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How To Negotiate When Buying a Resale HDB

Thanks to the COVID-19 outbreak, Build-to-Order (BTO) flats have been delayed. This means the average waiting time of 3 to 5 years has been increased to as long as 7 years. With many opting for resale flats instead, it’s no surprise that HDB resale prices have since surged 12.5% in 2021, experiencing the biggest rise since 2010.

If you’re also thinking of getting a resale flat, here’s how to negotiate for the best price.

1. Do market research on flats in the surrounding area

Avoid the rookie mistake of not doing your homework beforehand. While you may be inundated by work and daily happenings, this research can greatly pay off later in your house hunting process.

For a start, reach out to property agents who are selling flats in the area you’re interested in, and check on the resale value. Alternatively, you can even head over to the Housing Development Board (HDB) website to get an estimated price of the estate’s resale flats. With a better idea of how much a resale flat in the area costs, you will be in a better position to negotiate with the seller. You may even come across another resale flat at a better value while doing your research.

2. Get familiar with property jargon

If you are a first-time home buyer, chances are that you may feel pretty overwhelmed with all the property jargon. However, it’s crucial to be in the know, so you can work out how much you can afford for your resale flat.

JargonWhat it means
Cash Over Valuation (COV)COV refers to the difference between the sale price of the flat and its actual valuation, and this is only applicable for HDB resale flats.
Loan-To-Value ratio (LTV)The maximum amount in which you are entitled to borrow for home financing, based on the property’s valuation, or the purchase price – whichever is lower.
Buyer’s Stamp Duty (BSD)This is a tax levied on property buyers when purchasing any property in Singapore. The BSD amount is based on the market value or purchase price of the property, whichever is higher.
Additional Buyer’s Stamp Duty (ABSD)ABSD is a tax levied on property buyers purchasing their second, third, or subsequent property in Singapore.

If you are a first-time home buyer, you need not need to worry about paying ABSD.

Loan TenureThis refers to the period of time you will take to fully repay your housing loan.

The maximum loan tenure for HDB flats is capped at 25 years (HDB loan) or 30 years (bank loan).

3. Set a budget

Avoid biting off more than you can chew, or you could risk overstretching your bank account. Work out a budget you are comfortable with and can afford.

For example, how much COV are you willing to pay? Resale HDB flats in mature estates can range from $10,000 to $40,000 in COV since they are in high demand. Another thing to note is that COV has to be made entirely in cash, since it is not covered by CPF or your home loan.

Remember not to commit to a resale flat that will leave you struggling with mortgage payments, or your finances may suffer in the future.

4. Use a mortgage calculator

After setting your budget, you should have a clearer idea of the amount you can afford. The amount you need to purchase a resale flat may include CPF savings, cash, CPF Housing Grants, and the housing loan you can secure. If you are still confused, simply use Planner Bee’s Mortgage Calculator to determine what monthly mortgage repayment you can expect.

5. Get two to three property valuations

For a complimentary desktop valuation, you can drop by any bank. Simply ask to speak to the mortgage or home loans banker, and bring along the house listing.

Based on the recent sales in the area and the district you are enquiring, the bank will provide you with a valuation. Sometimes, they will also include factors such as capital gains projections. Since the valuations are just a ballpark figure, it would be a good idea to consult at least two or three banks so you can compare.

6. Offer a starting bid of 10% below property valuation

Be smart when it comes to negotiation, but remember not to lowball as you risk insulting the seller and may come across as disingenuous. You can go with a starting bid of approximately 10% below valuation, which is a decent starting bid.

Going any lower may result in the seller eliminating you, but of course that also depends on the seller’s situation. You can also try sounding the property agent out, and if the seller is looking for a fast deal, they may be willing to accept a lower price. In this case, you can try offering 15% below valuation.

7. Don’t give in to hard sell tactics

Always ask questions and communicate with your seller. For instance, you could ask them why they are selling the property to better understand the flat’s history and/or seller’s situation. Be fair and genuine, but assertive when it comes to seeking what you want. During the price negotiation process, give the seller some time to consider your offer. This also means that you can take your time to think things through when getting back to their offer or counter-offer. Don’t give in to pressure from the property agent or the seller. Be firm and walk away if it is not what you are looking for.

Remain in control when it comes to house hunting

Stay level-headed when it comes to the negotiation process. Unlike purchasing a BTO flat, resale HDB flat prices can be unpredicted. However, Singapore is still pretty much a buyer’s market with room for negotiation to get the best value. Some negotiations may go smoothly, but have patience if they don’t. If the seller makes you an offer or counteroffer near your ideal price, congratulations! If not, remember that the housing market is extensive and you can always find another resale flat that is suitable for your needs and budget. Good luck, and have fun in the process!

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