Buying Guide

Buying Guide

Onceyou have found a property you want to buy, this document explains thesteps to actually complete the purchase. Note that at this point youmay want to appoint a solicitor to act for you - but please consultyour agent about this first. You will need a solicitor in these phasesof the purchase process: to act in purchase, to act in mortgage (if youare taking a loan from the bank), and to act in withdrawal of fundsfrom the CPF Board (if you are using CPF Funds). Typically, onesolicitor can do all of this, so there is no need to appoint multiplesolicitors.

Before you sign any contracts, make sure you canactually get the money to purchase the property. Any deposits paid forreserving the property will be forfeited if you cannot go through withthe transaction - unless the cancellation is due to conditions statedin the contract.


Financing the Property

Most people will finance their property using a bank loan (mortgage). Theamount you can borrow will depend on your own personal financialcircumstances plus the bank's valuation of the property or the actualtransaction price (whichever is lower). Singaporeans can usually borrowup to 80% of the value and foreigners usually up to 70%. The bank willtake into account your capacity to pay the monthly instalments - forthis they will evaluate your income, assets, employment history andyour age, and they will also check your credit history for any previouspayment problems.

For the deposit you can use your CentralProvident Fund (CPF) savings, if you have an account, and the rest hasto be in cash. A Singaporean with good CPF savings might not need muchcash to pay for a property, but foreigners should expect to have atleast 20% in cash (+ fees) at hand to purchase a property.

If youare buying a HDB apartment, you should check the eligibility to get aconcession loan from HDB. If you are not entitled to get the loan fromHDB, you need to finance it with a normal commercial mortgage.

Youshould meet with your banker or mortgage broker before you sign anycontracts to see whether you can actually secure the financing when youneed it. Agents can also refer you to a bank or mortgage broker if youdo not already know one.


Necessary Documents

Thecontractual part is typically a simple two step process. First you willsign an ‘Option to Purchase’ agreement with a good faith deposit.Following this, you have 14 days to decide whether to go ahead or notwith the purchase. Alternatively, you can just give the seller the fulldeposit on ‘Offer to Purchase’ and bypass the ‘Option to Purchase’.After this, you will sign the ‘Sales and Purchase Agreement’ with theseller to complete the sale.

Option to Purchase

Onceyou have decided to purchase the property and agreed the price with theseller, you should ask for an ‘Option to Purchase’ agreement. The‘Option to Purchase’ agreement is typically prepared by the seller’sagent or solicitor, and you should therefore go through it with youragent or solicitor before signing. However, any amendments need to beagreed by the seller. Typically 1% of the purchase price is given tothe seller in exchange for the option as a good faith deposit.

‘Option to Purchase’usually gives you a 14-day exclusivity period to decide whether topurchase the property or not. The seller is not allowed to offer theproperty to another buyer during this period. If you decide to exercisethe option by signing it, you will send it back to the seller (orhis/her solicitor) with another 4% or 9% of the purchase price(whichever was agreed in the option).

If you do not exercise theOption within the stated period, the Option will expire and the selleris entitled to keep the 1% option money and sell the property to anyother buyer.

Offer to Purchase

If you do not wish to havethe grace period given by the option, you can always make a bindingoffer directly – ‘Offer to Purchase’. This should be prepared by yoursolicitor or agent, and would state the price, completion date andother conditions that you may have.

If the seller accepts theoffer by signing the ‘Offer to Purchase’, you can directly proceed tothe Sales and Purchase Agreement. At this point a deposit of 5% or 10%of the purchase price is typically given to the seller.

Sales and Purchase Agreement

Afterthe ‘Option to Purchase’ or ‘Offer to Purchase’ has been signed, yoursolicitor will do the necessary steps to complete the sale – lodge acaveat on the property, coordinate with the bank/CPF board for themortgage, and prepare the contracts. This process will typically takeup to 10 weeks to complete.


Inspection before Taking over Property

The‘Option to Purchase’ should clearly state a permission to inspect theproperty before completion of the sale. The buyer should checkeverything that the seller has agreed to sell with the property –especially all the fixtures and fittings, e.g. air conditioning,kitchen appliances, etc. If there are any problems, you can ask theseller to fix them before you sign the Sales and Purchase Agreement.

Ifyou are buying an HDB apartment, the Housing Development Boad will dothe inspection on your behalf. They will check for any unauthorisedrenovation. The seller will need to reinstate the flat into thecondition allowed by the HDB before it will approve the sale.


Fees and Commission

Thereare various fees that come on top of the purchase price when the saleis completed, and you should therefore reserve money to pay for them.Fortunately, some of them are borne by the seller. These are summarisedbelow:

Agent's Commission - For private property, theagent's commission is paid by the seller - unless you have specificallyappointed an agent as a representative. The seller typically pays 2%commission on the sale. For HDB apartment, the buyer pays typically 1%commission.

Solicitor's Fee - For the buyer, thesolicitor’s fees are typically 0.3-0.6% of the transaction value. Inaddition, there are extra legal fees if CPF is used to pay for theapartment. The seller pays typically 0.15% of the transaction value tohis/her solicitor.

Mortgage Fee - The banks typicallycharge an administration fee and valuation fee for the mortgage. Thesetogether are somewhere between S$200-300. In addition, you need to takeout on insurance on the property for the bank to give out the mortgage.

Stamp Fee - The stamp fee will be payable to InlandRevenue Authority of Singapore within 14 days upon exercising theOption to Purchase (or signing the Sales and Purchase Agreement whenyou buy from a property developer). For properties above S$300,000,stamp fee payable will be 3% of the purchase price minus S$5,400. Themortgage stamp fee is up to S$500, which is the amount payable for mostmortgages.

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Audrey Lim
Senior Director
CEA Licence No.:
L3010607E / R011753Z
+(65) 9129 6453