HDB Resale Flat – What is the HDB Buying Process – Part 3
Starting first January 2018, HDB launched a new resale portal for both buyers and sellers to help facilitate the resale transactions. The purpose is to reduce the time to complete the transaction and to have a better and more efficient process in place. This will lead to the better use of admin resources and allow both the buyers and sellers continue with their plans faster.
However, you need to know one important point. The system does not help you make decisions on whether you should buy or sell your HDB flat. It does not help you determine if this is a right HDB flat to buy. It does not help you negotiate and it cannot possibly advice you if this is the right price to buy or sell. Only you, if you’re going the DIY route or your competent agent like me and my team mates can help you do the above.
If you’re unfamiliar, I’d recommend you engage a professional like us to help you take the load off from arranging viewings and getting the best value for your money..... I’m just a phone call away.
Let’s continue with the HDB resale buying process.
Register Intent to Buy
The first thing you need to do once you’ve decided to start looking into buying a HDB flat, you should log in to the HDB Resale Portal. The very first step is the Intent to Buy registration.
The purpose of registering Intent to Buy is to allow HDB to qualify you if you are eligible to buy a HDB flat. You need not pay for the registration and you get almost instantaneous result. You’ll also know if you’ll be eligible for a HDB housing loan.
This intent to buy is valid for 12 months and you need to ensure the information you submit is correct. Otherwise it will be rejected later on. Keep in mind this is only an indication of eligibility and not an approval. The approval is given once all the documents are submitted by both seller and buyer.
At this time, you need to decide if you will be taking HDB Loan or Bank Loan. If you’re taking HDB loan, please apply for it a soon as you can because you must have the HLE letter from HDB before the seller can sell the HDB flat to you.
Option to Purchase (OTP)
What is Option to Purchase or in short OTP? The OTP is a contract between buyers and sellers. The OTP has a serial number printed on it and it can only obtain from HDB website. No other format can be used. How the OTP works is important to know.
Before any forms are signed, it is important that you negotiate with the seller on the price, timelines and any other things you need as part of the sales transaction must be agreed upon.
When a seller issues an OTP, what he is saying is “I am ready and agree to sell you my HDB flat at this price.” The terms and conditions for the sale is based on HDB prescribed form and it cannot be changed except for a few items on the form. This means the seller cannot cancel the sale or sell it to another person. The seller gives the buyer 21 days to decide after which, the OTP expires and it becomes void.
Once the buyer receives the OTP after giving the option fee to the seller, the buyer needs to quickly request for value of the property. Buyer or the salesperson can submit the request on HDB’s website.
The valuation will be carried out a few days after the submission and a valuation report will be posted on the HDB resale portal. This valuation report is important as you’ll need it for several applications.
First is you need to decide if you want to proceed. If the valuation is below your offer price, you’ll need extra cash to buy the flat. This is also known as Cash over Valuation.
For example, your offer price is five hundred thousand but valuation is only four hundred eighty thousand. You need another twenty thousand in cash. If you don’t have that amount of cash, your purchase may not go through.
Secondly, banks and CPF will only consider the amount based on the valuation price. So, if you’re taking bank loan at 75%, it’ll be 75% based on four hundred eighty thousand, not five hundred thousand and you’ll need more cash.
If the valuation amount is the same or higher, then your cash flow will be in a better position.
If you’re taking the bank loan, the next thing you have to do within the 21 days after OTP is issued,... is to decide on the bank and get the letter of offer from the bank. Get it signed as soon as possible once you’ve decided to proceed.
Let’s assume now you are ready to commit to the purchase of the HDB flat. To commit to the buying, you will need to sign the OTP. This is what we call exercising the OTP. After signing it, you have now complete the binding contract of buying the flat. To complete the exercise process, you will pay the seller the remaining option fee as a deposit.
What happens if you decide not to proceed? You just have to let the OTP lapse and expires. After the 21 days and you didn’t exercise the OTP, the seller can continue to market his HDB flat and your option fee of up to one thousand dollars are forfeited.
