PROPERTY: Before you buy your dream resale HDB flat


Ronald Chan, 30, and his girlfriend Charmaine Lim, 26, have been shopping for a resale flat in Jurong East to be near her parents. After viewing several units earlier this year that demanded $50,000 to $70,000 in Cash Over Valuation (COV), the young couple lamented: “We can’t afford to pay that much, on top of saving for our wedding!”

Fortunately for them, the slew of cooling measures introduced by the Government has led to the HDB resale price index dipping by 0.7 per cent in the third quarter of the year – its first drop since 2009. In September 2013, one in 10 HDB resale flats was sold with zero COV. Though most were in less popular areas such as Jurong West, Punggol and Sembawang, the couple is hopeful that with COVs dipping across the board, they may be able to afford a resale flat in Jurong East after all.

Like Ronald and Charmaine, home buyers previously put off by high COVs may now be eyeing the open market again. But don’t rush to buy just yet – keep these four points in mind as you shop.

“Firstly, ascertain your eligibility to buy,” says a HDB spokesperson. Singapore citizens and permanent residents (PRs) can either buy a resale flat under the Public Scheme (with your spouse and children; with parents and siblings; or with your children under your legal custody, care and control if you’re divorced or widowed), the fiance/ fiancee scheme, the Single Singapore Citizen scheme, Joint Singles scheme, Orphans scheme or Conversion scheme (buying a three-room or smaller resale flat that adjoins your current three-room or smaller flat).

Do note that from August 27, 2013, PRs can onlypurchase a HDB flat three years after getting their permanent residency. A Singapore citizen whose family members are neither citizens nor PRs may buy a HDB resale flat together under the Non-Citizen Family scheme.

Buy a flat you can afford, advises the HDB. Take a loan based on how much you’re comfortable repaying, not the maximum credit you can get. The HDB recently cut the maximum loan tenure to 25 years and reduced the Mortgage Servicing Ratio (MSR) to 30 per cent of the borrower’s gross monthly salary to repay his HDB loan. Consider your job stability and do a detailed calculation of monthly expenses: current loans such as study, car and credit card loans, future housing-related costs such as utility bills, conservancy fees and property tax, other possible costs such as further education plans, and regular savings and insurance. What’s left of your salary will give you a gauge of how much you can afford to pay for your monthly instalment.

Check out the HDB Infoweb (www.hdb.gov.sg) for details on resale procedures. It isn’t compulsory to hire a property agent, and you can handle your own paperwork by following the handy step-by-step guides. Also request e-services such as a valuation report or an HDB loan eligibility letter (HLE). The HLE’s date of issue must be before you exercise your option to purchase a resale flat, as this ensures you can afford to buy it before you commit.

HDB holds regular seminars on resale flats in the four main languages, particularly useful for first-time buyers and sellers. The next available English session is on Dec 7.

In a resale flat, the previous owner has probably already put in kitchen cabinets, flooring, lights or even wardrobes. If you’re content to reuse them, it could save you much time and money on renovations.

Buyers of resale flats purchase the flats on a willing buyer-willing seller, caveat emptor (let the buyer beware) basis. “Under this principle, it is your responsibility as the buyer to check the condition of the flat and resolve with the seller any irregularities or maintenance faults detected before you complete the purchase of the resale flat”, according to the HDB.

Unfortunately, first-time buyer Jenny Sim, 36, didn’t. She was pleased that the extra fourth bedroom the seller had created with wall partitions suited her big family’s needs. She paid $43,000 in COV for the $570,000 five-room flat, which is located in the west. Initially thinking she could move in after some minor touch-ups, she was shocked to discover that the messy wiring for the air-con system was a potential fire hazard. The kitchen cabinets looked okay on the outside, but were rotting inside due to leaky pipes. And none of the lights in the master bedroom worked. “The partition wall for the extra bedroom was also slightly crooked, so the door caught whenever we shut it,” recalls Jenny with a groan. “I blame my inexperience.” She ended up spending over $30,000 to fix the problems.

HDB, being a third party, isn’t part of the resale contract between the seller and buyer. (This is similar to buying a resale private property.) If you agree to buy a secondhand condominium unit from a seller but later discover that the plumbing is faulty, you can’t demand that the condo’s developer mediate to force the seller to fix it.

As part of the resale transaction process, HDB will conduct an inspection before scheduling the first appointment. However, this is to check for unauthorised renovation works in the resale flat that may affect the structural stability of the flat or building. If any are found, HDB will inform the seller to remove them before the transaction can be completed. In Jenny’s case, no such discrepancies were found. The onus was on Jenny to decide if she can accept the flat’s condition before proceeding with the purchase.

“When considering the purchase of a flat, flat buyers should also look at its attributes, such as location, age, size, design and height, and compare the selling price with the resale prices paid for comparable flats in the locality,” says HDB. Check HDB Infoweb under “Resale Flat Prices” to see what others have paid for units around you.

How should you negotiate if the valuation report isn’t ready? “My biggest concern is my tight cashflow, so my agent phrased my offer as ‘$30,000 above valuation’ on the option form instead of a flat $450,000. If the valuation turns out lower than we expected, I don’t have to worry about shelling out more cash to make up the difference,” says Ken Teo, 35, who bought a four-room flat in the east.

On the other hand, if the Valuation Report (which lasts three months) expires soon, should you wait for a new one or make an offer quickly? A flat’s valuation is influenced by recent resale transactions of similar flats in the vicinity. Thus, if prices have generally gone up since the flat’s last valuation report, chances are it would be valued higher the second time round.

Eric Tng, a business partner of District 65, says: “If the buyer I’m representing has made a firm offer of, say, $600,000 based on the current valuation, I’ll only recommend that we request for a new report if we’re very confident that the new valuation will be higher, as this means he’ll pay lower COV.” Otherwise, Eric’s advice is to process the paperwork quickly to lock in the offer.

A resale flat is usually more expensive than buying a new flat directly from HDB. However, it affords you greater flexibility to select a unit that suits your needs, such as choosing a well-renovated one to save you from taking a reno loan, or one near your workplace.

Being within 1km of a popular primary school is a key pull factor for many parents hoping to score their kids a spot in a good school. Others, such as Ronald and Charmaine, may prefer to stay close to their parents who will be babysitting their children in future. Don’t forget that buying a resale flat in the same town or within 2km also qualifies you for the CPF Housing Grant For Family (living near parents/married child) of $40,000 – a quarter more than the regular $30,000 CPF Housing Grant For Family.

Beyond just numbers, also consider the flat’s impact on your family’s lifestyle. For example, paying more for a flat within walking distance of an MRT station may be worth it in the long run since it saves the whole family the daily hassle and cost of taking a feeder bus or LRT service to connect to the MRT. After all, it will be your home for years to come – well, at least for the next five years to fulfil the Minimum Occupation Period before you’re allowed to sell it. By then, hopefully the convenience of a train station nearby will attract better offers, too!