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No more valuation upfront? How to buy my HDB flat!

The Gods of HDB have spoken once again. If you have not heard it, there’s a new game in town for buying and selling your beloved HDB flats.

With effect from 10th Mar 2014 at 5pm SG time, HDB will only accept valuation requests from resale flat buyers (or their appointed salesperson), after the buyers have been granted an Option to Purchase (OTP) by flat sellers. This is put in place to ‘reduce the focus on Cash-Over-Valuation (COV), and allow the negotiation base on recent transaction prices’ that HDB will publish daily. Other changes include a 21 calendar days option period instead of the previous 14 day period.

For those who are IN the process of buying/selling your flats already, our government  have allowed HDB to accept the OTPs and valuation reports granted before yesterday and have not expired.

But what about those of us who still want to buy our first flat or upgrade to a bigger HDB flat? What does it mean for us? What are the pros and cons?

  1. Option Fees may go lower than the typical amount of $1000. More negotiation will be done on this, and sellers may not agree to lower commitment amount, as they may find it a waste of time.
  2. Buyers will now be even more selective since it’s money-down-first situation. 
    This should tip the scales in favor towards buyers whom we are expecting to have more bargaining power as sellers scramble to let go of their flats.
  3. Since price has to be agreed upon first, it makes sense to pay only for a conservative estimate, close to today’s last transacted price.

Should valuation turns out to be lower than agreed price, that would mean more money flying out of your pocket in the form of COV as loans are based on the lower of purchased price or valuation. Not good for that new car you had in mind.

Should the valuation be higher, shout hooray and pop champagne! You’ve got a great bargain! (This can normally be achieved if you can spot a well renovated property that seems undervalued).

Overall, a good move by our government that supports buyers. The downside however is the guess work involved, and thus more sleepless nights while waiting for the valuation report to be ready.

Instead of sweating over the agreed purchase price, we would suggest buyers to 

  • Keep track of latest HDB transacted prices to be informed 
  • Understand the flats intrinsic value to you -> I like it as it’s near my son’s school, just downstairs! 
  • Must Must Must do an Approval In Principle (AIP) to determine the maximum amount of loan you can obtain from HDB/bank. Without it, you are akin to driving blindfolded on the MCE!

Want to know exactly how much you can loan and the monthly repayments? Contact us now to do an Affordability Analysis. We’ll be happy to help you out of this maze!


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