Your search results

What’s The Difference Between An Offer To Purchase And An Option To Purchase?

Posted by Jayson Ang on May 29, 2023

| 0

TLDR

Understanding the crucial difference between an Offer to Purchase and an Option to Purchase (OTP) is vital when buying a property. An Offer to Purchase is a non-legally binding document where a potential buyer expresses interest in acquiring a property. It includes essential details like the property address, offered price, and option period. On the other hand, an OTP is a legally binding agreement that secures the property for the buyer. The Offer to Purchase influences the terms of the OTP, so it’s important to pay attention to its wording. Both documents play significant roles in the real estate transaction process, ensuring clarity and protection for both buyers and sellers.

If you’re buying a property, it’s important to understand the distinction between an Offer to Purchase and an Option to Purchase—often referred to jointly as the OTP.

In order to avoid confusion, we use the terms “Offer” and “Option” separately these days. Although they occur near each other in the real estate process, many buyers tend to mix them up.

Remember, the language in the Offer to Purchase could later influence the Option to Purchase, so it’s worthwhile to know the difference.

What is an Offer to Purchase?

If a potential buyer is interested, their real estate agent will craft an Offer to Purchase for the seller to accept or reject.

This formal document from the buyer expresses their sincere desire to acquire the property, and is not legally binding like the Option to Purchase.

The Offer to Purchase may include:

The address of the property,
The price it’s being offered for,
The length of the Option to Purchase period (commonly known as the option period), which is typically 14 days for private properties and 21 days for HDB resale flats (though you can ask for a longer duration)
Completion of the transaction, which is usually 8 to 10 weeks after the option has been exercised (though you can request more time).
The Offer to Purchase must be valid for at least three days,
And should include additional terms such as a 5% deposit.
The phrase “subject to contract” will be elaborated on later.

The buyer’s agent typically drafts the Offer to Purchase, typically accompanied by a cheque for 1% of the purchase price as a deposit – commonly referred to as the ‘option fee’.

Once the Offer to Purchase is accepted and signed by the seller, they can then issue the Option to Purchase (OTP) to the buyer.

Should the seller opt to turn down the Offer to Purchase or no OTP being issued within the Offer’s set validity period, the buyer’s cheque must be sent back.

The seller should avoid banking the buyer’s cheque before signing the Offer, as this could unintentionally create a legally binding contract similar to an Option to Purchase (OTP).

It’s much clearer to just refer to it as the “Offer” and the “OTP” separately.

What is an Option to Purchase (OTP)?

The Option to Purchase (OTP) is the legally binding document to secure a property – and it doesn’t come for free! Generally, the cost of the OTP is 1% of the purchase price.

This offer is only valid for the duration of the OTP’s validity period (as stated in the Offer to Purchase).

So, if the buyer fails to exercise the OTP during that time, their 1% deposit will be lost.

The Wording Of The Offer To Purchase Can Have A Significant Impact On The Drafting Of The Option To Purchase – Make Sure It Counts!

In 2013, a famous resale condo incident made legal history; the Offer to Purchase stated that the “option period” was to be a mere “three days” as opposed to the typical 14 days.

When the seller issued the Offer to Purchase, they and the buyer agreed on a three-day option period that unfortunately fell during the Chinese New Year holiday, leaving the buyer in a tricky situation.

The buyer had paid the 1% option fee upfront and tried to exercise the option on the first working day following the holiday, only to find that the seller’s solicitor’s office was still closed.

Undeterred, the buyer tried again the next day, but unfortunately the seller rejected it, citing the expiry date had already passed and kept the option fee.

In the end, the Court declared that, despite the dilemma regarding the OTP, both the buyer and seller had created a valid contract for two key reasons : After the sellers signed and banked in the buyer’s cheque with no “subject to contract” clause on the Offer to Purchase, the transaction became legally binding.

After the episode, property agents are currently being extra careful to include the accurate term “subject to contract” in their Offer to Purchase.

This clause can prevent the Offer from being seen as a legally binding agreement, offering protection for both buyers and sellers before signing a valid OTP.

It’s important to pay attention to the Offer letter, since it can bring about complications concerning the Option to Purchase in the future.

Why Do We Still Need An Offer To Purchase?

It is generally a smart idea to go with the flow and send an Offer letter prior to the OTP, as this is the usual practice for all property agents – and for good cause.

On instruction from the buyer, the Buyer’s Agent issues an Offer to Purchase that allows them to set the conditions for the subsequent Option to Purchase.

For instance, if one is looking to upgrade from an HDB flat to a condo, and relies on the profits from the sale of their flat, specifying an extended OTP duration can provide more time to ponder over and accept the ideal offer for the flat.

If you’re planning to purchase a new HDB flat, it’s vital to have a clear understanding of the completion date stated in the offer letter.

Knowing exactly when the transaction will be finalized is essential for buyers so that you can start getting ready to move in. Plus, the sooner the resale completion date is, the sooner you’ll be able to access the proceeds to help fund your new home!

If you’re in the market for a new property, it’s always best to get your agent to draw up a formal Offer to Purchase if you’re interested in a property.

