As a first time home buyer, the process of buying a resale flat can be quite confusing (especially if you are doing this on your own and not through a buyer agent). There are just so many things that need to be done like getting all your documents ready, filling out paperwork, etc. That is why we have decided to write this article, to help ease you into the whole process of buying a resale HDB flat.
In this article, we have come up with 12 main steps that you will have to take to get you through your buying process from start to finish. We will also be giving you lots of expert tips and tricks as well as things to watch out for. Let's start with step number 1.
Step 1 - Register Your Intent To Buy
The first step in the resale buying process is to register your intent to buy a resale HDB flat. To do so, simply log into the HDB Resale Portal with your SingPass account. Please note that if you are buying a home with other applicants like your family members or your partner (fiance), only one person needs to register. Once you have done so, your intent to buy will be valid for 12 months. After its expiry, you will have to apply for a new one.
Step 2 - Apply For Your Eligibility for Housing Grant
Once you have registered your intent to buy, the HDB portal will start to show you your "buying process". This is their “step-by-step guide” on buying a HDB flat, even though there is more that goes into it. What you have to do now is to apply for your eligibility for housing grant. If you have done your research, you would know that there are 3 grants that you can apply for. If you have not, you can read our article on “Your Complete Guide to HDB Grants”. These grants are the Enhanced CPF Housing Grant (EHG), Family Grant (FG) and Proximity Housing Grant (PHG). By filling up the questionnaire on the HDB Resale Portal, HDB will tell you the estimated amount you are eligible for in terms of these 3 grants. Remember to save the results on your form because you might need it for later.
Step 3 - Apply For Your Home Loan Eligibility (HLE) or Bank Loan
Getting your loan early is very important as it will guide you through your next steps in purchasing a home. There are two ways that you can apply for a loan, one is through a bank of your choice and the other is through HDB aka Housing Loan Eligibility or HLE. There are pros and cons to both, so we recommend that you do your research before deciding on which type of loan you would like to take up.
Once you receive your loan amount, you should move quickly as it is typically valid for only 6 months which means you have to find a home in this stipulated time or you will have to apply for a new one once it expires.
Step 4 - Calculate Your Finances aka Budget
So you have your loan amount and your grant amount ready. Now it is time to figure out your budget so you have an idea on what you can and cannot afford. Before this step, you would probably already have an idea on what type of flat you want to purchase. In this step you should crunch the numbers to see if your dream home fits your financial power. To calculate your finances, there are some things you need to have in mind, including:
- How much you currently have in your cash savings and CPF (you will need to pay off a certain percentage through these means)
- How much you are receiving from your employer as CPF contributions (this is how you will be repaying your loan every month which will help you decide which tier of loan to take up)
- How much in HDB grants you are eligible for
- How much loan you are eligible for
- How much debt you currently have (car loan repayment, credit card bills, insurance, etc)
Here is some things that you need to take note of when calculating your budget:
You will need to fork out cash, $5000 to be exact (Option To Purchase (OTP) = $1-$1K, Option Fee = $5K - OTP amount). You will have to pay upfront $5K no matter the price of the flat.
As for CPF, you will need to pay 10% of the flat's selling price through CPF (for example you will have to pay $50K if the selling price of the flat is $500K: 10% x $500K = $50K)
Step 5 - Sourcing For Your Dream Home
After finding out how much you can afford, it is time to hunt for your new home. Here are some property portals that you can utilize to find your home:
- ST Property
- SRX Property
Through these portals, one useful tip is to use search tools to narrow down the type of flat that you are looking for, for example neighborhood (area), flat size, flat type, constructed year, floor level, balance flat lease, etc.
Things to be mindful of when picking a flat:
- In the case you are looking to take advantage of the proximity grant, you may use this HDB tool to check whether the flat is within the 4km radius of your parent's home.
- Before getting an appointment for viewing, sometimes the owner or agent might bring up something called Cash Over Valuation (COV). This means that the owner is expecting a specific amount to be paid in cash on top of the property's value.
- Check for extensions. Some owners may need an extension of stay before they hand over the keys to you. This needs to be agreed between seller and buyer. Some owners may need 3 months and some don't need any at all. You should clarify this with the agent during the viewing of the flat. An extension obviously means that your move-in date will be delayed, you need to decide early whether this is something that you are comfortable with.
