An 8-step guide to buying a HDB resale flat without an agent

This article was originally published on SingSaver.com.sg, the fastest growing personal finance comparison site in Singapore. Click here for the original article or visit the comparison site for more.

You may have heard about the home seller who saved over S$10,000 when she sold her family's 4-room HDB flat through a newly launched app. If you're wondering how you can get similar savings, but are intimidated by the thought of handling the paperwork and the negotiations yourself, worry not. It is entirely possible to conduct your HDB sale transaction on your own.

How much are property agent fees in Singapore?

There are no official guidelines for real estate agent fees. Instead, property agents charge a percentage of the transaction price for their services, which include searching for buyers or sellers, conducting viewings, and handling all necessary paperwork. The fees also differ for sellers and buyers. If you sell your property through an agent, you will be expected to pay between 2 per cent to 4 per cent as commission. If you buy your property through an agent, you will be expected to pay between 1 per cent to 2 per cent in commissions.

Not engaging an agent saves you thousands of dollars

With HDB resale prices starting at around S$300,000 for a 3-room flat, agent fees can cost S$3,000 or more. If you need to buy a larger flat, expect to pay double this amount. This can be a problem if you have limited cash savings. Not having an agent can save you thousands of dollars, which you can spend on furniture, appliances or renovation work. This makes buying a resale flat one of those times when it pays off to do it yourself. To help aspiring homeowners along, we've put together a detailed guide on how Singaporeans can buy their own resale HDB flat without an agent. Scan through the Step-by-step Guide for an overview of the entire process. If you are wondering how to plan your cashflow, refer to the Schedule of Fees to learn which fees you need to pay in cash, and how much.

Step-by-step guide to buying a resale flat without an agent

1. Determine your eligibility

The first thing you should do is to determine your eligibility to apply for a resale flat. Families and married or engaged couples can freely apply for an HDB resale flat together. For singles, you'll need to be at least 35 years old before you can apply, whether singly or jointly. There are also restrictions on citizenship status.

2. Apply for a loan

Next, you need to decide how you will finance the purchase of your flat. You can choose to apply for a loan from HDB, or take up a mortgage loan from the banks.

3. Start looking for your flat

You can start looking for a flat once you have begun the process of applying for a housing loan. There are many portals, websites and apps you can use to find available flats. Shortlist any properties you are interested in, and contact the owners for a viewing.

4. View and research suitable units

If you view any flats you like, it's time to dig a little deeper. Do some research to find out more about the unit, its neighbours and the neighbourhood. You'll want to find out what are the development plans for the precinct and surrounding areas. You will also want to request for a second (or even third) viewing where you can ask more in-depth questions and take a more thorough look at the intended unit.

You can also ask for an indicative selling price from the owner. Check the transaction history of similar, nearby flats to help you determine a suitable selling price. You should always stick to your budget, and should weigh any deviations carefully against your ability to service your mortgage. You will also need to check the ethnic quotas of your intended flat to make sure you are eligible to purchase it.

5. Negotiate a selling price and purchse OTP

Once you are fully satisfied with the unit, you can offer a buying price to the owner. If the owner accepts the price, he or she will offer you an Option to Purchase (OTP). An OTP is a contract between you and the seller. It reserves your right to purchase the unit at the agreed selling price for the next 21 days. During this period, the owner is legally forbidden to sell the unit to anyone else.

As the owner incurs an opportunity cost, you will have to make monetary compensation. This OTP fee is set at between S$1 to S$1,000.

To exercise your OTP, you have to proceed with the sale application. If you do not proceed with the sale after 21 days have passed, the owner will be free to offer the flat to another buyer. The OTP fee is not refundable under any circumstances.

6. Apply for a valuation report

Once you have been granted the OTP, you should apply to HDB for a valuation report, which will determine the value of the unit you are buying. This report is necessary for processing your housing loan.

7. Complete the resale checklist and execise your OTP

The resale checklist is an HDB document that ensures you are aware of the standing policies, and is also a handy way to keep track of your application progress. You have to complete and submit this checklist before you can exercise your OTP, i.e., send in your application to HDB to buy the resale flat. Exercise your OTP by a) signing on it, and b) paying the Deposit to Seller. This amount must not exceed S$5,000, including the OTP fee you paid earlier. Once you have done these two steps, you and your seller must submit your resale applications to the HDB. Before you do so, discuss a date and time with the seller to attend HDB appointments together, and indicate your agreed appointment dates in your respective resale application forms.

