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PROPERTY: 5 tips every home seller must know

By Stella Thng

1. TIMING IS EVERYTHING 
The prices of HDB flats tend to be more stable, but those of private properties can fluctuate wildly.

You could pick up a good deal during a fire sale, for example, when a seller runs into financial trouble and needs to cash out fast. If you are very lucky, you may sell at a premium, and prices might suddenly soften when you buy just a few months later.

Home-seller Jay Pang found himself in this fortunate position when he and his wife sold their five-room flat in Jurong East in early 2012, with a Cash-Over-Valuation of $50,000. As they planned to upgrade to a condominium, but needed the sale proceeds to come through before buying their next home, the couple moved in with their parents.

Then, the government announced the stricter regulations for the Total Debt Servicing Ratio (TDSR) that came into effect in January 2013. It restricts your total debt capacity to a maximum of 60 per cent of your income. As most buyers had to tighten their belts, sellers were more willing to lower their prices.

Generally, buying and selling around the same time mitigates your exposure to drastic changes in the market - you sell at a high price, and you buy at a high price. Having said that, it is definitely better to sell low and buy low. 

When you buy low, the interest you will be paying on your mortagage for the next 20 to 30 years will be based on a smaller loan - unless, of course, you pay for your property in cold, hard cash.

 

2. BE PREPARED FOR SUDDEN CHANGES IN POLICIES  
Jay got lucky, but that doesn't always happen. The enforcement of TDSR, for example, forced many to rethink their plans. Some buyers had sold their property to upgrade to a more expensive home, thinking that they could qualify for the maximum bank loan. However, the tightened TDSR allowed them to have debts up to only 60 per cent of their monthly income, and this cap includes housing, car, study and credit-card loans, as well.

Most of the buyers we spoke to had to manage their expectations and buy a cheaper home. Some moved in with family while saving up for their next home.

The moral of the story: Never overstretch yourself to max out your loan, and always have a contingency plan. You don't want to find yourself homeless because you've sold your property but cannot afford to buy your next one. 

 

3. BE CLEAR ON THE RULES IF YOU OWN TWO PROPERTIES 
Some home-sellers prefer to buy their next home before selling their current one. That effectively makes your next home your second property, which incurs an Additional Buyer's Stamp Duty (ABSD) of 7 per cent for that new home, says Patrick Loh, assistant vice-president of CBRE Realty Associates. 

"Once you exercise your option to purchase your second property, ABSD will be in effect immediately. However, you can apply for its remission if you sell your current property within six months, as soon as your buyer exercises the Option-to-Purchase," he explains. 

Different rules apply to different properties - take a look at these scenarios:
Selling a HDB flat to buy another HDB flat: 
Whether you bought a subsidised flat directly from the HDB, took a first-timer's grant (from $30,000) when you purchased a resale flat, or bought an unsubsidised flat from the open market, you will need to satisfy the Minimum Occupation Period (MOP) of five years before you are allowed to sell it, after which you have a maximum of six months to do so. Do note that the same six-months rule applies if you are selling your HDB flat to move into a new executive condominium.

Selling a HDB flat to buy private property:
As long as you have satisfied your MOP, you are allowed to buy a private property while holding on to your HDB flat. However, you will be taxed the ABSD of 7 per cent of the private property's purchase price. You can choose to own both properties for as long as you want. However, if you sell your flat within six months, you can apply for the ABSD's remission. 

Selling private property to buy a HDB flat: 
Whether you are buying a subsidised or non-subsidised flat, buyers cannot own any private property (local or overseas) if you want to buy a HDB flat. If you sell your private property, you must wait for 30 months before you can buy a subsidised flat. You can, however, buy a resale flat immediately.

Selling private property to buy private property:
There are no hard and fast rules about when you can sell and buy, as long as you are willing to pay the ABSD of 7 per cent for your second property, or 10 per cent for your third property. 
 

4. DON'T FORGET ABOUT PROPERTY TAX
So, you've decided to buy your new home first and take the next few months to sell off your old flat. Home-seller Aaron Tan and his wife decided to do that as they did not receive an attractive enough offer for their flat. They renovated their new executive condominium and took their time to sell off their flat.

However, they did not take into consideration that property tax on both properties run concurrently. One of them has a higher tax rate as they can only enjoy the lower Owner-Occupier Tax Rate (4 per cent on its annual value) on the property they live in. Their executive condo was taxed at 10 per cent. When the shocking bill came, the couple decided to sell their flat as soon as possible.

 

5. COST OF TEMPORARY ACCOMMODATION OPTIONS
Some savvy homeowners sell their home when prices are bullish, but intend to rent for a year or two while waiting for prices to drop. But is it worth the cost? Factor in expenses such as:

  1. ​Rental of $3,000 per month for a modest three-bedroom flat, or at least $36,000 per year
  2. Hiring movers, which costs up to $1,000 each time.
  3. Half a month's commission to your rental home's property agent, for a one-year lease.
  4. Paying for a warehouse to store your excess furniture.

So, when is it the right time to sell? While we all hope to sell high and buy low, do be realistic, especially in the current property market. After all, analysts such as Propnex have predicted that property prices will correct by 5 to 6 per cent this year and buyers are spoilt for choice.

Aaron sums it up: "Most property-sellers in Singapore will definitely sell their properties at a profit; it's just a matter of how much. So, don't be too greedy!" It may be better to accept a reasonable and sincere offer, instead of constantly holding out for the elusive better price. 

[Photos by Robert Such/Arcaid/Corbis]

 

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