3 processes you need to agree before securing your dream home

Necessary documentation processes you need to know

Option to Purchase

The ‘Option to Purchase’ gives you a 21-day exclusivity period to decide on purchasing the intended property. Upon signing the ‘Option to Purchase’ agreement, 1% of the purchase price is placed as a good faith deposit.

If you decide to purchase it within the stipulated deadline, you must return the agreement to the seller together with another 5% or 10% depending on what is on the agreement.

If you fail to honor the agreement within 21 days, the developer will be entitled to forfeit 25% of the booking fee. The other 75% of the booking fee will be refunded to the purchaser. Thereafter, the developer can sell the property to any other interested party.

Offer to Purchase

The ‘Offer to Purchase’ is an agreement where you may not want any time to consider or contemplate on the property but instead prefer to make a binding direct offer to purchase.

This agreement is to be prepared by your solicitor or agent, stating the price, completion date and other conditions you want to specify.

If the seller accepts the offer, the ‘Offer to Purchase’ agreement must be signed and you can move into the next phase of the process which is the Sales & Purchase Agreement (S&P).

At this stage, 5% or 10% of the agreed price is paid to the seller as a deposit.

Sales and Purchase Agreement

During this phase, your solicitor will lodge a caveat on the said property, coordinate with the bank/CPF board for the mortgage up to the preparation of the contracts which will in total take approximately 10 weeks.

Fees and Commissions

You will also need to consider fees and commissions that will be incurred from transaction such as:

  1. Agent Commission:
    • For a HDB flat, the agent’s commission is usually paid by both the seller and the buyer.
    • According to industry practice, most agents receive 2% of the selling price from the seller and 1% from the buyer. For landed property or a condominium, the commission is usually paid by the seller, from 2% onwards.
  2. Solicitor’s Fee:
    • Solicitor’s fee paid by the buyer is between 0.3-0.6% of the selling price.
    • Extra legal fee is applicable if CPF is used to pay for the apartment. The seller pays 0.15% of the transaction value to his/her solicitor.
  3. Mortgage Fee:
    • Banks charge an administration fee and valuation fee for the mortgage which is usually around S$200-300.
    • You are also required to purchase an insurance policy on the property.
  4. Stamp Fee:
    • The stamp fee is payable to Inland Revenue Authority of Singapore within 14 days upon exercising the Option to Purchase or signing the Sales and Purchase Agreement when buying from a property developer.
    • For properties above S$360,000, the stamp fee is 3% of the purchase price. The mortgage stamp fee is around S$500, which is quite the standard amount for most mortgages.