Singapore’s bustling real estate market is ever-active, there are new launches every month with excited buyers flooding the showflats.
Amid the plethora of terms and procedures, one crucial element demands your attention: the Option to Purchase (OTP).
Within the confines of this piece, I will scrutinise the OTP concerning new launch residential properties. The focus will be on unraveling the impact and significance of this aspect from a buyer’s perspective.
Understanding Option to Purchase (OTP)
The Option to Purchase (OTP) is like a special agreement between someone selling a property and someone who might want to buy it.
For a new launch project where the property is still under construction, the OTP will be issued by the developer.
The developer issues the OTP to the buyer once the booking fee is paid (typically amounting to 5% of the total purchase price). At this juncture, the buyer is committed to acquire the unit.
Exercising the OTP
Following the issuance of the OTP, the developer will provide the Sale and Purchase (S&P) Agreement to the buyer, who subsequently has a period of three weeks to endorse it, thus exercising the OTP.
For buyers who need more time to finalise requisite arrangements – such as the sale of their existing property – before opting to exercise the OTP, they can opt to apply to the Controller of Housing for an extension of the OTP’s validity period.
Such an extension, if granted, can extend up to 12 weeks from the initial OTP date.
What happens if the buyer decides not to proceed?
Buyers who do not proceed to exercise the OTP within the stipulated timeframe will have 25% of their initial booking fee forfeited.
How much is required to exercise the OTP?
Within 14 days of signing the S&P Agreement, the buyer is obligated to settle the Buyer’s Stamp Duty (BSD), along with any Additional Buyer’s Stamp Duty (ABSD), if applicable.
The remaining 20% downpayment, which is payable by CPF OA, cash or a mixture of both, is stipulated to be settled within an eight-week timeframe subsequent to the formalisation of the S&P Agreement.
Do I need professional assistance when dealing with OTP?
Once in possession of the OTP, you can proceed to speak with a mortgage banker to formally initiate the home loan application.
Subsequently, the bank will furnish you with a Letter of Offer, encompassing essential loan details such as loan amount, interest rate, repayment duration, lock-in period, re-pricing opportunities, and redemption conditions.
Furthermore, you will need to engage a lawyer or if you don’t have one, your property agent can recommend one experienced in new launches, to oversee the legalities associated with your property acquisition.