How Ready Are You to Purchase Your Property?

Many times during the course of our work, we get many requests from agents and buyers to arrange for viewings of our listings that are for sale.

Naturally, we will do the necessary pre-qualification checks to assess how ready or keen the buyers are before entertaining the viewing request. Over time, agents and buyers are also getting very good at ‘faking’ the answers that we are looking for just to score a view.

Recently, I did an open house and had 7 groups of buyers, some with their agents, come and view a listing.

After the open house, some interested buyers gave offers for the unit. However, here is the big catch: The majority of the offers all came with conditions requesting for sellers to give them an extended period ie 6 months to sell their existing properties before they can exercise this option.

Naturally, after presenting the various offers to the seller, they were all rejected assuming that the offers that were given were all around the asking price. In the end, the offer with no conditions attached was accepted and the deal was done.

The Aftermath

Buyers unrepresented by agents were upset when their requests were rejected and some even commented that it is the seller’s luck that they even gave an offer.

What we usually do is to calm them down first and explain the rationale. We will usually ask them a series of questions, in no particular order:

How long do they need to sell their current home?
Have they engaged a professional to assist them in preparing their unit and advising them on an estimated price to market?
Have they done their financial calculations on expected sales proceeds from the sale of their current home?
What if their current home cannot be sold within an agreed time frame?
Have they considered planning on alternative accommodation for their family in the event that they have sold their existing home and needed a period before gaining possession of their new home?

We will then proceed to paint a scenario whereby we request the buyers to reverse roles and put themselves in the seller’s shoes. Will they accept such conditional offers assuming the offer prices are around the market price?

What if the offer was accepted and the option issued to the buyers, then the market deteriorates over next 6 months? The buyer can decide to forgo the purchase and give up the option fee of 1% or 2%. There’s a cap to their loss. What about the seller? It is very easy to lose 3-20% over the course of 6 months. Who is going to bear that risk?

Conversely, if the market improves over the next 6 months and property prices continue to rise by 3-5%, the buyer would have locked in at current prices and made a paper gain but the seller cannot rescind the option that was issued out.

Acceptance

After that, the buyers understood the situation. A suggestion was even given to them to allow them to commit first and then proceed to sell their current property but not everyone is in the position to do so. Buyers who have more disposable cash set aside can opt to pay for the ABSD first for the new purchase and apply for a refund from IRAS if they are able to sell their existing property within 6 months of exercising the option of a resale residential property provided the existing residential property is their sole marital home and the new property is also bought under joint names.

A typical resale property transaction takes anywhere between 10 – 12 weeks to complete. We are all too familiar that market conditions can change month on month, let alone 3, 6, 9 months down the road.

We gently broke the news to the buyers that they are categorized as “NOT READY BUYERS” who think that they are ready.

READY BUYERS are defined as buyers who can and are able to commit to make a purchase without any other conditions attached. ie. They come for a viewing, see something they like, and with cheque book in hand (with or without an agent assisting them) and proceeds to put down an offer for the unit.

In our experience, it is not wise for buyers to start looking at properties and arranging viewings on their own. They will only end up being frustrated at seeing something that they fancy being sold to another party within a short space of time. In this particular instance, the listing was sold on the first open house in the evening. To summarize, this type of buyers are essentially wasting their time as well as the lister agent’s time in arranging viewings. There will likely be no positive outcome from the viewings.

Fear

One reason given by upgraders for not selling their existing home is the fear of not being able to find a suitable new property. This is by far the biggest stumbling block in every upgrader’s situation. There is NO perfect situation. One cannot have the best of both worlds.

Either they have alternative housing arrangements available to them in the form of parents, relatives or friends or they have ample cash to pay ABSD first.

Alternatively, they just need to bite the bullet and sell their existing home, rent a place for 6-12 months while shopping for a new home simultaneously. Time is also required to plan and allow time for renovations for the new home.

There is a lot of planning involved when one is looking to upgrade.

Contact either Benjamin (87788778) or Glynis (83632331) to take you through your upgrading journey.