Once you’ve exercise the OTP, both the seller and buyer now must be ready to submit the application to HDB via online. There are two important time-specific tasks to be completed... One is the time-frame to submit and the other is when the second party must submit after the first application is submited. So, keep this in mind.
During the submission of the resale application, you’ll be asked to submit all the necessary document requested by HDB. You’ll need to pay $80 for each application and payable online.
After both parties submitted, HDB will verify eligibility and review supporting documents. If everything in order, HDB will notify within 10 working days, about 2 weeks, if the application is accepted via SMS and email. It is important correct phone number and email is necessary. This date of acceptance is the start of 8 weeks processing time for the transaction.
During this 8 weeks, you will be asked to endorse documents HDB prepared for you. You will also need to pay the necessary fees online. All these will be done on the HDB Resale Portal. You will need your SingPass to login to complete these action items.
At any time you want to know the status updates, you can always log-in to the HDB Resale Portal to view them.
You may be wondering if your resale application can be cancelled. Yes, there’s always the possibility but if you have done all the checks and provide all information and documents correctly, you should be okay. Most of the time, problem arises due to insufficient funds and timing of funds availability plus unforeseen problems from either the selling or buying party. To be sure, engage an experience real estate salesperson to help you with the transaction.
Before the revamped process by HDB, both buyers and sellers had to make two trips down to HDB office to complete the sales transaction. Beginning 1 January 2018, you are required to attend only one resale appointment at HDB. This is the completion stage and you as the buyer must have paid all the necessary payments and in return, you get the keys to the HDB flat plus the title of the property transferred to your name.
The completion is about 8 weeks from HDB acceptance of your application. This can be longer if both you and the seller agree to complete the transaction at a later date.
You can always check the HDB resale portal for the appointment details.
If you engage a private lawyer, your lawyer or its representative can attend on your behalf. But if you are using HDB lawyer and you’re unable to attend the resale completion, you can prepare power of attorney to appoint another person to act on your behalf.
After this completion is done, congratulations, you are now the new flat owner. From this day, you’ll start paying your mortgage, conservancy charges, property taxes and so on.
Temporary Extension of Stay
In the event your seller made a request to extend their stay for another 3 months and you agree, the seller will continue to stay until the end of the 3 month period.
As you are now the legal owner of the property, you will be responsible for all the payments that is related to the property. Payments such as housing loan, conservancy charges and property tax at non-occupier rates.
Your Minimum Occupation Period or MOP is pushback for another 3 months. But of course, you can make arrangements with your seller to compensate you for the expenses. This arrangement is between seller and buyer and HDB will not be involved.
Conditions after Buying
So, the other thing you should know after buying a HDB resale flat is you must occupy the flat for minimum period of 5 years. This is what is known as MOP. At this time you cannot sell your flat, rent out the whole unit and invest in another private property. The MOP starts from the completion date of your purchase.
You also need to be aware of resale levy, refund of CPF money, conditions on Proximity Housing grant, TOP-Up grants and so on. I’ll cover all this when I sit down with you to explain the process. Just know there are a few more items that needs to work out.
So, in a nutshell, these are the processes you need to know to complete your purchase of a HDB resale flat.
If you need more help, give me a call and i will help you search your ideal home, make arrangements to show you the flats and ensure you have a smooth buying journey.
There’s just too much to cover within a short video. There are a lot more details i did not cover, some minor but equally important depending on the your scenario. If you are not sure, I welcome you write to me or drop me a message. Timelines and availability of funds at the right time is often most critical. You need to time it right.
I hope the above is useful to you. Let me know what you think and if there’s anything i left out and how i can improve further, just leave your comments below. Do let me know too if there’s any topic you want to know more of. I’ll create more blogs to answer your questions.
The next video you should watch is How to Choose your HDB resale flat. It’ll help you prepare, research and know what to look for when buying a HDB resale flat. Do check it out! So, until my next video....take care and all the best.
I would like to state a disclaimer statement here. These information that I’m sharing, they’re valid at the time of writing and recording. The regulation and policies can change at anytime without prior notice. It may not be complete as every transactions are different. Please engage a licensed real estate salesperson to help you with your own transaction. Use of information herein is at your own discretion.