Buying a resale flat for the first time can be particularly tricky, and knowing what the important information you need to make your purchase is, in fact, even more difficult. Read on to find out what you should be asking when you meet your agent!
1. Do I need to pay the COV?
COV, or Cash Over Valuation, is defined as the difference between the resale price and the market value of the flat that is paid by the buyer upfront. It is a common misconception that resale flat buyers no longer need to pay COV. However, it depends on the situation. Previously, buyers would make an offer for a resale flat based on its valuation report, plus offer a cash amount known as the COV. Since March 2014, HDB overhauled the system by allowing only a resale flat buyer or his agent to request a valuation report, and only after agreeing on one purchase price.
Many potential flat buyers remain very confused over COV, and it is likely that you may also not understand how and why you will need to pay. Check with your agent to make sure you know what you are paying for.
2. Is this resale flat eligible for SERS?
The Selective En bloc Redevelopment Scheme (SERS) is a scheme that renews older housing estates. If you are a SERS resident, you will get the opportunity to move to a new home with a new 99-year lease. SERS flat owners will also be given a package comprising compensation and rehousing benefits. Sounds fantastic, right?
However, the government has recently warned that not all old HDB flats will be eligible for the SERS, so there’s actually a possibility that if you buy an old resale flat, you might actually live to see the day when your home is acquired by the government upon expiry of your lease.
3. How much did the seller pay for the flat?
If you’re quoted a high price for the flat but don’t really understand why, ask your agent how much the seller paid initially. Some homeowners may have stayed bought the flat at a high price and would not want to sell at a substantial loss. They also tend to be more rigid in price negotiations, so you will have a rough gauge of whether you can ask for a price any lower than initially quoted.
4. How long has the flat been on the resale market?
This is another good indication of whether it is worth doing negotiations. A good benchmark would be around 6 months. It is unlikely that the flat owner will be willing to significantly lower the price if the flat has not been put up for sale for long. However, if the flat has been on the market for more than that, you could have two possible scenarios: (1) the seller will be willing to lower the price in order to sell the flat, (2) the seller is insistent on his price expectations, despite the fact that these expectations may not be very realistic. In this case, you can try to throw in an offer, and test which scenario it is.
5. Are there any possible red flags?
One important concern highlighted by the news is the possibility of a previous homeowner having unsettled debt with illegal moneylenders. This can cause a lot of problems and trouble in the future, so it is advisable to ask your agent upfront. Other possible things that are potential red flags also include structural issues (especially common with old flats), and illegal modifications.
Don’t worry about dishonest answers – your agent and the previous house owner are required by the law to answer such questions truthfully – as a buyer, you have the right to seek legal recourse if they have not been honest.