- Check for contra. Contra is a deal whereby a resale HDB flat transaction is referred to the Enhanced Contra Facility to help second time homebuyers smoothly move the sales proceeds from their HDB flat to be used for the purchase of their second HDB flat. So in a nutshell, the seller needs the money from the sale of his/her flat to fund the buying of their next flat. What usually happens is that once OTP has been exercised, the seller will need time to look and finalise the sale of their next home before you can move in.
Step 6 - Negotiate And Option To Purchase (OTP)
Once you have done your viewings and have decided on the flat that you want to buy, it is time to negotiate. Prior to the actual negotiation, you must first do some research on the estimate value of the flat. To do so, you can go to our "HDB Transaction Prices" tool. This will show you the amount people have paid, for the different units in the block. And if the seller is not the first buyer of the flat, you may even be able to find how much the seller has bought the unit at. When you have the rough estimate on how much you think the unit is worth, you may begin to negotiate the price.
A word of caution, you may want to try to negotiate as low as you can, because once you OTP, the flat will be valued by HDB and if the valued price is higher than your agreed price, you will have to pay the balance in cash. Let's say the agreed price is $480K and the valuation comes up to $460K. You will then need to come up with the remainder of $20K in cash to successfully purchase the flat, or you will have to withdraw the sale and forfeit your OTP amount.
The OTP amount is between $1 to $1000 and is to be paid in cash. The amount will be decided by the seller but sellers will usually opt for $1000 so that in any case that the OTP doesn't get exercised, they don't lose out. You can also try to work out an agreement with the seller in the case of cancellation whereby you get a percentage of your OTP amount back if the OTP doesn't work out.
When you finally OTP, you will have 21 days to confirm the purchase of the flat. So the time crunch really begins after you OTP.
Step 7 - Submit Request For Value
Once you have OTP, you will have to submit a Request for Value of the flat you are buying. This needs to be done one day after you have OTP and it can be done online through the HDB Resale Portal. The home valuation process takes about five to seven working days and will cost you a non-refundable amount of $120. Once you get the result, you will know how much the flat is worth according to HDB. Again, if your agreed sale price is higher than the valuation price, you will have to pay the remaining amount in cash.
Step 8 - Exercise The OTP And Pay Option Exercise Fee
After you receive the valuation of the flat and everything is in your favor, you will need to exercise the OTP and pay the option exercise fee. This needs to be done before the 21 days since you OTP comes to an end. The option exercise fee is $5000 minus the amount you OTP. It should not go beyond the $5000 mark.
Step 9 - Submit The Resale Flat Application
It is now the collective step for both buyer and seller to submit a Resale Application to HDB. This is once again done on the HDB Resale Portal and will cost you around $40 to $80 in admin fees. You will both need to submit this application within 7 days of one another, so make sure that you keep in contact with the seller's agent so that you are in sync when it comes to your application.
Step 10 - Endorse HDB Documents And Pay Conveyancing Fees
Once HDB has accepted your Resale Flat application, HDB will alert you to your next steps on the HDB Resale Portal as well as through SMS. These will include endorsing your supporting documents, withdrawing CPF monies, payment of admin fees, HDB resale fees, conveyance fees and so on. In this time you will also have to book an appointment with HDB (if you chose to go for a HDB loan) or your bank (if you have decided on a bank loan) to formalize the terms of your loan and check on the exact HDB grants you are entitled to.
Step 11 - Flat Inspection And Fire Insurance Policy
It takes about 8 weeks for HDB to confirm the receipt to your Resale Application. During this time, HDB will arrange for technical executives to inspect the flat. This is to make sure that the seller has not made any illegal modifications to the structure of the flat. What they won't do however, is to check the condition of the flat, that is your job. Once the seller finally moves out, you will have to make your own inspections and confirm the flat's vacancy.
While waiting for your resale completion appointment, there is another mandatory thing for you to do which is to purchase a fire insurance policy for the flat. This is important as you will need to bring the Certificate of Insurance to your final appointment.
Step 12 - Attend The Resale Completion Appointment
In this step, HDB will send you an SMS to arrange your final appointment to which you have to attend in person. At the Resale Completion Appointment, you will need to pay off any balance payment for the flat, sign the mortgage document (if you have taken a HDB loan), get the letter of confirmation for the transfer of ownership, and finally get your keys from the seller!
Once the keys are in your hands, the flat is yours and you are free to move-in to your new home!