Being in the property industry for more than 10 years – I have seen my fair share of mistakes made.
Of course I’ve made my own mistakes but usually these are easily rectifiable.
But I have encountered mistakes made by sellers and buyers because they didn’t engage agents…
And when they eventually talk to me for advice?
I can only exhale a breath and say in my heart – “So wasted. If only you spent just 10 minutes conferring with an experienced agent….”
Some of these mistakes are really costly when it could have been easily avoided.
Usually the cost is both money and time down the drain.
Here I share some of the most common mistakes made by both buyers and sellers – especially when they are not represented by an agent!
Mistake #1: Making an offer for a unit before getting a desktop valuation from the 1-2 bank (s) you’re like to get a loan from
I understand the excitement. But you really need to make a few preparations first.
Often, buyers assume they would get the max 75% loan as long as they meet the TDSR requirement (monthly loan replacement doesn’t exceed 60% of their salary).
However, if their offer for a unit exceeds the fair valuation, the bank can only offer 75% of the fair value (not what they are paying), which means they end up coughing out more cash.
And if they are not able to do so, it means they will most likely lose their deposit (usually 1% for private residential properties) paid in exchange for the OTP.
Mistake #2: Not getting an in-principal approval (IPA) for their loan before committing.
Yes, when you find your dream home, it is often tempting to put in a quick offer to snap the unit, especially with promises from the marketing agent that the unit is selling below or at valuation.
Some sellers may even have a valuation report to strengthen their case. Or at new launch showflat, you could miss out on some attractive offers if you fail to book a unit that day.
But whatever the case, it is still prudent to get an IPA from 1-2 banks you are likely to secure the home mortgage loan.
Again the amount could be much lesser that what you think you would get, and this would in turn mean higher cash output.
Not as issue if you have the funds, but if not, then again it means losing your deposit of 1% for most resale deals and 1.25% for a new launch.
Mistake #3: Blind spots – Sellers and seller’s agent would naturally know the best time to show their unit
For instance, a west-facing unit may still look lovely in the morning, but if you were to view it in the late afternoon, it may get unbearably hot.
Something unsuspecting buyers could miss if they weren’t sharp enough.
I once had a client lament “No wonder the previous owner would only accommodate viewing in the morning or late at night.”
And they sold the unit after just 3 years as the strong afternoon sun got to them.
Another blind spot – unbelievably high management fees.
Yes – some buyers actually forgot to check on quarterly management fees/ sinking funds before committing to an offer. And before they know it, they are forking out hefty $600/ month management fees.
Mistake #4: Failure in managing the buyer – especially for HDB sales
Some sellers who opt for a DIY approach makes the effort to understand what is required on their part as a seller – to register the “Intent to Sell’ via the HDB Resale Portal.
They fulfil their part as a seller, from advertising, facilitating viewings, down to filling up the Option to Purchase.
But issues can still arise if they are not adequate in advising/ managing their buyers whom they feel should be up to the tasks.
Some HDB buyers may an offer before registering their Intent to buy, or obtain a HDB Loan Eligibility Letter which makes the deal void.
I’ve even heard of buyers missing out deadline to apply for valuation visit.
While things could still work out if both parties are willing to compromise an wait for certain procedures or write in to HDB for an exemption/ advice to rectify certain issues, I’ve also seen deals go bust and sellers eventually engaging a realtor after they realise it’s not that straightforward.
Mistake #5: Choosing an unsuitable home loan package
Interestingly, some buyers may spend so much effort looking for their dream house, but they just get a loan from the bank they have an existing relationship (savings account etc.) without comparing rates and packages.
Sometimes speaking to a mortgage broker would open up more options.
I’ve also come across HDB buyers who opt for a HDB loan only to regret years down that they would actually end up saving more if they had gone with a private bank loan instead.
Again, no one size fits all, but a realtor would usually be able to direct/ link buyers/ sellers up with a few banks.
If you’re working alone, then it is also prudent to speak to more people and be aware of your options.
Mistake #6: Not getting a lawyer
Most of us know that conveyancing lawyers are required by both the buyer and seller for any property transaction.
But I’ve still come across buyers (more often than sellers) who are surprised that they need to engage a lawyer to act on their behalf.
Some scramble to find a lawyer a few days before their option lapse or engage a law firm that is not on the panel of the bank they are taking the loan from or a law firm that is not on the CPF board panel – which means they end up paying a higher legal fee.
There are also law firms that unfortunately are not as professional as they should be, so before committing, it’s always a good idea to speak to the lawyer/ or business manager to check if you are comfortable with the law firm.
Mistake #7: Poor Management of Timeline
Timing both the sale and purchase for a seamless transition is a skill.
Some sellers take for granted that they will definitely be able to secure a place to buy when they sell.
Failing to negotiate on an extension/ longer completion can result in a stressful and frantic move for the sellers closer to completion of the sale.
This is something that I discuss in-depth with my clients before we accept an offer.
Sometimes realtors will also need to nudge sellers to actively look at options while their unit is being marketed.
Mistake #8: Paying Unnecessary ABSD
Paying unnecessary ABSD – this happens when the timeline is poorly managed.
The timeline for selling can sometimes be very tight. Without proper planning & marketing, some sellers may miss the 6-month ABSD remission period.
Singaporean families who buy a new property can apply for ABSD remission if they sell their old flat/ unit within 6 months of the purchase or within 6 months of the new property obtaining Temporary Occupancy Permit (TOP) status.
Some may start marketing too late or price their unit too high.
More often than not, they start to panic as the 6-month deadline comes to an end, and slash prices or accept any offer that come in.
There are also individuals who are unable to sell within the stipulated period and end up having to pay the ABSD, even though they have no intention to hold on to more than one property at a time.
Mistake #9: Missing out on the best option by making the wrong choice – be sure to check with IRAS, HDB, banks if you are unsure, or read up extensively.
I’ve come across a PR and Singaporean couple who thought that they were liable for a 5-percent ABSD as the wife is a PR.
They were pleasantly surprised when I shared that a PR married to a Singaporean doesn’t need to pay the 5% for their first matrimonial home.
I’ve also come across elderly folks who thought they were able to cash out by selling their flat and buy a place near to their children, without working out their financial calculations and checking on prices of the area they wish to purchase.
End up it was mission impossible…so they ended up selling. But they were not able to get a place near their children due to limited supply/ unaffordable.
Mistake #10: Underestimating the challenges of being a landlord
The sale process could be non-eventful, but when you purchase a unit with tenancy as an investment, there are more things to look out for.
First, buyers may not know that they should ask for the tenancy (with names blocked/ erased etc.) and inventory list before committing to check for any anomaly.
Once that’s cleared, the buyer or new owner must understand his roles and responsibilities as a landlord.
If not, they could end up being taken advantage of by tenants or more often than not, becoming a bad landlord as they do not fulfil their obligations properly.
I usually also ask for photos taken before tenancy started or a condition report that had been prepared.
Sometimes you get lucky when you do your property transactions in a DIY way. Everything proceeds smoothly.
But I highly recommend you get a good agent to help you. The benefits far outweigh the costs of engaging one.
Why? Simply put – there is always a likelihood of something going wrong because of something you might have overlooked.
And truth be told – most people only go through very few property transactions in their entire life while good agents have handled easily dozens to hundreds of cases over the years.
Don’t leave things to chance and your blindspots – especially for something that is so important!
Unsure if I am a good agent? 😉
Let me know so I can refer some clients to have a chat with you.