Buying a property for your own residence or investment is probably one of the major financial decisions we have to make in our lifetime. As it involves a considerable amount of financial commitment, it adds up to the stress of making a decision. We hope to alleviate some of this stress by compiling 8 costly mistakes made by real buyers when buying their property. Hopefully, you will now have a greater understanding of the property market and avoid these costly mistakes by learning from their painful lessons.

1. Not Getting a Loan Approval-in-Principle
2. Listening only to seller’s agent
3. Saving on getting a house inspection
4. Overlooking the “Added” and “Running” Cost
5. Overlooking the limitation of using CPF for repayment of housing loan
6. Trusting verbal agreement
7. Not considering the resales and rental value of the property
8. Listening to too many people

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Mistake 1: Not Getting a Loan Approval-in-Principle

First and foremost, getting a Loan Approval-in-Principle (AIP) will protect your deposit, which will be forfeited if banks turn down your loan application. An AIP also saves you a great amount of time, as it helps to narrow down your search to homes you know you can afford. In general, sellers or their agents will be more willing to engage in a negotiation with buying customers with AIPs.

Even in today’s slow market, (i.e. the year 2016) where properties take a longer time to sell, there are still good properties (e.g. fire sales properties) put out in the market. The last thing you want to happen is to let this good property slip through your fingers because you are not ready to commit to the deal without your loan AIP.

So, do apply for a loan AIP before heading out to buy your property. As it is free and without obligations, it’s definitely a wise move.
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Mistake 2: Listening only to the Seller’s Agent

To put it bluntly, the seller’s agent is NOT there to help you get a good deal. They are appointed by the seller to sell the property. Yes, there are codes of ethics and professional care, there’s the Council of Estate Agencies to ensure real estate salesperson are professional etc. But there’s nothing wrong with the seller’s agent withholding negative information about the property. They are there to tell you what they want you to know about the property with one goal – to sell it. They are likely only to tell you the great potential of the property, how affordable the asking price is etc. After all, they are serving the sellers.

So, it is worthwhile that you spend time on researching on the property and its surroundings. Singapore Masterplan is a good place to begin with if you are looking out for future development within the neighbourhood. To assess if the asking price of the property is reasonable, you can check past resales/new sales transaction of comparable units within proximity via HDB and URA. As for the interior of the property, be observant. If you spot something weird (i.e. water stains, different tones in parquet flooring etc.) in the property, ask about it. Alternatively, you can engage a third party house inspector to identify the defects within the property, which leads us to..
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Mistake 3: Saving on Getting a House Inspection

Defects inspection (or also known as Home Inspection) for new residential projects is becoming popular in Singapore after series of poor workmanship delivered by developers. As revealed by Absolute Inspection’s Mr. Tan Wee Kwang, inspection for resale properties is gaining traction in our country. His firm has been receiving more requests for his services for resale properties. For such inspection jobs, the prospective buyer will, with the seller’s consent, engage his inspectors to check the house prior to signing the Option to Purchase.

Wee Kwang also noted that it is common for buyers from other countries, e.g. USA, UK, Hong Kong and Australia etc., to get a house inspection done before committing to purchase the property. Getting the property inspected before committing helps to identify the pre-existing and potential defects, any of which may incur significant repair costs in the future. This enables you to make a more informed  purchasing decision. With the inspection findings on hand, you would also be able to better ascertain your best offer price to the seller.

Contrary to common belief, inspections of resale properties may not necessarily work against the sellers. Wee Kwang also shared that some resale properties were found to be in good condition and free of major defects after their inspections. This would further reinforce the saleability of the property and, hence, benefit the sellers.
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Mistake 4: Overlooking the “Added” and “Running” Cost

Too often, buyers take the price tag of the property as the only cost of buying a property. When buying a property, there are other costs involved, such as buyer stamp duty, additional buyer stamp duty, legal fees, agent fees etc. that could add up significantly to the cost of buying that property. Even after making your purchase, it’s not the end of the road. Your financial obligations include much more than your monthly mortgage repayment. There are other running costs like maintenance fees, property tax, repair and replacement costs due to wear & tear, insurance etc., all of which adds up to the cost of owning the property.

So, before you head out to buy your property, it is good that you put effort into financial planning for the purchase of your property. You can now do it easily with a property budget calculator, also known as the affordability calculator, to establish the cost of buying a property. As for the running cost of owning a property, you can find out more from this article, “Cost of Owning a Property.”.
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Mistake 5: Overlooking the limitation of using CPF for repayment of housing loan (Applicable to Singaporean & PR only)

It is common for Singaporeans or Singaporean PRs to utilize their CPF to repay their housing loan. Things start to get complicated when you are approaching the age of 55 and you are still financing your housing loan using CPF. To continue using your CPF beyond valuation limit, up to the withdrawal limit, you need to meet the basic retirement sum (BRS) in your special account (SA). This includes the amount withdrawn for investment and ordinary account (OA).

In the scenario where you are buying a private property with a remaining lease of fewer than 60 years, the amount of CPF you can use is also lowered. You can use the calculator provided by CPF to calculate how much CPF you can use to repay your housing loan for a property with a lease of between 30 and 60 years.

So, to avoid a scenario where you can no longer use your CPF for housing repayment, make sure you have enough cash to repay the housing loan when you reach 55 years old. Otherwise, it is wise to buy a property with a lower price tag.
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Mistake 6: Trusting verbal agreement

When nothing goes wrong, everyone is happy. But when something bad happens, the situation will turn ugly. Contractual agreements are often the only evidence that can be used in establishing the facts. There was a case where the seller told the buyer that the unique fittings & fixtures will be included in the sale of the property. But when the buyer took over the property, those unique fittings & fixtures were removed and it was hard to justify who’s right who’s wrong.

So, if you are buying a house and are willing to pay slightly more, because of the classy chandelier hanging from the ceiling or porcelain door knobs from Italy, it is better to confirm in writing that these items are included in the sales of the property. You can use an inventory list attached with photographs for this.
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Mistake 7: Not considering the future resale and rental value of the property

When most buyers are buying a house, they would not think of putting it up for sale in the future. However, it is common that a few years down the road, homeowners look to upgrade or downsize their property due to them reaching different milestones in life. For young couples, you may start off with a smaller property. Perhaps, a few years down the road, when your family starts to grow, you would need a bigger space.

So, you may want to find a place that is easy to sell in the future. Plus, wouldn’t it be great if you can also receive a good profit from the sale of the property which you can use to purchase a bigger place? A tip to share: look for properties which are near offices, transport hubs (like MRT) and schools. These properties tend to have better rental demand/yield which can attract investors, leading to better capital appreciation.
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Mistake 8: Listening to too many people

Everyone is an expert in real estate. When you inform your family, friend, colleagues that you are buying a property, you can imagine the loads of supportive and/or opposing feedback you can receive from them.

The only surefire way that you will know if the property you are eyeing is a good buy is for you put in an effort to research on the property. If you don’t have the time, you may consider engaging a trusted buyer agent to do the work for you.

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We do hope these articles will help you avoid some of the costly mistakes made by previous buyers. If you have any experience that would help future buyers, feel free to let us know at hello@realila.sg. We will pay it forward by sharing your experience with our readers.