Case Study #1 - Concurrent Sell and Buy A HDB
Concurrent selling and buying is popular among HDB upgraders and down graders these days. It simply means the sellers will carry out the sale and purchase within the same period so as not to ‘double shift”. However there will still be a time gap, usually 1-3 months to facilitate the funds from the sale flat to be transferred to the purchase flat. Confirmation on the family nucleus is needed before the execution and one common way to do it is to place one of the buyer’s name under essential occupation so the nucleus is intact. Check HDB eligibility The following is a case which I helped my client to sell his 4 room flat and upgrade to a 5 room HDB resale unit.
Important things to take note for handling this type of transaction are as follows:
a) CPF fund and cash proceeds from Flat A needs to be back before completing Flat B. Thus careful financial calculation is required to ensure there is sufficient fund to finance for the Flat B purchase.
b) Temporary Extension of Stay may be required if there is a lapse or using contra facility. If extension of stay is mandatory so as to facilitate the "time gap", then it shall form part of the negotiation before the offer is accepted.
c) Take note of the submission dates for Flat A and B and ensure that is at least a 3 weeks gap if bank loan is required for Flat B. It is encouraged to leave a 21 days gap between the completion of Flat A and B. You will also need to take consideration if there is any public holiday and weekends (non-working days).
d) Check of current CPF Ordinary Account to ensure down payment and stamp duty is provided for. Note that if there isn't sufficient CPF fund to pay for stamp duty, it is required to pay in cash.
e) Determine the type of loan for Flat B purchase so as to determine the time needed for the CPF refund and balance down payment.
Please do not hesitate to contact me if you need any further clarification. Thank you!
Case Study #2 - Upgrade from HDB to Private
It seems to be a trend that many HDB owners are upgrading to either a Executive Condominium (EC) or a private condo especially after obtaining the HDB's M.O.P. Let us take a closer look at the technicality aspect of this type of upgrade and what to take note to ensure the entire process is a smooth one.
Let's look at one of my clients who went on selling his HDB 5 room and purchase a private 4 bedroom property and the following are the important considerations before the execution.
First of all, we need to look at the existing amount of CPF Ordinary Account as there is a possibility that it will be needed to pay for the stamp duty or partial downpayment for the subsequent property you are purchasing. If both you and your spouse's OA are insufficient to cover for the stamp duty, you may reconsider of doing the concurrent relocation but to settle the selling first instead. Stamp duty liabilities can be determined and calculated via IRAS
Secondly you need to prepare for the 5% downpayment of the purchase price in cash. 20% of the downpayment can be settled using CPF OA.
Thirdly it is advisable to get in contact with a banker to find out the loan feasibility as that will give you a better picture of the budget you can set for the upgrade. Do not simply do a verbal enquiry without assessing your CPF and income statements as the loan amount can vary drastically.
After you have determined your financial situation and if everything looks healthy, you can kickstart a relocation plan. My advice usually is to start marketing your existing property and getting a feel of the market and pricing before proceeding with your property hunting. Using a conservative approach, do not secure a property until you have secured a buyer. A simpler way is to place the option fees for your purchase when someone places the option fees for your existing property so risk can be lowered.
When you have gotten interest for both properties, you need to map out and negotiate the timeline before the seal. Always leave a safety gap of 3 weeks (21 working days) between your existing property and your subsequent purchase with your selling property complete first so you will have enough time for the CPF refund to your OA and pay for the purchase downpayment. Also remember that if your current property is under a bank loan, you need to check if there is any penalty for early discharge.
There are many considerations which may affect and alter your relocation plan but as long as you do your due diligence checks and homework before the execution, it can save a lot of time and make your upgrade a happy one.
Hope this sharing session can help you and do not hesitate to contact me if you have any query or need a detailed relocation mapping. Thank you!