From our experience, both dealing with clients and hearing horror stories, there are some points in the property market that agents might have 'missed out' on sharing with you when you are dealing with a buying & selling property transaction. The 4 utmost important points that are vital in such a process will be shared today!
Check out the video to hear from him firsthand.
Point 1: Loans & other Financial calculations
For someone that is buying & selling property, the very first thing to be handled with no uncertainty is the understanding of every financial related calculation and terms, especially the fine print.
Some agents would always say 'yes, you can' when you want to sell your unit and then make a purchase. However, once your unit is sold and the option is exercised and you ask how do you go about making your purchase, the questions and conditions start to come from the same agents.
These could be the fees you need to pay for purchase, $1000 + $4000 for HDB, 1% + 4% in private and then the stamp duties (in cash for private, no less). This is when some buyers realise that they do not have enough to make their subsequent purchase!
The devil is in the details, so be sure to find an agent that is really able to bring you on this discussion fairly and does not 'forget' to fill you in on the important details of financial consultation.
Option period extension
A related point to be careful about is option period extension as we see incidents of Buyer/Buyer agents asking for option period extension. Usually, an option period is valid for 14 days. Yet, we hear of people asking for 2 months or 3 months between option and exercise. This is impractical and unrealistic of buyers to ask. For Aaron, he will never allow his seller to accept such terms.
In the market, the maximum is 3 weeks or 4 weeks. And if a seller is willing to provide 4weeks, the option fees should be increased from the usual 1% to 2 or even 3% to cover this extension period and make it fair for the seller.
Point 2: Agent asking you to sell sell sell!
There are agents that want you to sell without understanding the purpose or objectives of your property sale. There have beem situations of people selling their 5 years MOP only to buy a 20 or 30 years old HDB flat in a similar location, thereafter having to pay agent fees, COV, stamp duties. Some sellers think they have turned a profit from such a sale, but is it true?
If there are valid reasons like moving to a different location, an urgent need for cash, disliking the current unit after living for 5 years, then it's okay. But for people that just want to 'earn money', it's not a valid reason with the additional costs involved.
Some agents suggest buying a condo after selling a 5 years MOP unit, yet the condo bought usually does not earn money. Then, why would someone do it?
It's important to be sure of your objective in selling and buying, are you looking to invest in property and earn a profit, or are you looking for a home with its accompanying attributes
The worst situation is after the owner has sold their unit, then asking Aaron for advice on the units to buy. When they realised that the condo they were eyeing has no profit potential, they were in for a shock. Thus, it's vital to get the right advice before you make any move in the property market.
Point 3: Bridging loan
There is a false concept that one can always buy first and sell later with a bridging loan. Bridging loans are often used to allay fears of clients without full disclosure or a thorough explanation of how they work in reality, alongside potential pitfalls.
For a bridging loan to be disbursed, it requires a HDB approval letter, where you buy and sell at the same time. If you have not sold, the loan would not be disbursed for your private purchase.
Not every transaction can be handled with a bridging loan and it's important for anyone that's looking to use a bridging loan to be clear of the terms and conditions, especially in understanding the potential situations which might stop the loan from being disbursed and causing your plans to unravel!
Point 4: Extensions - Sell and buy later
Extensions are touted by certain agents as a way to resolve complicated scenarios after selling first and planning to buy later. Do buyers/sellers understand the risks of extension?
As HDB extension is between the buyer and the seller, if you meet someone that goes rogue, there's nothing much you can do in terms of legal recourse. There's too much trouble to deal with when you use extension as a way to skirt around the issue. For both buyers & sellers alike, it's easy to meet people that go rogue and sour your whole experience.
Often, we do see people that do not want to rent despite the gap between selling and buying. But today, the renovation industry lacks manpower and time with renovation takes 2 to 3 months. Our advice is to think twice if you feel a 3 months extension is enough for a smooth transition. There are too many variables and possibilities of things going wrong to delay the timeline in reality.
It's really easy to get trapped after choosing to go with the route of extension. To Aaron, extensions are not always the way out, and should really be considered your last resort.
Final Tips from Aaron!
Despite running the risk of being grumbled by some people in the industry for 'exposing' these important points, Aaron feels it's important to educate the buyers & sellers looking to participate in the market today.
The main point to remember is that buying a property unit is not so easy. If when you rush into buying a house, you will lose and hate it. Never rush into a purchase!
When in doubt, make sure to get advice from a reputable agent you can trust!
Learn about the 4 important points of a buying & selling transaction you must be aware of. Everything is shared by Aaron in the video below!