In Singapore, almost 80% of the people have HDB flats. Their main aim is to buy better private property. If you have bought your first HDB flat with an easy process, they upgrading HDB flat is simple. But upgrading from an HDB flat to private property is much harder than buying first HDB flat.
Why Buying HDB Flat is Much Easier Than Upgrading From HDB to Private Property?
When you buy your first property, you will be having main concern about the minimum paying downpayment and you will be thinking about whether you will qualify for an HDB/ bank loan. If you want to choose an HDB loan, the minimum downpayment required is 10% and for a Bank loan, the minimum downpayment required is 25% and 5% should be cash. Because of this reason, many of HDB buyers prefer HDB loan instead of Bank loan eventhough interest rate of bank loans are higher.
When upgrading from HDB flat to private property, steps will be much more complex. If you are careless while processing, there will be much more chances of getting something wrong. Still for upgrading HDB to private property is a double process, first you need to sell your HDB flat then you need to buy property.
So for upgrading HDB flat to private condo consulting property agent is the best idea to make process in smooth way. The property agent will guide in every step of selling and buying process of property. You will be having stress process for upgrading your property.
Do You Want to Sell Your HDB Flat Before Buying a Private Property?
If you want to upgrade from HDB flat to private condo, my suggestion is to first sell your HDB flat then plan for a condo. By selling your HDB flat you will receive some amount of money and you can analyse which property you can afford. Then you can afford better property than you think. Secondly, if you sell your existing hdb flat within 6 months you can avoid 12% of ABSD (Additional Buyer Stamp Duty). Selling your HDB flat in a hurry to get ABSD remission is the last thing you want to happen, as this may result in accepting a lower offer than you wanted.
For instance, if you want to buying other private property, price of that condo is $1 million you need to pay 12% of ABSD that means you need to pay $120,000. If you have not sold your HDB flat upon exercising the option to purchase the private property.
Steps to Upgrading from HDB flat to Private Property
Step 1: Making decision to sell your HDB flat:
If you decided to sell property, engaging with property agent is the best thing to complete selling process easy. Before giving your property for marketing make sure to discuss about the commission fee and exclusive agreement with the real estate agent.
One of the best agent for selling property or upgrading your property is Kumar. He will help you to sell your property above market value and also give suggestions for next purchase of your property. First you need to register your intent to sell for your HDB flat. You can only grant an Option-To-Purchase (OTP) to buyers at least 7 days after registering your intent to sell. Depending on the location, demand on your property it takes time to sell your property.
Step 2: Issuing An Option-To-Purchase (OTP), Receiving The Option Fee & Exercise Fee
If you market your HDB flat and you will be receiving so many offers from the buyers. You should choose potential buyer who can offer more money to buy your HDB. To grant the OTP for an HDB flat, the potential buyer needs to pay an option fee of between $1 to $1,000. This is unlike buying a private property when the option fee is usually at least 1% of the mutually agreed price.
In the case of a poor valuation report, the cash over value (COV) will be $50,000. If the HDB valuation report is only $450,000, the flat will cost $500,000, but the cash over valuation (COV) will be $50,000. As HDB will only perform the valuation after the OTP is issued, buyers and sellers faced some uncertainty.
It doesn’t matter whether you have issued the buyer an OTP or not. They can still look for other flats that are more suitable for them. The same block/level as a parent’s HBD flat may suddenly become available to an already committed buyer for a similar price. In such a situation, even if they have paid you $1,000 for the OTP, they may choose the other flat and not exercise it. Alternatively, they may find a cheaper flat, even after accounting for the option fee that they have paid.
During this period, you cannot issue an OTP to another buyer. If your buyer does not exercise his OTP within 21 working days, the option lapses, and you are allowed to grant your OTP to other buyers.
To exercise the OTP, the buyer will need to pay a deposit to you. This is an amount that should not exceed $5,000.