Australian expatriate and award-winning blogger, who wrote about his experience of living as a foreigner in a HDB in Woodlands here, Peter Breitkreutz, takes us through his own experience of buying a HDB flat as a Singapore Permanent Resident. Previously, he discussed engaging a property agent, here he looks at selecting a property and securing an option to purchase
(Image courtesy of Singapore Tourism Board)
Step 4: Select a Property to Purchase OK – let’s go shopping! The agents should provide you with a schedule (preferably including many apartments in one day) for viewing of various flat. This is where ensuring that the agents have taken on board your specifications and requirements is really important. Be sure that the agents do not take you to view apartments that do not fit your specifications – we wasted a lot of time looking at apartments that were just not suited to us. They were too old, weren’t corner blocks, didn’t match our budget, and there is nothing more frustrating than wasting your time in this manner.
I strongly recommend that you view as many apartments as possible that fit your requirements. In this way you will be able to get a ‘baseline’ from which to compare prices in locations. Once you have found the property that you want to purchase, the next stage will be the seller providing you with an “Option to Purchase” (OTP).
Step 5: Option to Purchase (OTP)
An Option to Purchase is the right given by seller to an intending purchaser to buy the property at a specified price within a specified period of time). To receive the OTP, a fee is payable (maximum of $1,000) and the OTP will have an expiry date and time in which the OTP needs to be ‘exercised’. Once this is received and the fee paid, the seller cannot offer the property to any other potential buyer. To proceed, the OTP needs to be exercised before the expiry date. This is done by the buyer and seller both signing the final page of the OTP (acceptance). A fee is also payable at this stage (maximum of $5,000). Once the OTP has been executed, the buyer and seller are bound in a legal agreement for the purchase transaction.
The OTP expiry time is usually one week from the time that the option is offered by the seller. This time should be used to finalize the loan or mortgage at the bank. A copy of the OTP (and official valuation) needs to be furnished to the banking institution and the loan will go through the formal approval process. Once approved, the bank will provide you with a “Letter of Offer”. This will also have an expiry date, and once signed will also become a legally binding agreement to accept the loan. When exercising the OTP, the seller or their agent will request to see a copy of the banks “Letter of Offer”.
All fees paid in the OTP process will form a part of the deposit. For example, you are borrowing money from the bank for a $400K (valuation = sale price) property and the cash (deposit) amount is 20% ($80K). If you have paid $1000 when receiving the OTP and $5,000 when exercising the right to purchase, the balance of the deposit to be paid is $74,000.
Remember, if the sale price is more than the valuation price, then the difference must be paid in cash along with the deposit. When looking at apartments to purchase, the seller will generally show you the official valuation report, and the price of the apartment will be described in terms of over or above valuation. For example, it may say the price is $450K and that it is $10K over valuation, or $20K under valuation, etc) There are a number of factors that will effect the purchase price versus the seller valuation, and usually this is negotiable to some extent.
Having selected a property and taken up the option to purchase, let’s now look at meeting with HDB, engaging legal representation, and taking possession of your new property.
Read more of this series:
Part 1: Budget and Specifications
Part 2: Financing
Part 3: Engaging a Property Agent
Part 5: HDB, Legal and Taking Possession
Read more from this author… Peter Breitkreutz is an Australian living and working in Singapore. To read more about him, check out his award-winning blog at http://www.aussiepete.com/.
Find a HDB for you… For the most authoritative and comprehensive listing of HDB properties for sale or rent, go to http://sg.yfittopostblog.com/2010/10/19/an-expat-at-home-in-the-heartlands/www.iproperty.com.sg/HDB.