Ultimately, this is included in the agent commission that you’ll pay when the deal is finalized!

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

You May Also Like …

All Buying Tips Opinion

Fresh Take: Old vs New Condos in District 15 — Which Gives Better Value in 2026?

Jayson Ang – April 6, 2026 –

TLDR District 15 condos show a nuanced split between old and new developments. Freehold projects have driven much of the...

All Buying Tips

What Is Cash Over Valuation in HDB (COV)

Jayson Ang – November 8, 2023 –

TLDR Cash Over Valuation (COV) in HDB resale flats occurs when the purchase price exceeds HDB's valuation. COV cannot be...

Mandarin Top 5

Singapore’s Real Estate Market: Disproving 5 Common Misconceptions

Jayson Ang – February 25, 2024 –

Singapore's real estate market is a complex and dynamic market that can be difficult to navigate for new investors. With...

All Blog Posts Buying Tips

A Beginner’s Guide to Homebuying: How to Choose the Perfect Property

Jayson Ang – May 20, 2023 –

TLDR When considering property investments, understanding your motives is crucial. Factors like accessibility to amenities, remaining lease, transaction history, rentability,...

All Opinion

What You Need to Know About Residential En Bloc Sales in 2025

Jayson Ang – October 28, 2025 –

TLDR En bloc sales in Singapore involve selling entire buildings to developers for redevelopment, with most owners needing to agree....

All Blog Posts Buying Tips

The Advantages and Disadvantages of Purchasing an Auction Property in Singapore

Jayson Ang – January 13, 2023 –

TLDR When considering purchasing a property through auction in Singapore, remember that you can potentially get a great deal below...

Mandarin Top 5

Top 5 Tea Rooms in Singapore for High Tea

Jayson Ang – July 16, 2024 –

Singapore, a melting pot of diverse cultures and culinary delights, offers an exquisite high tea experience that caters to both...

All Opinion Selling Tips

Why More First-Time Buyers Are Picking Condos Over BTO Flats in 2025

Jayson Ang – November 1, 2025 –

TLDR In 2025, more first-time Singapore buyers are choosing condos over BTO flats. Key reasons include faster move-in times, better...

Mandarin Top 5

Introducing Top 5 Power Property Tips

Jayson Ang – May 14, 2023 –

Hello, everyone! We are excited to welcome you to our blog posts! On this blog, we will be sharing daily...

Blog Posts Mandarin Top 5

Travel Without Worry: The 5 Best Telco Companies For International Roaming In Singapore

Jayson Ang – July 8, 2023 –

Travel Without Worry: The 5 Best Telco Companies For International Roaming In Singapore When it comes to choosing a mobile...

All Blog Posts Top List

Discover the Top 11 Most Outstanding Condominiums in Singapore’s Holland Village Areas

Jayson Ang – December 9, 2022 –

Originally established in the early 1900s by Singapore's Dutch community, Holland Village was originally a residential area home to British...

All Buying Tips Opinion Selling Tips

Is Renting Out Your HDB to Live in a Condo a Smart Move? How Rentvesting Can Help You Save Money

Jayson Ang – February 18, 2025 –

TLDR Rentvesting is a strategy where individuals rent a home in their desired location while purchasing investment properties in more...

Mandarin Top 5

Top 5 Romantic Date Spots in Singapore

Jayson Ang – March 18, 2024 –

Singapore, known for its stunning skyline and diverse culture, is a melting pot of romantic opportunities just waiting to be...

All Opinion

Why Can’t More People Own Private Property?

Jayson Ang – April 2, 2024 –

TLDR The blog post discusses the aspirations of individuals like Siti and Mr. Tan regarding property ownership in Singapore. Siti...

All Buying Tips Opinion

Can You Skip the 15-Month Wait When Selling Private and Buying Resale HDB?

Jayson Ang – April 2, 2026 –

TLDR The 15-month wait-out rule requires private homeowners to sell their property and wait 15 months before buying a resale...

Mandarin Top 5

Top 5 Factors : Why Now Is the Perfect Time to Invest in Singapore’s Real Estate Market – Insider Analysis!

Jayson Ang – March 15, 2025 –

Singapore's real estate market has always been an attractive investment destination for both local and international investors. The city-state's stable...

Buying Tips Mandarin Top 5

5 Things to do When You Go For A Property Viewing In Singapore Part 2

Jayson Ang – June 8, 2023 –

5 Things to do When You Go For A Property Viewing In Singapore Part 2 Here are 5 more things...

All Buying Tips Opinion

Decoding the HDB Classification: The New Prime, Plus & Standard – What It Means for Singaporeans

Jayson Ang – December 26, 2023 –

TLDR The National Day Rally 2023 introduced a new classification for HDB flats, replacing the old 'mature versus non-mature estates'...

All Buying Tips Reports

2024 Residential Property Market Outlook

Jayson Ang – December 22, 2023 –

TLDR The market outlook for 2024 suggests continued uncertainties affecting housing demand and risk appetite due to geopolitical tensions, macroeconomic...