Resale-HDB flat buyers more cautious to new rules

main hdbSINGAPORE: Buyers could be more cautious when purchasing a flat from the open market, following new HDB rules which kicked in on Monday.

Under the new rules, a buyer will only be able to request for a valuation after he has agreed on a price with the seller and been granted an Option-to-Purchase (OTP).

He will then only be able to exercise the option with valid loan documents.

The new rules are part of a move to shift the focus of buyers and sellers away from the cash-over-valuation (COV) to the total price of the resale flat.

But a growing concern is the unexpected valuation.

HDB now mentioned an option fee of between $1 and $1,000 should be put down. If a buyer chooses not to exercise the option, he forfeits the option fee.

Thomas Tan, executive director of RE/MAX Singapore, said: “In order to make myself feel more assured with this transaction, I probably would want to limit my option fee. Instead of paying $1,000 to the seller, I probably would want to, say, pay a $50 commitment fee, or maybe even a dollar.

“I would want to limit my commitment, in that sense, in case the valuation doesn’t match up to my expectations.”

A buyer walking away from a deal will of course impact the seller, especially since the option period has been extended from 14 to 21 days.

A seller will have to wait for the 21 days to lapse before being able to sign another Option to Purchase.

Mr Tan said: “The seller, once he commits to you, he gives you the option, he can’t market the property for the next three weeks. That means he’s locked up with you, in that sense.

“Once that happens, the buyer will be holding on to it, and if the buyer were to walk away if the valuation doesn’t match up to his expectations, then the seller would have wasted three weeks of marketing time.”

Mohamed Ismail, CEO of PropNex, said: “How should we, as salespersons, advise the sellers (on) what price they should be asking? Should you anyhow just pluck (a price) or is there a way to measure?

“What I am trying to do for my sales people is I’m trying to work with professional valuers who, for such properties, are able to give an indicative valuation, maybe a reasonable price. That forms a benchmark.

“But there’s no guarantee such indicative value provided will be quite close or similar to (the eventual value) when the deal is inked.”

Another possible concern for buyers is ensuring that they remain eligible under the Ethnic Integration Policy.

One analyst says having to wait for a valuation report and loan documents will mean a longer period between signing the Option to Purchase and the buyer exercising the option.

Mr Mohamed Ismail said: “If we take the OTP at its face value because the contract was done while waiting for the valuation, and when the contract was inked, there wasn’t any change in the integration policy.

“If we can consider such cases to be accepted, obviously it will minimise the anxiousness of things being not productive.”

HDB currently publishes COV data by town every quarter on its website. But with its latest move to shift the focus of buyers and sellers away from COV, the board has said it will monitor reactions to these new measures and see whether it’s still meaningful to publish such COV data in the future.

Source – CNA/xq

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