12 Costly Property Buying Mistakes You’ll Regret (And How To Avoid Them!)

With projects like Emerald of Katong and Parktown Residence selling out fast, it’s clear that buying season is upon us. That isn’t just true for new launches either: good resale condos have become an increasingly rare find, that you’ll want to snap up ASAP. With all this rushing about though, there are several things that could go wrong. Check out some overlooked risks at different points in the property purchase timeline, so you’re better prepared:

1. Fix your credit score early—last-minute payments won’t help 

If you rush to pay off car loans, credit card loans, etc., in the weeks or days prior to your home loan application, it may be too late. It can take up to 12 months for various loan repayments to be reflected in your credit score, and for any previous damage (e.g., former late payments) to be rectified. You need to start paying down loans or fixing your credit score at least a year before trying for a home loan. 

For discharged bankrupts, it can take five to seven years after receiving your official Letter of Discharge, before you’re eligible for a home loan (this depends on the bank). If you speak to a mortgage broker, there may be other alternatives, such as non-banking financial institutions (but interest rates can be much higher). 

2. Your IPA isn’t a guarantee—final loan approval can still fall through

You should scout out the bank you want to use, before putting down any cheques. An IPA from the bank lets you know how much you can borrow, following a review of your finances. It’s usually valid for about 30 days. 

If you don’t get an IPA, there’s a chance that you might put down a booking or Option fee, and then find you can’t secure a bank loan. 

You usually have just 14 to 21 days to execute the Option To Purchase (OTP). So if you put down the deposit, and then find you don’t qualify for a loan, you could end up forfeiting part or all of the deposit. Alternatively, you might need to scramble for the quickest approval from any bank you can find, which may end up being the bank with a higher interest rate. 

3. Failing final loan approval 

If your finances change, or you weren’t entirely clear when applying for IPA, the bank can deny your loan even if you’ve secured an IPA. It’s not a binding agreement. So if your income changes, you should re-apply for an IPA. This is also why it’s a bad idea to deceive the bank (e.g., try and make your income appear different), as you might sometimes get the IPA but unexpectedly be rejected later. 

4. Be ready to pay the difference when the bank’s valuation falls short

This is not a factor for new launches, where the developer’s initial price is always taken as the valuation. For resale properties, the valuation accepted by the bank may end up being lower than the seller’s asking price. 

For example, the selling price is $1.8 million, but the bank will only accept a valuation of $1.76 million. In this instance, you’ll need to top up the extra $40,000 in cash, as it can’t be covered by the loan or your CPF. 

In some cases, there may be a large disparity between the valuation and the selling price. This can be problematic, such as if most of the money for the property is locked up in CPF. 

If you get a mortgage broker’s help, you may be able to shop around for a bank that will accept a higher valuation, within the time you have available (but it may end up being a bank with a higher interest rate). 

5. Letting your OTP expire could cost you thousands

The OTP is usually only valid for 14 to 21 days. For new launches, if the OTP lapses, you usually forfeit the entire booking fee. For resale properties, you will usually end up losing the entire option fee.

If you’re late with securing the bank loan (see above) this can happen to you. In some circumstances, simple administrative issues – such as submitting cheques late, waiting till the last minute to sign, and so forth – can result in the OTP lapsing. Keep in mind that banks are closed on public holidays. 

6. What happens if the seller backs out? Know your legal options

It’s more common to see cases where buyers back out of the OTP, such as if their financial situation suddenly changes. But sometimes, the seller is the one that changes their mind about selling – or even worse, sells the property to someone else in violation of the contract.

In these cases, you need to contact your law firm, and the Court can sometimes compel the seller to go ahead with the sale (depending on the circumstances). Unfortunately, legal actions mean a lot of time and effort, and there may be no easy way out of this. 

When your buyers’ agent – or yourself – senses that the seller is reluctant or unreliable, it may be best to trust your gut instinct. 

