Advantages of buying versus renting
Pros:
- Security – Owning a property to stay in provides protection, stability and assurance as it’s not subject to rental fluctuations and lease terms set by the Landlords.
- Investment – Property in Singapore will appreciate over time due to limited land usage. Property can also be used to hedge high inflation where cost of living goes up with real income.
- Forced Savings – Repayments of mortgage loans are a type of forced savings strategy. It helps to instill proper money management and discipline through forced savings.
- Investment returns – Renovating a rented place is a sunk cost as the property will be returned to the Landlord when the lease ends. However, owning a property and renovating it would increase the value of the property and thus increases the investment returns.
- Succession Planning – Owning a property(Freehold) can be passed on to future generations as compared to renting a place and returning the property to the Landlord when the lease ends.
Cons:
- Deposit / Downpayment – It takes time to accumulate deposit/downpayment to purchase a property thus it can take years of prudent spending and changing of lifestyle to save up on the deposit.
- High Costs – Owning a property can be more expensive than renting because of high maintenance fees, repairs of the property, house insurance and property tax etc. If the mortgage loan amount is high, the monthly repayment might be more than half of the income which might pose a huge financial strain on the owner.
- Price Depreciation – Property market moves in cycles. Any investment will carry a certain amount of risks. Thus, if there is a downturn in the market, the property value will depreciate. If the owner is unable to service the mortgage loan, the banks will foreclose the property and the owner might have to incur heavy losses from the event.
- Interest rates risk – Mortgage repayment is subject to the interest rates risk. Repayments of the loan increases if the bank interest rates increase. However, as compare to renting a property, the renter can choose another property to stay should the owner increase the rental amount due to an increase in the repayment loan amount.
Difference between an open listing and an exclusive agency
Open listing – Given to any real estate salespersons. However, the real estate salesperson may not be obliged to spend time and money to make the sale because no commitments have been made. They will slowly wait for offers by buyers and offer to the owner for considerations. Most of the time, the property will take a longer time to sell and at an unfavorable price. This is because many real estate persons may resort to undercutting prices so as to close the deal.
Exclusive Agency – Given the right to a particular agency to sell the property within an agreed specific period of time. This is to ensure that there is price control for the property without unnecessary price undercutting. Moreover, this will ensure that the real estate salesperson will put in time and effort in the marketing tools to get the best price for the owners.
Although many property owners doesn’t believe in this truth, and believe that by having an open listing, the owner would be able to sell his property fast.
REMEMBER : SELL FAST DOESN’T MEAN GOOD PRICE!!
Most successful real estate transactions are conducted through exclusive agency. This means appointing only one real estate agent to manage the marketing and sale/rental of the property. In Singapore’s context, this exclusive period is valid for three months upon signing the agreement. Let’s look at the advantages and disadvantages of such an arrangement.
Disadvantages of exclusive arrangement
Most of the time, it is because of ONE reason – Appointing the wrong agent.
- Disappear after the exclusive agreement is signed.
- No updates and returning of calls to the owner’s call.
- Did not carry out any of the activities that he promised the owner.
- Does not act in the interest of the owner.
Three months will pass by very fast and the owner ends up with an unsold unit. To make matters worse, the market has soften. The owner will feel cheated, angry and swear at using a sole agent and starts telling everyone not to do it.
Unfortunately, these things happen.
Advantages of exclusive arrangement
The established partnership gives the agent total confidence and trust to go ahead and market the property. He wouldn’t need to worry about the deal being closed by another agent. This will ensure full commitment and marketing effort.
- The appointed agent will keep the owner updated regularly of the marketing progress
- The only agent that the owner needs to talk to and hold him responsible for the property.
- The appointed agent will scan and qualify the buyer to ensure that the owner will not waste his time opening the unit to unsuitable buyers.
- Price is hold and controlled.
- Units that are marketed by multiple agents, many agents will quote the lowest price to attract buyers to call them. Thus, the agents are always pushing for the lowest price.
Usually, a buyer will call up many agents to find out who can get the best price (Lowest Price) for the unit. There might be ten different calls from different agents calling in to enquire about the property but only serve the same buyer or different buyers.
For the owner, would it be better to appoint an exclusive agent to make these buyers compete to offer at the highest price OR to make many agents compete among themselves to secure the lowest price?
