Selling a home is not an easy feat. The process is complicated and lengthy, and can span across months from ideation to planning to marketing and eventually to the purchase of your next home. Given that 70% of buyers in Singapore are homeowners, the most salient reason for the sale and purchase of a home in Singapore is the movement of the seller’s primary residence. Many times, this process of selling is made even more tricky as sellers have to concurrently plan for their next move.
Why is selling and buying so complicated?
The answer lies in the ABSD tax and legal restrictions in Singapore. Introduced as a cooling measure in December 2011 as a mere 3% tax for Singapore Citizens buying their 3rd property onwards, this number has risen to 17% as of December 2021.
The idea of having to pay an ABSD tax is frightening for most buyers. They feel compelled to sell their home prior to exercising the Option To Purchase (OTP) for their next home to avoid this additional tax. Even if the buyers have the financial capability to stomach the upfront ABSD sum (given the ABSD remission that can be granted should they sell their current home within 6 months), they still face a drop in the Loan-To-Value ratio (from 75% to 45%). This results in a downpayment of 55%, which further deters many buyer. On the other hand, selling without planning for a future home could lead to a situation where the owners will have nowhere to stay next and have to turn to renting for a short or extended period of time.
The problem of trapped funds
Another area of potential stress lies in the funds that may still be tied up in one’s previous property. As many sellers use their CPF (Central Provident Funds) to purchase their existing and also future property, it is imperative to ensure that the seller will have sufficient funds to fund their next purchase. In committing to a second home before knowing that the cash from the sale will arrive in time, it inflicts unease unto the seller, who is in constant limbo. Here, prudent planning can ensure that the necessary funds are freed up from the sellers’ existing home, in time for the payments.
How we sold (and bought on the same day):
In our team, such stressful situations are not uncommon. We are compelled to recall a particular sale and purchase that occured in 2021. At that time, a seller came to us with the request to sell off their unit at One Fort with the intention of purchasing another property. In terms of the new location, the sellers did not have a concrete idea in mind – they simply had one criterion: to buy into a location of high growth potential.
The sale:
Similar to many sellers who are selling to purchase their next home, our clients shared similar concerns and anxieties about the entire process. First, they had to sell their home for the highest price possible, to bridge the gap between the selling price and the purchase price of the next home. As the sellers were doing a home upgrade, it was imperative for us to try to sell their current home for the best value possible, such that they would not need to dig in too much into their savings or existing cash pool. This relates to a kind of sale and purchase we view as cash-neutral, transactions in which homeowners can make favourable home transitions without having to allocate excessive financial resources.
In terms of selling, the biggest challenge posed was also the last sold at the project. The project, One Fort, was a relatively small development with little past transactions – which often does not help with bank valuations. At our asking price, we were targeting an internal closing price that had never been seen for that unit size in the particular development before. To defend our seller’s asking price, we aggressively marketed the product with heavy, data-driven numerical analysis. Comparing our project to prices in the city centre and surrounding projects, we also used the price disparity effect to help potential buyers see past the last done price at our project. This approach allowed interested buyers to recognise that despite low volumes of transactions that reflected a lower price point, we were in fact, through doing deep market analysis, pricing the project in a fair manner.
Additionally, like every home on the market, the project had its potential challenges, the biggest being the full panels of glass, with a direct West sun-facing. Many potential buyers avoid the West sun which made it even more crucial for us to highlight it during our home tour videos. An extremely common misconception for many sellers and even agents would be to downplay or even hide the main “obstacle” of the property. It is important for sellers here to recognise – something negative to one buyer is almost always acceptable or even favourable to another buyer – hence the saying “an audience for every home”. More importantly, as much as the buyers are selecting their ideal future home, by highlighting objective facts of the home as well as qualities we know certain buyers find undesirable, we are qualifying the buyers as much as they are us.
In other words, time is precious and viewings are limited. A dealbreaker for one will always remain a dealbreaker to that particular someone. Rather than wasting both your time and the buyer’s time, always remember to be transparent about the facts of the home. This is not saying that one should simply list the cons of the house as it is. It is up to the skill, imagination and empathy of the seller, to step into the shoes of a potential buyer, that could see past or even come to love these panels of West sun – which we so term as an obstacle. At our team, this is one of the values we hold close: the ability to rise beyond our personal preference and biases, to put ourselves in the buyer’s shoes – that is one facet of the art of selling.
The Purchase:
Looking at the purchase, a huge challenge was identifying a property according to the criteria the buyers wanted. The buyers simply highlighted that they wanted to buy into a location of high growth potential, putting our team in a tight spot as the criterion was simultaneously broad and demanding. Such a condition required extensive study of the market conditions and mastery of not just current homes in the market, but more importantly foresight of industry-backed by statistics and market studies.
The occurrence of buyers not knowing what they want is surprisingly common. Often, when clients come to us, it is not unusual that they are only able to provide very vague descriptions of the next location they want to move into. As such, it is important for us to ask leading questions that help the buyers to decide which factors are most important to them. Questions such as future family plans, intended length of stay for the next home, budget and ideal quantum to buy into, as well as financial standing and risk appetite are important issues that need to be addressed before one can conclusively decide on such a large quantum purchase. Buying in a seller’s market in 2021, we also acted as negotiators for the buyers and used prompt follow-up to secure their dream home – a well-priced development in the CCR primed for growth. Using our MOAT analysis model – an exclusive PLB analytical tool that filters and ranks projects according to MRT effect, parents attraction, density and more, we shortlisted homes of high growth potential that met the wants and needs of our clients.
Above: Aspen Heights unit under renovation
Working as a team, we comprehensively and simultaneously brought in expert opinion and expertise to secure the best home in the market for our clients, while maximising the returns of their current home sale. To assuage the worries of whether one should sell or buy first, our team prepared the marketing campaign while supporting our clients on their journey to search for their new home – once they had identified something of interest, we immediately launched their home on all our portals, while going into negotiations with the sellers on the other side.
The deal:
Eventually, with a targeted approach at shortlisting homes, coupled with aggressive data-driven marketing, we supported our clients to upgrade from the Rest of Central Region (RCR) to the Core Central Region (CCR) with a mere 100 top-up per-square-foot (PSF). Selling their home for a historic high, we facilitated a smooth financial transition to their next home. In terms of timeline, working as a team allowed us to complete the sale and purchase on the same day at the same time – saving our clients not just tax from ABSD, a potential lowered LTV, but also many unneeded anxieties and worries.
After the signing of the option-to-purchase on both ends, we continued to negotiate with the buyers on renting the property back for the next few months to aid our sellers in the seamless transition to their dream home. This period allows the sellers to stay in their current place while awaiting renovation to be completed in their next home, furthering the stress-free transition.
Meet the agents:
This sale and purchase was conducted by George Peng and Ong Beng Yew, our listing managers at Property Lim Brothers. George, who loves to crunch numbers and spot disparity between prices in the market has a deep passion for honest and transparent problem solving for his clients. Seeking commonality in this love for numbers, Beng, who runs a floral business, shares in the vision of a “fluff-free” transaction, one which dispels the age old stigma of the shady agent.
If you have a property that you want us to list on the market or are on the hunt for a your next home, contact us here. PropertyLimBrothers, always happy to show you the place.
