Before you purchase a property, do you know how to conduct due diligence? Do not take anyone’s word. There were misrepresentations by agents, seller or even lawyers. Learn the points on protecting yourself before buying a property in Singapore.
1) Make sure the seller is the property owner.
(a) The seller should be eligible to sell the property. For HDB flats, there are varied Minimum Occupation Period depending if it was purchased from HDB directly or resale market, and whether a housing grant was used.
(b) In case of bankrupt sellers, the seller needs a written consent from the Official Assignee for selling the property as the Official Assignee may request that the payment be paid to them.
(c) The buyer should be eligible to buy a property as per HDB’s eligibility rules and the Residential Property Act. Foreigners face restrictions on buying Singapore properties.
2) Factors to consider
Consider how far the property is from your workplace, school, leisure and parents’ place and from amenities like banks, market and shops. The home should be large enough to cater to present and future needs. You may need condominium type facilities like gym, tennis courts and swimming pool. If you plan to have a family, consider those within 1 to 2 km near the property.
3) Noteworthy points
Check the listed points to ensure a smooth property purchase proceeds.
(a) Find out from the seller if the property has any illegal renovations or alterations. Consequently, get an understanding from the seller that when the relevant authorities require that the seller change these illegal renovations, it is the seller who bears these costs to rectify it.
(b) Buyers have to satisfy the ethnic integration policy in HDB purchases. So if the purchaser’s ethnic group quota for a flat exceeds the sellers’ prescribed ethnic group quota, the buyer cannot buy a unit from that area unless the seller too belongs to the same ethnic group.
4) Sale completion
Once the seller and buyer agree at the price, they can complete the sale by making payments and transferring the Certificate of Title (CT) issued by the Singapore Land Authority, from the seller to the buyer.
(a) The buyer has to enter a valid real estate contract in the form of ‘Option to Purchase (OTP)’.
The buyer has to pay an option fee at this stage, which is usually 1% of the agreed sale price to get the right to buy the property at the said price within a defined period usually 14 calendar days. The seller within this period is obligated to sell it to you only. In the event the seller retract from the deal during the period, he will lose only the option fee amount. It is during this period where the buyer should be making home loan comparison.
(b) The buyer has to pay another 9% of the agreed price called Option Exercise Fee to exercise the OTP to create a valid sale contract called Sale and Purchase Agreement. The option fee and option exercise fee thus form the down payment, which is 10% of the agreed sale price. The remainder amount should be paid on or before the legal completion date after the buyer’s lawyer does all required checks, including Certificate of Title and bankruptcy searches.
(c) As the Certificate of Title (CT) is the only legal document proving property ownership, the buyer’s lawyer can inspect it once the buyer accepts the OTP. The buyer’s lawyer usually keeps the CT till the old CT is surrendered to the Singapore Land Authority for reissuing a new CT to the buyer.
(d) Once the CPF boards approves the release of the buyer’s CPF funds for making the purchase, the buyer’s lawyer prepares (i) completion statements and (ii) transfer document or draft conveyance. Even if you do not intend to utilize CPF for any repayments, the buyer should still request for the lawyer to apply and deduct a nominal sum say $1 per month as an application after completion of this transaction will incur additional fees.
(i) The completion statement is issued to the mortgage bank so that the buyer can finalize the down payment amount and for the buyer to determine the balance amount to be paid on deducting the deposit amount. The completion statement is usually sent to the buyer a few days before the date of legal completion.
(ii) Once the buyer settles all outstanding dues on the legal completion date, the seller’s lawyer hands over the keys and Transfer Document to the buyer’s lawyer. This document records proof of the transfer of ownership of the property from the seller to the buyer.
(iii) The buyer’s lawyer applies for the CT from the Singapore Land Authority on the same day, and keeps it safe till the CT is handed to the mortgage bank.
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