Most of the buyers have an agent during viewings. The owner will still have to pay a commission to the agent if the deal is concluded. The owner might well appoint the RIGHT agent from the start to ensure that his interests are well taken care of.
Helpful tips
Pick the correct and professional real estate agent to work with on an exclusive to ensure a win-win situation for both parties.
After choosing your ideal home, it’s important to get the correct mortgage for your property. By choosing the right mortgage loan, thousands of dollars can be saved over the long run.
There are plenty of products from banks with different interests rates ,features and fees being offered to the public. Below are some ways to narrow down which loan is suitable for you.
Purpose and requirements of the loan
- Consider the purpose of the loan. If you are a purchaser planning to stay in your property, you would require a home loan while investors would look more at a residential investment loan.
- Next step is to decide what type of loan would be best to suit your needs – Fixed or Variable rate ? Flexibility to pay off more than your scheduled payments or offset your mortgage agai
nst your income earnings monthly thus save on interest expense. - Plan how long do you intend to repay the loan.
nst your income earnings monthly thus save on interest expense.Loan Features
- Understand the features of several loan products. Bearing in mind that many banks will also allow you to split your loan amount over more than one type of loan to meet your needs. Walk in to a few banks (OCBC, DBS, UOB, Standard Chartered, HSBC, etc) and talk to the mortgage bankers to find out more about the mortgage loans packages.
Long term expenses
Prioritize your preferred features in a loan and calculate the long term costs of the options that you have considered. Will you save more if you choose a Fixed over a Variable loan even though fixed interest rate is slightly higher? It all depends on how well disciplined you are with budgeting, family lifestyle and future plans. Plan well ahead in order to forecast as accurately as possible your ability and/or limitations to repay your loan.
Word of Advice : A mortgage is a guarantee or pledge to repay the loan you take to buy real estate. The word mortgage is a French Law term meaning “death contract“, meaning that the pledge ends (dies) when either the obligation is fulfilled or the property is taken through foreclosure. Please keep in mind when reading the terms and conditions of the mortgage you are entering!
Your Ideal Home
It’s useful to engage a professional real estate agent to do house hunting together as the agent has a wide network of database, information and knowledge.
Make a list of your needs and wants in a house and study the property market in the areas that you prefer. During house viewing, bring along a notepad and write down
everything that you “likes” and “dislikes” about the house. It’s useful to prepare a checklist of criteria beforehand so that you can compare the properties that you have viewed.
Things to consider :
- Investment perspective:
- What is the rental yield if you plan to rent out?
- What is the rental yield if you plan to rent out?
- Will it continue to increase in value based on surrounding development?
- Require high maintenance costs?
- Family’s lifestyle:
- Easily accessible public transportation to and from work, parents’ place and children schools?
- Any local amenities and eateries within walking distance or a short drive away?
- House with a view, any empty plot of land in front that might potentially block out the view in future development?
- Closely build houses, sufficient privacy away from your neighboring blocks?
- The aspect and block:
- Any West sun during the afternoon? Any preferred facing of the sun? North and North-East facing houses usually give better energy efficiency.
- Is the house situated on a high ground?
- Does the block faces noisy road, expressway or train tracks?
- Special features:
- Nice, unblock view?
- Designer Decoration of the house?
- Charming courtyard or unique design?
- A house that stands out in some way from the rest may give it the edge over other houses on offer and is likely to have better resell value if the feature is an integral part of the house.
- Renovations:
- Does the renovated house match your tastes or suit your lifestyle, how much will this value add on to the purchase price?
- Would you rather be looking at old and original condition house and transform it into a GEM?
Helpful tips
When it comes to house hunting, understanding your priorities and having a good knowledge of the property market will equip you with the best tools to purchase a property. Lastly, with a little common sense and sound advice from a professional real estate agent, the home buyer can be confident that his final decision is the RIGHT one!
Attend Open Houses
- By attending open houses, buyers can understand the actual condition of homes in the market. Keep the handouts given at open houses and then monitor the property around the area. Do research on the sales prices around the area/neighbourhood.
Find Home Sales Prices
- Look at website, newspaper advertisements to get a feel for the average asking prices of homes. However, usually the asking prices of homes are often inflated for negotiation on the prices. Main focus should be on the sales prices of similar homes that have been sold recently.
