Hiring an experienced property agent can help ensure you get a good price on your existing unit.
Selling your house for a bigger profit means the money can be used to upgrade to a larger unit.
By Joanne Poh
Many Singaporeans upgrade their homes by purchasing a new property and selling their old one at the same time. In this way, the proceeds from the sale of their existing property can be parlayed into the purchase of a new property.
This is a procedure that should be very precisely timed, preferably with the help of a lawyer, in order to help save on costs and ensure you are able to maximise the sale proceeds of your existing property. Here are some tips for making the most out of your sale and purchase.
Make sure you get a good price for your sale
Selling your property in a hurry is not a good idea but unfortunately, it can happen, especially when you are trying to sell in time to raise funds for a new property purchase.
Avoid being lowballed by having a very clear idea of the psf selling price of similar properties in your neighbourhood.
Ideally, you want to ensure you receive at least the average psf price for your area, property type and amenities. This might require extensive research on the latest transaction prices in your area, as well as properties that are currently on sale there.
Other than hiring a capable agent, you should also want to ensure you do all you can to give your property the best shot at a good selling price. This means making sure it is clean and presentable for viewing by potential purchasers, and enhancing the interior with items like potted plants.
Make sure you are not paying too much for your purchase
You will need to do similar research when it comes to hunting for a suitable TOP project. Once again, you will need to get an idea of the last transacted psf prices of properties in the area, as well as similar properties which are currently on sale there.
Note that factors like amenities and the size of your unit can affect the psf selling price. For instance, smaller properties like shoebox units tend to command higher psf prices.
You also want to be aware of the fact that developers can slash their prices when they are looking to dispose of unsold units. Do research on the selling prices of previous units in the development and you will have a better idea of whether you are getting a good deal.
Choose a TOP property in an area with growth potential
Ideally, you want the TOP property you are purchasing now to be worth much more in future. Do
research on the area in which you are purchasing the property to ascertain if there is potential for growth.
For instance, if a new MRT station is slated to open in a few years’ time, it is a great sign that the value of your property will rise significantly.
Pay attention to the Urban Redevelopment Authority’s (URA) plans for the future in an area where you are considering making a purchase. If plans are underway to increase accessibility by building new roads, or to revitalise the neighbourhood by constructing new facilities like hawker centres, that is an indication that your property’s value is likely to soar.
It is always a good idea to explore the area around the site to get a more accurate idea of what it will be like to live there.
TOP projects located near MRT stations will benefit from capital appreciation and good rental yield.
Consider rental yield for investment property
One of the benefits of purchasing a unit in a TOP project rather than a newly launched development is the fact that you can begin to rent out the property almost immediately, which can go a long way towards covering the cost of your initial outlay and mortgage repayments.
If you are purchasing a unit in a TOP project as an investment to be rented out, the projected rental yield should also be considered when choosing a property.
Buyers who wish to immediately start renting out their property might be better off purchasing TOP units in areas where the URA’s plans to improve infrastructure have already been carried out, as this will mean higher rents from the get-go.
Do the math
Selling one property in order to buy another is a complicated procedure, and it is imperative that you do the math to ascertain exactly how much you will have to pay in cash or borrow to avoid any nasty surprises.
Ong Teck Hui, National Director of Research and Consultancy at JLL, says, “Whenever one disposes of a property, homework should be done to determine the outstanding loan to be repaid if any, and the cash gains to be realised. If one is upgrading from a less expensive property to a more expensive one, the gains from the disposal of the existing property could be ploughed into the new property together with CPF monies available for the purchase to keep the loan quantum manageable.”
Do not be tempted to take a shortcut by simply subtracting the cost of your property sale from the purchase price of your TOP project.
There are various miscellaneous costs involved that will reduce the actual amount you receive from the sale. For instance, the cost of your legal fees, Seller’s Stamp Duty (if any) and your share of the property tax will be deducted from the total amount you receive.
You will also end up paying more for the TOP project than the price quoted to you by the developer, due to legal fees, administrative fees to the bank from which you are taking your home loan, as well as Buyer’s Stamp Duty and Additional Buyer’s Stamp Duty (ABSD), if applicable.
To avoid surprises, it is a good idea to have your lawyer advise you on your finances. He or she will be able to work out exactly how much you will need to set aside for the purchase, and the amounts to be paid in cash, through CPF and via a bank loan.
There is no one-size-fits-all approach to buying and selling in tandem, and you will need to obtain advice on your particular situation.
Ong advises, “Some buyers may wish to retain part of the disposal gains for other purposes but this would result in a higher loan amount to be serviced, assuming compliance with borrowing limits. Buyers should be prudent and make sure they are comfortable with their monthly mortgage payments. In the event that one is downgrading from a more expensive property to a less expensive one, say in the case of retirees, it may be possible to fund the purchase with just equity, in order to be loan-free.”
Have your lawyer coordinate your sale and purchase
Timing is crucial when you are trying to orchestrate a sale and purchase hand-in-hand.
Eugene Lim, Key Executive Officer at ERA Realty, advises, “Buyers should time their selling and buying of the properties well in order to avoid having to pay ABSD, or selling too early such that they do not have a place to stay.”
According to Wong Xian Yang, Head of Research and Consultancy at OrangeTee, once a prospective buyer has exercised the optionto- purchase of the property you are selling, that property will no longer be taken into account when determining your liability for ABSD. You are then free to enter into a contract for sale of a TOP project.
Still, that does not mean you should set in motion the sale of your current property before you have found a TOP project to purchase. Ideally, both transactions should be timed with precision.
Speak with your agent and your lawyer, who can advise you on a suitable timeline for the sale and purchase of the two respective properties. Your agent will work to secure a buyer for your property in a timely fashion, while your lawyer will be instrumental in timing the completion of the sale of the property, such that you can use the sale proceeds to offset your purchase.
Read the full TOP Special here.
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