cost a bomb to maintain. If you’re forking out the cash on a house, you might want to consider hiring a professional inspector.
Look out not only for defects in the building, such as ceilings, walls, doors and windows, but also fittings and installations such as air con units, cabinets, stoves and so on.
Negotiate the price
Pricing for private properties tends to be quite a bit trickier than it is for HDB flats.
Know that owners are always going to list their properties at a higher price than they’re willing to accept. So do your research on past transactions of similar properties in the area you’re looking at, and then negotiate hard.
If you’re buying an older or landed property, you might want to get some valuations done on it so you can be sure you’re not getting ripped off. Banks sometimes offer free desktop valuations, but these can fluctuate greatly, so ask for at least two or three.
Also, know that we’re in a buyer’s market right now. So use any excuse to drive down the price—dated renovations, a bad view, poorly maintained premises and so on.
2) Secure the Option to Purchase
Unlike uncompleted developments, resale private property is not sold using a standard-form Option to Purchase (OTP) or Sales and Purchase Agreement (S&P).
That means the seller is free to write their own contract, or use their agent’s. It’s also possible for sellers to dispose of their properties with only one contract.
However, the most common method to buy property is still to secure an OTP.
By the way, before procuring an OTP, make sure you check your ABSD liabilities. If you’re a Singaporean who already owns at least one residential property, you’ll have to pay ABSD. All PRs and foreigners are liable to pay ABSD as well.
If you’re not a Singapore citizen but are looking to buy landed property, you’ll also need to get approval from the Land Dealings Approval Unit, who are famously strict and reportedly reject about half their applications.
To obtain the OTP, you will pay an option fee, typically 1% of the purchase price, payable in cash. Once you’ve paid the option fee, the seller is not allowed to sell the property for a specified duration, usually 2 weeks.
You should have already engaged a lawyer at this point, who will make sure you exercise the option in a timely fashion.
It’s possible to get your lawyer to coordinate the sale of a current property with the purchase of a new one in order to reduce or remove ABSD liabilities.
3) Get a loan
You’ll need to secure a bank loan to finance your purchase unless you plan to pay entirely in cash or CPF savings.
Compare the various home loan options quickly and easily using MoneySmart’s home loan wizard.
You’ll want to take note of how much cash you have on hand and in your CPF account. Make sure the bank is able to lend you the balance, otherwise you’ll have to raise more cash.
For private property buyers, the main regulation constraining how much banks can lend you is the Total Debt Servicing Ratio (TDSR), which dictates that you can’t be paying more than 60% of your income in loan repayments—this includes not just your impending home loan, but also any car loans, student loans, credit card debt and so on.
4) Exercise the OTP and pay balance of downpayment
Before the deadline on your OTP, you will need to exercise it to officially become a buyer of the property.
When you exercise the OTP, it is likely that you will have to pay the balance of downpayment, usually comprising 4% of the purchase price. Check the terms of your OTP if you’re not sure.
5) Wait for completion
Both you and the seller should agree on a completion date. This is to ensure that there’s enough time for the seller to move out, and the agreed fixtures or furnishings are left behind in good condition. There might also be a formal valuation of the property during this period.
In the lead up to completion, your lawyer will be bugging you to submit the documents and money needed to successfully complete the sale.
This means you will have to prepare the cash portion of your payment (this should be at least 15%, and might be more depending on how much CPF you’re using and how much your bank loan is) and other sums such as Buyer’s Stamp Duty (BSD), Additional Buyer’s Stamp Duty (ABSD) if any, and legal fees.
On completion day, your lawyer will handle the transaction and get you registered as the property’s new owner.
All that’s left for you to do is to swing by your lawyer’s office and pick up the keys to your new home.
Do you have any questions on buying resale private property? Leave them in the comments!
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