- Search for records around the area are available online or ask your real estate agent from his company database or research. Use the information to understand where the prices of roperty is heading now, however don’t make the mistake of putting in an offer on the amount that the seller has paid for a property– usually it doesn’t work because no sellers would want to sell at the price he/she bought and the additional cost of interest on the mortgage that the seller has incurred .
- Buying a property/home is a forecast of future value.
Valuation Report
- It’s useful to have a valuation report before making an offer and also understand how different banks value the property on sale. Ensure the results are kept confidential and bear in mind that the opinions of different valuers often vary.
Putting in a Low vs. High Offer
- Putting in a LOW offer would show insincerity of the purchase – “Testing water”. This would put off the seller and would potentially create problems in future negotiations if the seller interprets the low offer as a personal insult. However, if the property is over-priced and the offer is the maximum you can offer, it’s alright. Engage a professional real estate agent to negotiate the price for you so that we can be the one to block/filter off any insults or comments from the sellers.
- Putting in a HIGH offer wouldn’t probably get the base price from the sellers. However, if you are really interested in the house, and if there are a number of offers for the house, putting in an offer at or slightly above the asking price might be necessary. Try to consult your real estate agent as much as possible before putting in an offer.
Sellers Motivation:
- How long has the house been listed in the market? If it’s only a short period of time the sellers might not be ready to lower the price.
- How does the house compare with others for sale in the same neighborhood? Too high or too low? Try to understand the reason.
- Any major renovations required.
- Number of years lease left.
- Neighborhood development. Foresee any home values climbing, stagnant, or possibly taking a downturn.
Helpful tips
SEE, ANALYSE and COMPARE each property/home’s condition and asking price. Most of the time, your final offer will likely involve a good deal of gut instinct. Whether this house is suitable for you, you will probably know the answer the moment you step into the house.
Market Conditions
Ideally, everyone wants to buy low and sell high, unless you are an investor, this is challenging for home buyers to do so. However, it is necessary to understand the economy demand and supply fundamental. Any changes within local and national markets can affect the property prices and the cost of living. When the economy is doing well and interest rates are low, demand for property is generally high and this will push up the prices. On the other hand, when there is a downturn, demand for property will drop and thus prices will be affected. By understanding the demand and supply of houses in the market and economy, you would be able to make a sound decision on whether to buy or sell.
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” – Warren Buffett
Commission Fee
There is no standard percentage for real estate agents commission.
Upon appointing the Exclusive agent to represent in the property marketing, seller and agent will agree on the amount/percentage of commission payable after the property transaction. When the seller has agreed to a commission with a listing agent, the seller should understand that there are usually two agents involved in most transactions. Most of the time, the commission is share with the buyer’s agent and part of the seller’s commission goes to the listing agent’s company.
Marketing tools:
- Multiple Listing Service (MLS) – Wider coverage to potential buyers and agents. Every agent is invited to bring potential buyers to your property. A bigger pool of buyers and agents will help to increase the property exposure, seller’s asking price and the ability to sell the property faster.
- Internet marketing – Using many high traffic flow property websites ( squarefootproperty, propertyguru, iproperty, stproperty etc), buyers from other parts of the Singapore/world can be reached.
- Newspaper marketing – Classified newspapers (English, Chinese and Malay papers), ask about the frequency of advertisements.
- Exclusive and customized services – Beyond the “traditional” marketing services that are available through most companies.
- And many many more…
Points to ponder for Sellers:
Which is more important? – Getting the BEST PRICE from the sale or Paying the LOWEST SALES fee?
Don’t be bluffed by real estate agents who undercut their own commission and still promises to provide extensive marketing coverage.
Commission fees provide income for three items only – Profit, Overhead & Marketing. Overhead is a variable fixed cost and that leaves only Profit & Marketing.
Where would you think these real estate agents cut back to make up for their reduced commission fees?
It’s not Profit. They cut back in Marketing. A reduction in marketing expenses would result in less exposure for the property.
As the saying goes “If the sales estate agent cannot protect their commission, will they protect your selling price?”
