Why Can’t We Buy Low, Sell High?
Madam Tan voiced that approximately two years ago, when her apartment hit its minimum occupation period, she and her spouse...
Read More
TLDR
Home buyers are advised to thoroughly research property values using online tools, secure an ideal home loan package early on, ensure cash availability for upfront payments, research renovation costs and providers to avoid overspending, and obtain a valuation report from HDB or a property agent. By following these steps, buyers can make informed decisions and navigate the home buying process smoothly to avoid costly mistakes.
Securing an Option to Purchase (OTP) is a big milestone for any home buyer.
Once the OTP has been issued by the seller, the buyer will be awarded exclusive access to buy the house at a predetermined price.
As the OTP is legally binding, buyers must exercise their option 21 days after the contract is delivered.
Those who don’t follow this will not only lose their option fee, but also their special right to the home.
How Much Will Buyers Lose If They Back Out During The Option Period?
Once the OTP is issued, buyers and sellers enter a 21-day period known as the option period.
Although this duration is usually fixed for HDB flat purchases, private property transactions can take anywhere from 14 days to multiple months of negotiating, depending on how the talks progress.
Before they can receive the OTP, buyers must first put down an option fee deposit – which, for HDB flat buyers, ranges from $1 to $1,000. Although it may seem like a small sum, no one wants to lose their money needlessly. Remember, if your OTP expires, you’ll have to reimburse the option fee.
When it comes to private property purchases, the stakes are considerably higher – one must shell out an astonishing $20,000 simply to enter the option period if the property’s price is at a whopping $2 million!
Though negotiations can help lower the cost, this is a figure that you should expect to pay. It is thus imperative to be absolutely sure of your decision before entering the option period – this is not the time for browsing around for a home.
Buying a home is no small commitment – and signing an OTP requires even more commitment. With so much on the line, it’s understandable why some buyers might hesitate before signing off on the extensive paperwork associated with a six or seven figure home purchase.
5 Things Home Buyers Must Do Before Signing The OTP
To ensure a smooth home buying process, be sure to read on and avoid being in a difficult situation!
1. Do Your Research
Nobody wants to look back 30 years down the road and realize they’ve wasted hundreds of thousands of dollars due to their home losing value.
The three week option period provides home buyers with the opportunity to decide if they’ve made the right investment (even though it would have been ideal to figure this out before signing the Offer To Purchase, sometimes it’s best to cut your losses and find a better deal).
Although no one can predict the future of the housing market, it is wise to get a second or third opinion about the property you are buying.
Fortunately, there are plenty of free online home valuation tools, such as my free home valuation report, to help you in this process.
Are you trying to ascertain the value of the home on your own?
Keep in mind that property prices are typically calculated based on the following criteria:
- Location
- Urban Redevelopment Authority zoning
- Number of rooms
- Age and condition of the property
Take a deep dive into past real estate deals in the vicinity – your estate agent should be able to provide you with this info. Don’t skimp on market research – not doing it properly could cost you a lot more than just your reservation fee!
2. Lock In An Ideal Home Loan Package
Secure your loan in advance of signing the OTP to ensure you have sufficient funds to cover the multitude of payments ahead.
Getting a loan is not something you can do without due diligence, so make sure you don’t wait until the last minute.
In addition to assessing your income, savings, and existing debt, you should also evaluate:
- Whether you’re taking a loan with floating or fixed interest rate.
- Who your joint borrower should be for an optimal Income Weighted Average Age (IWAA), or if you even want a joint borrower in the first place.
- The amount that you are eligible to borrow based on your MSR and TDSR.
Figuring out your financial outlook for the next two decades or so can be a tiring and overwhelming process, particularly when you have to balance your day job and family responsibilities.
Thankfully, I am connected with a fantastic, complimentary mortgage advisory service which allows home buyers to assess home loan options from all banks to find the best fit for their financial requirements.
3. Secure Your Cash For Upfront Payments
It’s no joke – buyers should be sure to get their loans locked down in the initial week of the option period, as there’s a hefty number of expenses that will have to be taken care of.
To give you an idea of the amount of cash you’ll need to bring to the table, have a look at the following table for a rough estimate.
4. Research On Renovation Costs And Providers
Ensure that your renovation loan does not spiral out of control by setting a cap of $30,000 at the most.
Additionally, your loan should be no more than six times your monthly salary, as long as it does not exceed the $30,000 limit.
Bear in mind that this will be an additional loan, in addition to the primary home loan that must still be paid.