8. Attend the first and second HDB appointments

After both sets of resale applications - one from you, one from the seller - have been submitted, HDB will proceed to process the resale application. There will be two appointments you have to attend. During the First HDB Appointment, your eligibility to purchase the unit will be verified. In addition, you will also:

- receive a briefing on the resale procedure

- give your authorisation for HDB to act for you in the conveyancing

- determine the manner of holding (i.e., determine joint tenancy or tenancy-in-common if there are multiple buyers,) and

- fix the completion date for the purchase

In between the first and second appointment, you should visit the unit together with the seller for a final walkthrough to make sure the unit is handed over in good condition. Any defects discovered will have to be made good by the seller before the handover. This final check is usually performed after the seller has vacated the unit, but before the resale application completion.

The next appointment is the Resale Completion Appointment (also commonly known as "The 2nd Appointment."). This is when you sign the mortgage document and agreement. You will also make any outstanding payments during this appointment.

Once everything checks out, you will be handed the physical title deed (if the seller has it) and also the keys to your flat. Congratulations, you've just completed the sale of your first resale HDB flat, all by yourself!

Schedule of fees to be paid in cash

Here's an explanation of the fees you'll need to pay in cash as you proceed with getting a resale HDB flat.

Option-to-Purchase fee and deposit-to-seller (up to S$5,000)

When you and the seller agree on a price, both parties will need to fill up an Option-to-Purchase (OTP) form. Accompanying this, you will need to pay the buyer an OTP fee of between S$1 to S$1,000. Do note that this fee is not refundable even if you later decide not to go ahead with the sale. Assuming you proceed, the next cash payment you have to make is the Deposit to Seller, which is an amount not more than S$5,000, inclusive of the OTP fee.

So for example, if you paid an OTP fee of S$1,000 to the buyer previously, the maximum amount you can pay for Deposit to Seller is S$4,000. The Deposit to Seller is part of the selling price, which means it will be subtracted from the final amount you have to pay.

Valuation report (Up to S$200)

Before you can proceed with the purchase of the flat, you have to request for a valuation report. The cost for the report currently stands at S$140.40 (for 1 and 2 room flats) and S$199.25 (for 3 room and bigger flats).

Resale application administrative fee (Up to S$80)

Upon submitting your resale flat application, you will need to pay a resale application administrative fee. The fees are S$40 for 1 or 2 room flats, and S$80 for 3 room or bigger flats.

Initial payment (Up to thousands -you may not have to pay this)

After the resale application has been submitted to HDB, you will need to put up an Initial Payment using your CPF. This is either 10 per cent of the sale price if you're taking an HDB loan, or 20 per cent or 40 per cent of the sale price if taking a bank loan. If your CPF funds are insufficient to cover the Initial Payment, you will need to top up the rest in cash. And if you're taking a bank loan, you will also need to pay cash equivalent to 5 per cent or 10 per cent of the transaction price as part of the Initial Payment.

Cash-over-Valuation (Up to thousands -you may not have to pay this)

Another possible cash amount you may have to pay is the Cash-over-Valuation, or COV. This amount is calculated as the difference between the selling price and the property's valuation, which is determined by HDB. If the selling price is below the valuation, you won't have to pay the COV. If, however, the selling price is higher than the valuation, you will need to pay the difference in cash. The reason for this is your loan amount is capped at the property's valuation.

With the recent change to the valuation process, COV payments have all but evaporated from the property market. In contrast to previous years, when paying COV was a de facto part of buying a flat, the likelihood of paying COV has reduced sharply. To gauge your likelihood of paying COV, check the prices of recent transactions for similar, nearby properties. If the agreed selling price is significantly higher than average, you may need to pay COV.

Miscellaneous fees during 2nd appointment (Up to S$300)

COV, if applicable, is payable during the Resale Completion Appointment - or, as most people refer to it, the 2nd HDB appointment. 

If there are any shortfalls in stamp duties, you will also pay them during the appointment, along with any other miscellaneous fees. Prepare a few hundred dollars for this.