HDB Flats
To check the recent transacted price of HDB flats, please click: HDB Resale Transactions
Types of HDB flats, please click : Different types of HDB flats in Singapore
Private Property
To check the recent transacted price of private properties provided by URA, please click: Residential Property Transactions
Types of Private Property
Apartment and Condomimium
- Apartment and Condominium(Condos) – Residents will share the common compound and facilities. Some of the condos come with good-quality finishes, luscious landscaping, basement car park and full recreational facilities such as clubhouse, children’s playground, gymnasium, swimming pool, squash and tennis courts etc. Most developments have 24-hour security surveillance, security guards and intercom systems. The residential units range from studio, 1, 2, 3, 4 , 5 bedroom units and penthouses. They start from as small as 300 square feet (Mickey mouse house) to as large as 8,000 square feet (Penthouses).
- Duplex houses are divided into two living residences, having separate entrances.
- High rise and low rise apartments usually have with no facilities.
- Mansionette houses have two levels which is double storey.
- Penthouses are the biggest unit in a condo or apartment block. The unit sits on the top floor and usually occupies two levels.
- Town Houses are landed houses that shares the same compound or facilities (if any).
- Walkup apartments are low rise apartments with no lift. Usually these apartments are 5 storey high.
Landed Property
- Landed properties are houses with own private gardens. Conventional landed housed comprises of bungalows (a freestanding house), semi-detached (a pair of houses) and terrace units (a row of houses), all of which come with private garden compounds or garage.
- Bungalow is a free standing house with no shared wall with others except the fence.
- Semi Detached house is a pair of houses, two houses joint side by side.
- Inter Terrace (Intermediate Terrace House) house is a row of houses joint side by side.
- Corner Terrace (Corner Terrace House) house is the last or first house of the row of houses.
Others:
- Colonial Houses, Bungalows are houses built in the pre-war British colonial times.
- Conservation Houses, Shophouses are houses or Shophouses that are marked for conservation.
- Black and White Houses are houses built in the pre-war British colonial times, usually with white external walls with wood support painted in black.
- Heritage Houses are house constructed with a touch of Asian heritage and culture and Balinese concept.
1st Mistake: Asking price based on needs or emotions rather than the market value.
- Often, people make their decisions based on how much they have paid for or invested into their home. This could be an expensive mistake. Overpriced properties will take a longer time to sell and also lower their investment returns. Ideally, people would like to buy low and sell high. However, most of the time we couldn’t get the peak and trough of the property cycles. Consult with a real estate professional. They can help to assist you in pricing your home correctly from the beginning of the process.
2nd Mistake : Fail to “showcase” the home.
- Make a GOOD first impressions and people will never forget it. Look at showrooms at new launches to understand how important first impression can impact a buyer’s decision. Surprisingly, many sellers fail to understand the importance of first impression. Clean and prepare your home in the best possible shape before putting it on the market if you want the best price.
3rd Mistake : Trying to SELL/PROMOTE their house to buyers during viewings.
- Biggest mistake an enthusiastic home sellers is to follow the buyers around the home and try to SELL them the property. Sometimes, this might create a negative effect on the buyers because they might want to look at the property at ease and without any pressures from anyone in the home. The correct thing is to stay out of the way and let the buyers look at the property at their own pace. They’ll get a better feel for the property and whether the house is suitable for them. Let your professional real estate agent do the selling while you sit back and relax with a cup of tea.
One of the most important factors that to determine if a property gets sold or not.
As a real estate professional, I will help you to predict and analyse what most buyers will be willing to pay for at the particular point of the market condition if the property goes on sale. This is known as the FAIR MARKET VALUE. The old adage says “There will always be a buyer for every home – at the buyer’s price“.
Three major factors to determine how your property should be priced.
- The property’s condition.
- The current real estate market and economy.
- Recent transactions in the area and current units available for sale.
Should you price above fair market value and hope for an offer?
Please do be distracted by the agent who promises sky high prices for your property if you engage him. It could turn out to be a very costly mistake. If you are serious about selling your property, it should never be priced above the fair market value.
- The golden period during the first 30 days will be wasted.
- Help to convince buyers that other fairly priced properties are a better buy as compared to yours.
- Showflat for buyers to compare a overly priced property to a fair priced property.
- End up showing the property to the wrong group of buyers. For example, if your property is worth $1m but you decided to sell at $1.5m, you would be trying to compete against the fairly priced properties that are worth close to $1.2m. How would a $1.5m property compared itself against a $1.2m property? Why would buyers want to buy something that is overly priced in the market?
Helpful tips
A serious seller would price his property correctly in the beginning so that he would not end up selling at an even lower price.
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