By Peter Lim, MoneySmart.sg
Last I checked, we’re enjoying the Internet age in Singapore, with blazing fast broadband speeds and a high tech living environment. Already there are cars that can park on their own and some that can even drive themselves. So why is it that, when it comes to selling our HDB flats, we’re still getting a housing agent to do all the work for us? And worse, paying them 2% of the flat price for something many of us can do ourselves?
Yep, that’s right. I’m here to tell you that you don’t need a housing agent to sell your HDB flat. Here’s how you can sell your own flat and save yourself thousands of dollars in just 5 steps.
1. Check whether you’re eligible to sell your flat
There are two things you need to find out before you even begin the flat selling process. You won’t need the “expertise” of a housing agent to obtain either of this information.
How long have you stayed in your flat?
To discourage aspiring property investors who thought they could make a quick buck selling HDB flats, the government insists that you must have physically occupied your flat for at least 5 years. This is called the Minimum Occupation Period or MOP. It starts from the date you collected your keys to your HDB flat. But don’t think you can just rent it out for 5 years and then try to sell it after that. The 5 years MOP excludes the time it was rented out, as well as any other time you didn’t occupy it – if HDB knows about it.
Does your buyer meet the specific quotas for your block or neighbourhood?
You know how it’s said that the road to hell is paved with good intentions? These are two of those good intentions – the racial quota and the Permanent Resident quota. HDB’s quota policies are supposed to ensure that there is a mix of races and nationalities in an HDB block or neighbourhood. It’s supposedly to encourage social cohesion, though the reality doesn’t always match the ideal.
You’ll need to check HDB’s website to see if there are any problems selling to a particular buyer. However, if you’re selling your flat to someone of the same race as you or the same citizenship as you, you don’t need to check, since there won’t be any change to the quota.
If you don’t meet either of these two requirements, there’s no point reading further since you’re not even allowed to sell your flat. But if you’re good to go, then read on.
2. Submit the Resale Checklist
This needs to be done as early as possible, since you will need to wait at least 7 days before you can move on to the next step, which is granting an Option to Purchase. Submitting the resale checklist is a straightforward process that can be done online and you’ll have to do this regardless of whether you have a housing agent or not. You will need to go through the checklist with all your co-sellers, should there be any.
Part of the checklist involves providing the address of your next home. If your new home is an HDB flat, then you’ll need to estimate how much you can sell your flat for and come up with a financial plan for your next flat purchase. HDB provides e-Services to help you with your calculations.
If you don’t know how much you can sell your flat for, HDB also provides a list of resale flat prices for the past two years. Just key in your flat’s details and you can use that to determine how much you can sell your flat for.
Once you’ve gone through the resale checklist, you can start marketing your flat. However, do take note that you can only grant the Option to Purchase 7 days after you’ve submitted the resale checklist.
3. Putting your flat up for sale
This is the part where you feel a housing agent may do better than you, since they have the sales experience. But in this day and age, there are many ways you can do just as well as any housing agent. Advertise your flat on the various property market portals on the Internet. Most of it is free although you may have to register for a “trial” account on some sites.
While waiting for people to respond to your ads, tidy up your flat and get it ready for an open house so that you can give potential buyers a date where they can come by and have a look. Remember that you should only have the open house at least 7 days after you’ve submitted the resale checklist.
Make sure that there is an Internet-ready computer and printer available during your open house. You will need to print out the Option to Purchase if you have found a willing buyer.
4. Granting the Option to Purchase
As the seller, you’re only allowed to grant one Option to Purchase or OTP at a time. Each OTP is valid for 21 days. What happens is that you download a copy of the form from the HDB website, and agree with the buyer what the true resale price of the flat is.
After printing out the form, sign on it. The buyer should then pay you an Option Fee in exchange for the signed OTP form. The recommended Option Fee is $1,000, though it can be as low as $1. Once you have granted the OTP, the buyer has 21 days to confirm their decision to buy. In the meantime, you cannot grant another OTP. If the buyer does not exercise the OTP within that time, you may keep the Option Fee.
If the buyer wants to proceed with the purchase, then they will need to pay a deposit to you in the form of an Option Exercise Fee. This is negotiable, but the recommended amount is $4,000. The Option Exercise Fee and the Option Fee cannot exceed $5,000. The buyers then have to sign on the OTP.
5. Complete the resale process
Once the buyer has paid the deposit and signed the OTP, they have to agree with you on a deadline to submit the resale application. This can be done online using the e-Resale service. Both you and the buyer need to submit your respective section of the resale application within 7 days of each other, otherwise the entire transaction is invalid. There will be an admin fee of $40 for 1-room and 2-room flats, and $80 for 3-room flats or larger. Both you and the buyer need to pay this fee.
Next, book your First Appointment with HDB. The date for this First Appointment needs to be agreed on between the buyer and you as you both have to be present. If either of you miss the First Appointment, the resale transaction will not go through.
As the seller, HDB will require several documents for this meeting, as well as charge you a legal fee. The legal fee is based on whether you still have an outstanding loan, and if it is an HDB loan or a home loan from a private bank.
If there is no outstanding loan or if it is an HDB loan, then you can use HDB’s lawyers. This will cost you anything from $200 to $500 depending on the size of the flat. If you have a home loan from a private bank, you will need to engage a private lawyer, and they will advise you on the fees. Regardless of the size of the flat, expect to pay between $1,500 and $1,800.
What other costs and fees are there?
As the seller, you need to pay the flat’s property tax to cover till the end of the year. You will also be expected to pay service and conservancy charges up till the second HDB appointment 6 to 8 weeks later.
You may be expected to pay for any upgrading costs that have been carried out before the second HDB appointment, as well as a resale levy and an upgrading levy if you meet certain criteria. This second appointment is known as the Completion Appointment, because that’s when you hand over the keys.
It seems so complicated… shouldn’t a housing agent be handling all this for me?
A housing agent is expected to charge you between 2% and 4% of your selling price for their services. Paying an agent may not seem so bad if your HDB flat sells for only $300,000 – the agent fee comes up to about $6,000. But when your flat sells for $600,000? That’s at least $12,000 you owe your agent. Look back at all the steps that you have to go through anyway, with or without a housing agent, and ask yourself if their fee is worth it.
If you’re still not confident enough, even after reading our step-by-step process, you can even attend one of HDB’s regular resale seminars to get more information. It’ll only cost $25 per person for a half-day session.
This article was first published at MoneySmart.sg