7. Tragic circumstances just after securing the OTP, or right after exercising it

We have encountered a situation where, right after exercising the OTP, one of the co-buyers of the property passed away unexpectedly. We have also come across a situation where a fire damaged the kitchen, between the time when the Option was secured and before it was exercised. 

In the latter situation, it was fortunate that the agent in question was diligent, and carried out last-minute checks even after the Option was secured.

As these are “unknown unknowns,” there’s no real way to prepare for them, and not all of them can be rectified. This will boil down to the experience and competence of your agent and law firm. But we would add that, just in case, it’s a good idea to ensure you have life insurance coverage, spare cash, etc. before initiating a property purchase. 

8. High queue number for new launches

For new launches, queue numbers may be used to determine who gets their first pick of units. This gets a bit nerve-wracking in high-demand situations, where you’ll see the desirable units disappear at a rapid pace. 

When you have a high queue number, you have to come to terms with the possibility of not getting your desired unit. Try to work with your agent to find second, third, or even more alternatives, in the event your desired unit gets snapped up. Because if you don’t have a plan for that, you may just end up with a unit that you aren’t totally happy with, or just have severe buyer’s remorse.

Doing your research, getting prepared and already equipped with your IPA (see above), helps a lot in these situations. 

9. Title defects can derail your purchase if you overlook the risks

This is not very common, but it does happen from time to time; such as back in 2017 when a relative challenged the sale of a bungalow in Bukit Timah. Or this case described on a forum, where one of the sellers went bankrupt before the transaction could be finalised. 

Rare doesn’t mean never, so listen to the advice of your conveyancing lawyers here. Someone desperate for a sale may indeed give you a lower price; but if they’re days away from being declared bankrupt, or there are conflicting interests in the property, it may be better to pass on the deal. 

10. Ensure agreed-upon repairs are done before you sign

If you have a deal that the seller will fix certain things about the property, you need to check that it’s all done before signing the Sale & Purchase Agreement. 

In particular, look out for an “as is, where is,” or caveat emptor clause in the OTP: this clause means you agree to buy the property in its current condition, whatever your verbal agreements with the buyer may have been. 

You may still try to take legal action after the transaction, if you find certain repairs weren’t done as agreed. But this is a time-consuming process that involves added legal fees, and it’s further complicated if you’ve done renovation works of your own (the seller will try to claim it’s your renovations that broke something). So always push for a second or even third re-inspection of the property, before signing off on the purchase. 

11. Outstanding fees and taxes on the part of the seller

There have been cases where the seller, perhaps because they’re intent on selling, skipped out on the last quarter of maintenance fees for a condo. 

(Note: condo maintenance fees are often paid quarterly and not monthly, so some sellers try and run off without paying if they sell in the middle of the quarter)

The same goes for unpaid property taxes. While this won’t put you on the hook for the costs, it can end up delaying the transaction; especially if the sellers drag their feet or get into trouble for it. We’d check that all the required bills are paid. 

For utilities (water, power, etc.), these are registered to an individual and not to the property, so you won’t be responsible for these bills. But that doesn’t change the fact that it’s a major hassle for you if the water or power gets shut off. You’ll need to make the calls and make your case with PUB. 

12. If the seller won’t move out on time, here’s what you can do

Sometimes, sellers are still not out of the property by the date of vacant possession. This is a major hassle, and you may need to take legal action if the sellers refuse to budge. 

Usually, the consequences are spelled out in the Sale & Purchase Agreement. Depending on the contract, the seller may be required to pay damages, similar to a late completion penalty on developers (for new launches). A Late Completion Interest (LCI) clause usually has a penalty of eight to 10 per cent per annum of the purchase price, prorated daily. In extreme cases though, court orders to evict the former owners may be needed. 

But if it’s a case of a developer taking too long to complete the project, there’s not much you can do: you just have to hope the compensation is worth the wait. 

While your conveyancing firm is handling all this though, you’re still stuck without a place to stay, and possibly having to rent. So just in case things turn out this way, have a backup plan for such scenarios.