singapore asia usa tips for property buyers & sellers

Permanent Residents Buying Singapore Properties. Buying 75-year leasehold private properties
Replies dated November 21, 1997 (are in blue/red).
Date: Thu, 20 Nov 1997 01:20:31 +0800
From: ....@hp.com> Organization: Hewlett-Packard Singapore
To: drsing@asiahomes.com
Subject: Advice

I am a PR along with my wife. We are almost buying an apartment at
Thomson View which is 22 yrs old (99 lease).

Permanent Residents (PR) should not put down a deposit to Seller as they may need government permission to buy Singapore properties especially landed properties. In this case, "condo properties" may be exempted but it is best to check with the lawyer.

Another little known regulation is that PR need government permission to rent out the whole apartment but in this case, the writer intends to reside in it.

Its size is 1313 sq. ft.

The asking price is %598k. But we are seeking it at $530k. The condition is good.

Is a 75-year leasehold private property a good investment?.

Above property has remaining 75 (99-22) years lease and is being sought at around $400/sq. ft but if it is freehold, the selling price will probably >$500/sq. ft. It is therefore more affordable.

Enbloc sales prospect. It will not be as good an investment as a freehold property, unless there is a prospect of "enbloc sale" in later years whereby each owners walk away with as much as $2 million dollars for freehold properties in a case in Changi 2 years ago. The government is reported today to be passing a law to allow 75-80% of the owners to overcome objections by 1 or 2 individuals blocking "enbloc sales"

Difficult for prospective Buyer to get cheap financing. 10 years later, the lease will be 65 years and only finance companies will consider mortgage, at higher interest rates, if present banking policies are still in existence. The higher financing cost and age of the condo will drastically reduces the pool of prospective Buyers unless the Sales price is very attractive.

Difficult to re-finance to obtain emergency funding. If the writer needs money, the bank can give an overdraft based on, say 50% of the valuation (assuming no outstanding loans). However, since the lease will be <65 years and valuation will be at least 10-30% lower than a freehold property, there may be no asset appreciation to obtain loans.

I work in Alexandra Road and obviously worry about the traffic jam from Upper Thomson to Queensway. Before 7.15 a.m., there is no traffic jam as I live in this area.

I believe the buying process is as follow :

Pay 1% for option to purchase
Pay 9% two weeks later
Get a lawyer to act for my family (including liaison with CPF)
Lawyer to get Bank to "valuate" for loan

Buyer to get valuation report even before putting down the option money.
Valuation report costs around $150 but it is worth it. The writer may be offering a higher price than valuation. Nowadays, it is a Buyer’s market and selling 10-20% below valuation is common.

Pay 10% eight weeks later (to lawyer or seller?)

10% will be held by lawyer in trust. It is usually the Seller’s lawyer but can be the Buyer’s lawyer. It can be given to the Seller if you authorise it and your lawyer has done a bankruptcy search to ensure the Seller is not a bankrupt. The writer should judge whether he can release the 10% to the Buyer. If there is an incentive, such as early occupation or discount, the Seller may authorise early payment.

Pay stamp duty of 3% less $5400 (never understood this calculation)

Buyers now pay 3% stamp fees. The $5,400 may be a rebate but please check with the lawyer. Also, check whether Seller will give further discount of 3% as Sellers need not need pay the 3% stamp fees within 3 years of his purchase (as new regulation was announced on Nov 20, 1997). Seller might have purchased >3 years though.

Pay 1% legal fee (probably after transaction?)
Yes. There is a scale of fees and will vary according to Sales price.
Transaction usually completes after 3 months (12 weeks - can this be longer or shorter???)
Yes, if both Buyer and Seller agrees. This should be put in writing.
Bank loan would be 80% bank valuation less CPF (me and wife, I suppose).
Yes, if joint-ownership is requested. Unless you only want yourself to be sole Owner and to service the loan yourself.
No warranty for 2nd hand home - plumbing leakage is good luck to me.

Difficult to check all these stuff - good checklist needed - a suggestion to you.

lf walls and ceilings have been recently painted, be careful as this is a means to hide leaking of water from bathrooms/balconies of upper floors (especially bathroom areas) and seepage of rain water from outer walls.
Floor tiles to be checked for cracking and popping out.
Termites or white ant infestation to be checked.
Electrical wiriness may need replacement after so many years especially circuit breakers.
Unauthorised extensions or additional rooms to be checked for structural soundness.
Ask the Management for a history of this apartment.
Read minutes of meetings of Management Corporation for past 22 years if you can obtain them to find out whether there are more funds for substantial repairs required from Owners from 1998 e.g. leaking car park floors.

I have read as much as I could, talk to loan officers, and even to friends who just bought to ascertain. But I have NEVER seen a documented process in buying a private home. Any advice from you would be very much appreciated. By the way, I am trying not to exceed $600k, though I can move up to $650k. However, I find it difficult to spend my entire life (I am now >40) paying for a place.

Some advices:

Buy freehold if you want to cash during retirement.
Wait at least 6 months as prices in general are declining rapidly.
Check with all banks and big property agencies such as Jones Lang Wooton, Knight Frank, Edmund Tie & Co, Richard Ellis (for mortgagee sales as many Sellers need money to cover their stock market losses.)
Buy distressed properties (mortgagee sales).
Attend property auctions but you may be spending a lot of lime as many auctioneers do withdraw properties because the bids are below "reserve price". This indicates that Sellers in general are still asking high prices.
Rent a place for the next 12 months. It will be worth it if you save >$24,000 one year later.

Good luck.