As such, we suggest that you focus on only essential renovations and repairs, to keep costs as low as possible.
It’s completely understandable that the prospect of so many pricey bills has you hyperventilating; owning a home shouldn’t cost this much!
5. Get A Valuation Report From HDB Or Your Property Agent
It is mandatory for buyers who wish to take out home loans from HDB or private banks to get their home valued by HDB; however, you may have the luck of saving tens of thousands of dollars if the valuation is higher than the selling price – the sellers would then have to bear the expense, though such luck is rare. Don’t count on it!
By consulting with a property agent, buyers can reduce the chances of overspending for a COV.
Although no one can predict HDB’s valuation with absolute certainty, agents have extensive experience with past HDB reports and can provide educated guesses.
Furthermore, my free e-valuation service can provide you with a rough estimation of your home’s worth – however, this is not a replacement for official appraisals, and HDB’s valuation will still be the final decision.
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 …
The Psychology of Property Investing: 5 Reasons Why Singaporeans Love Real Estate
Real estate investing has always been a popular way to grow wealth and secure financial stability. In Singapore, the love...
Read More
Sentosa’s Sizzling Property Market: 5 Reasons Chinese Investors are Flocking to Singapore’s Premier Island
Sentosa's Sizzling Property Market: 5 Reasons Chinese Investors are Flocking to Singapore's Premier Island Here are the top 5 reasons...
Read More
What’s Next for HDB Owners?
Buying a home always seems daunting especially such it is a big-ticket item and the prices for private homes can easily...
Read More
6 Key Contrasts Between New Launch and Resale Condos to Assist You in Making the Right Choice
TLDR When deciding between a new condo or an older resale unit, consider the differences in design features. Older condos...
Read More
5 Impacts Of The Singapore-Malaysia High-Speed Rail On The Property Market
The proposed Singapore-Malaysia High-Speed Rail (HSR) is a joint project between the two countries that aims to improve connectivity and...
Read More
5 Impacts Of The Singapore Government’s Cooling Measures On Property Investing
The Singapore government has implemented several cooling measures over the years to regulate the property market and prevent it from...
Read More
The Changing Faces of Orchard Road
Should You Buy, Sell or Wait? If you're reading this, you must be trying to figure out the best course...
Read More
5 Tips : How To Invest In Singapore Property Without Losing Sleep Over It
Investing in Singapore's property market can be a lucrative venture, but it's important to approach it with caution and a...
Read More
The Advantages and Disadvantages of Purchasing an Auction Property in Singapore
TLDR When considering purchasing a property through auction in Singapore, remember that you can potentially get a great deal below...
Read More
Top 5 Most Common Red Flags To Watch Out For When Investing In Singapore Property
Investing in Singapore property has long been considered a lucrative and stable way to build wealth. However, like any investment,...
Read More
7 Essential Considerations to Keep in Mind When Assessing a Floor Plan for a New Condominium Development
TLDR When selecting a property unit, carefully examine the floor plan beyond aesthetics. Consider non-living spaces like ledges and void...
Read More
Singapore Property Price Set to Explode Upwards in 2024?
TLDR Understanding the factors influencing property prices in Singapore for 2024 can help in making informed decisions. Despite high rental...
Read More
Downpayment For Condo: How Much Do First-Timers Need In Singapore?
TLDR The blog post delves into the complexities of condo downpayments in Singapore in light of the impact of Covid-19...
Read More
Should We Upgrade to a Condo Now or Wait for Interest Rates to Go Down?
TLDR Considering the Singapore property market trends and financial factors, it's crucial to make informed decisions about upgrading from an...
Read More
5 Factors : Why Singapore’s Property Market Is A Good Hedge Against Inflation
As inflation becomes a growing concern for investors worldwide, the stability of Singapore's property market has become an attractive option...
Read More
Can You Make the Leap to a Condo Upgrade in 2024?
As the Chinese New Year festivities wind down, folks are once again on the prowl for new homes, and understandably,...
Read More
5 Reasons Why Condos Are The Best Real Estate Investment in Singapore
Investing in a condo in Singapore is a popular choice for both locals and foreigners. Condominiums offer a range of...
Read More
Singapore Property Bubble Ahead? My Friends Share My Market Predictions
TLDR The author delves into various opinions on the Singapore property market for the year 2023. Experts have differing views...
Read More
How Much You Need to Earn to Afford a Condo 2023
TLDR When considering investing in a private property in Singapore, it's important to understand your borrowing capacity. Financial experts recommend...
Read More
