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.

• All Singapore citizens and companies can buy any type of private residential property. However, there are HDB rules and CPF restrictions that might affect a private property purchase.

For flats bought directly from HDB (including flats from the open market with or without CPF Housing Grant)

• The flats lessees must satisfy the required occupation period for the flat before acquiring a private property (Minimum Occupation Period (MOP) – 5 years)

Foreigners or foreign companies can buy certain types of private property except landed houses which foreigners have to submit to SLA for approval.

• As stated in the Residential Property Act, foreigners since 1973 are not allowed to purchase landed properties in mainland Singapore. An application to the Land Dealings Unit under the Singapore Land Authority (SLA) must be made if the foreigner has intentions in purchasing landed property in mainland Singapore.

The Buying / Selling Process:

1) Select an agent
Recommended even though it’s optional. A professional and licensed agent will help you to find the right property, get the best price, works in your interest, guide you through the process and make recommendations on financing and legal representation.

2) Search property and negotiate price
Before putting in an offer for the property, ensure that all important details have been discussed and agreed between all parties (Buyers and Sellers) – including extension of stay, repairs or any special requirements from both parties and the agreed completion date.

3) Sign an Option to Purchase
For Private Property – The Option to Purchase (OTP) is obtained from the seller through their lawyer or estate agent’s company. At this point, Buyer is required to pay a non-refundable option fee (normally 1% of purchase price) to the Seller. The option period is usually 14 days (number of days in the option period is negotiable).
For HDB Property – In buying and selling of a resale flat in the open market, buyers and sellers MUST use the HDB standard Option to Purchase (OTP) as the form of contract in the transaction, any other agreements and supplementary agreements relating to the sale or purchase of the flat is not valid under the Housing and Development Act. From 1st August 2012, there is a unique serial number for each HDB Option to Purchase (OTP) contract. The buyer will pay the seller an option fee of ($1,000) for the OTP.

4) Appoint a Conveyancing Lawyer
Appoint a lawyer to make all legal enquiries on the status of the seller, the title of the property, the terms of the sale and transferring the legal title of property from seller to buyer .

5) Arrange Financing
Compare different banks interest rates and special terms when choosing a finance scheme. Most banks provide fixed and floating interest rates packages for customers with different needs and requirements.

6) Exercise the Option / HDB 1^st Appointment
For Private Property – After everything is agreed, upon signing the OTP contract, a 5% of the purchase price (less the option fee 1%) has to be paid to the conveyancing lawyer. Stamp duty has to be paid within 14 days of the contract.
For HDB Property – The buyer will exercise the OTP (exercise fee of $4,000). Both the buyer and seller must both attend the HDB 1st appointment. If there is a Cash Over Valuation (COV), it will be paid within 14 days after the HDB 1^st appointment.

7) Legal Inspection & Completion
Buyer’s lawyer will carry out an investigation of title deeds and send requisitions to various government departments. Seller’s lawyer will also prepare the completion statement and send documents for stamping to effect completion.

8) Settle Payment and Handover / HDB 2^nd Appointment
For Private Property – Any outstanding balance of the purchase price will be paid. This might be 8 to 12 weeks after exercising the OTP. Seller’s lawyer will then handover the keys and title deed of conveyance. Buyer will become the rightful owner of the new home.
For HDB Property – Completion will take place at the HDB 2nd Appointment, usually about 4 weeks after the 1st Appointment. House/Fire insurance and mortgage are settled. Stamp duty, legal fees and agent commission fees are paid. The sale is completed.

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.

Setting short term goals for long term targets. Plan for something that you can afford and make some compromises on the lifestyle  for a sound financial start.

Setting a budget

• It is important to set a budget.
• Do an Approval-In-Principle (AIP) from banks to understand how much you can borrow before starting to look for a house. The loan amount will be limited by your income earning capacity, assets and existing debts, credit card limits, study loans and car loans etc.
• Set aside another sum of cash for mortgage/house insurance, stamp duty, legal fees, renovations and maintenance fees etc.
• Set aside 6 months of income for emergency.
•  Important to buy a home that you can comfortably afford to repay over the long term with the goal of being debt free in the shortest possible time.

Focus on your preferred area

• Near to work place
• Near to parents house so that your parents can take care of the babies easily
• Near to public transportation (MRT, LRT and buses)
• Lifestyle
• Favourite District

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 against your income earnings monthly thus save on interest expense.
• Plan how long do you intend to repay the loan.

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!

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?
• 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!

• 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.

The OWN approach (PROS)

• Saves time
• Less hassle

The OWN approach (CONS)

• Do not know what important questions to ask or what to look out for/take note of (inexperienced buyers).
• Do not know the criteria when searching for investment properties versus properties for own accommodation.
• Do not have neutral feedback from an experienced real estate professional who will bring valuable opinions and thoughts to the purchase.
• Purchasing a home/property is very often an emotional decision. Thus, one could be influenced by the sales pitch and ended up buying something that is not suitable for stay or investment.

Engaging a Professional Real Estate Agent
Get a real estate professional to assist you in your search. He will help you to prevent most of the problems faced by the OWN approach method. Usually for private property, the buyer does not have to pay any commission to the real estate professional who is representing him unless the price of the property is low. Therefore, as a buyer, why not make full use of this value added services since it’s free?