Worrying About Your Property Purchase Choice? 5 Logical Things To Consider Before Backing Out

It’s not uncommon to get cold feet when buying a property. It’s a huge purchase that can mean a big change in your lifestyle; and in a situation where you have many options, cases of “analysis paralysis” can be devastating. Sometimes, backing out is just the right thing to do, if it means peace of mind. But make sure you do so in an informed way, and that you’ve considered the following implications:

1. Forfeit of any deposits or booking fees

You need to put down a deposit (the Option fee) to secure the OTP. This is usually the first one per cent of the price (the remaining four per cent is due when you exercise the Option). Backing out after you secure the Option means forfeiting this fee.

For new launches, the entire booking fee (usually five per cent of the price) is forfeited if you back out. 

This is, on some rare occasions, worth doing. If your financial situation has changed, or you have an incredibly good alternative offer, then it may be worth forfeiting the money. But you typically have 14 to 21 days*, so make good use of them: if financing is the issue, engage multiple mortgage brokers to find a loan, or find a bank that accepts a higher valuation (possible for resale properties). 

If you find another alternative that’s very good – like a much cheaper project nearby – it’s a simple matter of determining whether the savings would outweigh the lost deposit. 

*For resale properties, the validity period of the OTP is negotiable.

2. Prices almost always rise if you decide not to buy now, but then come back later

There’s an ongoing joke in Singapore property that, if you want to see a more expensive unit in a show flat, just go back to the same unit next month.

It is true though, because of how developer pricing strategies work. If you back out and come back in a month – or sometimes even a few days after the launch weekend – you might find prices have all gone up. In general, developers keep prices lower to get the ball rolling, and then gradually hike them. 

This is not always applied in a uniform way: some layouts may see steeper price hikes than others. In some cases, developers may have “all floors same price” promotions: so when you come back in a week, the difference between a fourth floor and sixth floor unit can see a huge jump. 

This is especially true for condos which have just one or two tall towers.

Parktown Residence is a good example of what we’re talking about. Because Parktown has 12 blocks of 12 to 13 storeys (instead of just one or two very tall towers), the quantum can stay manageable for longer. For example:

If you back out of a Parktown 10th storey unit and come back later, there’s probably another block with a 10th storey unit, that costs about the same. The consequences aren’t too bad. (Although given that Parktown sold 87 per cent on the launch weekend, it doesn’t seem that anyone backed out of anything anyway). 

Now consider if the project was just one or two towers that are each 30 storeys tall.

If you back out of a 10th storey unit and later come back, you may find only units above the 20th floor are still remaining. There’s no way a 25th floor unit will cost anywhere near the same as a 10th floor unit, so now you’re priced out of the remaining units. 

3. A good queue number may not recur in a different project

Imagine you have a good queue number for project A, or project B is your second alternative. Partway through, you’re wondering if you should instead leave and go for project B, because the cost seems more palatable, you like the layout a bit more, etc. 

Before you do so, remember that your good queue number can be just as relevant a factor: having first pick, and being able to secure a unit with a better facing, better layout, etc. could mean higher returns (or just more comfortable living). It’s plausible that, in the alternative new launch, your queue number will be a lot higher, and you’ll end up with an undesirable home anyway. 

We’re not saying you should go through with a purchase just because of a good queue number of course; just to be aware you’re surrendering more, by backing out when you have first dibs. 

4. Ensure there are nearby alternatives, and re-check listings that you previously saw

You can check the URA Master Plan to look for future residential zones, which may be near your current property of choice. Perhaps these may be future options; but you don’t know when exactly those plots will be developed, or what the prices may be by that time (almost certainly higher, if you end up waiting a few more years). 

Some areas may also be lacking in resale supply. Recently, for example, a realtor shared a story about a couple who contemplated backing out of their purchase at ELTA, but finally decided against it. While the quantum worried the buyers, they realised that there were few viable alternatives in the Clementi area. Had they backed out, they wouldn’t have found suitable resale homes, and their children would have had a hard time getting to NUS.

Another realtor warned that, when new launches occur, multiple buyers will be checking out the launch and surrounding properties for comparisons. This can sometimes result in better resale listings being snapped up in quick succession. So while you may have seen two or three resale alternatives a few weeks ago, a subsequent check may reveal that suddenly all of them are Optioned out. 

5. For resale projects, any new information can mean the price gets higher, if you come back later

Sellers are constantly monitoring transactions near their property. Sometimes another transaction – a property next door, or just one floor above or below – transacts at a higher price than the sellers are asking. When this happens, sellers tend to adjust the price upward. 

It can happen that you back out of a purchase, and come back only a week or two later; but by then a higher transaction in the same block has caused the seller to increase their asking price. Even news of en-bloc potential, or seeing a higher valuation from a different bank, can cause them to change their price. 

So if you feel you’re getting a good deal, it’s sometimes best to lock it in while you still can.

Again, we’re not saying you should never back out of a property purchase 

It’s not easy to undo a property purchase after you go ahead with it. If you have serious doubts, remember that the sooner you drop out the less damage there tends to be. But do brace yourself for the resulting opportunity costs, and you can reach out to Stacked if you feel you’re in a conundrum.