As a real estate market observer, we are constantly surprised at the bizarre things that can occur during a property sale. We’ll often say, “This is the most unfortunate (unfortunate)/weird possible thing that could happen; it’s only one in a million,” only to see the same thing happen a few months later.

This was evident in the failed sale by Lim Oon Kuin, founder of Hin Leong Group, of a S$27million Good Class Bungalow back in 2020. The sale took place amid financial difficulties for the firm. The court ordered the GCB to be placed under an asset freeze, along with other assets belonging to Lim family members. This was done in 2020 amid financial difficulties at Hin Leong Group founder Lim Oon Kuin.

Here are some of the worst things that can happen to Tembusu Grand if you sell it quickly.

1. In just two weeks after the OTP has been signed, terrible things can happen.

Let’s say you are selling your house and the buyer has obtained the Option to Purchase (OTP). Your 1% deposit is paid, the remainder due in 14 days. You’re confident that everything will be fine within two weeks.

It is quite a bit. Many buyers skip getting pre-approval from banks, and they are then told they cannot get a loan once they have signed the OTP. Sometimes, their income situation changes. For example, they may receive retrenchment notices within the two-week period.

We don’t know the details of the transaction in the case of the failed sale to the GCB in 2020. However, the profile of the seller raises the question: Is the seller’s business situation causing the sale to fail?

Other cases, such as one where a seller was facing bankruptcy, have seen deals canceled even though an OTP has been signed. Buyers may be concerned that creditors might come after their property and could end up in legal entanglements (e.g. If they purchase the property and then a creditor claims they have a claim to it).

It may seem like buyers will just walk away, but that is not the case. You get to keep your deposit. It delays your sale.

The seller might have a limit of six months to obtain the Additional Buyers Stamp Duty (ABSD remission). If the buyers withdraw, there will be a very short window of time to find a buyer. This is especially important if the seller needs to sell the house in order to receive the ABSD remission money to avoid bankruptcy.

Tips for Sellers

Some sellers and agents will ask the buyer if they have an In Principle Approval (IPA); they might even refuse to work for buyers who do not. This is to prevent buyers from backing out after they have secured the OTP but can’t get loans.

If you are selling due to financial issues such as litigation, liquidation, or similar, it is important that you consult your lawyer immediately. Buyers might be notified about your property if they have existing debts. Open communication is key. Don’t wait for your buyers to realize this. Alarm can cause people to withdraw.

You can offer the buyer an extension of your OTP in less dire situations. If the buyer needs extra time to get a loan, this can be a viable option. Talk to your agent before you make this move. There is risk, because if the buyer still withdraws from the purchase, it would be more time wasted.

If buyers are fickle it is better to end the relationship and look for someone else rather than offer OTP concessions.

2. The bank intervened in the transaction because you made a negative sale

Negative sales are when your bank loan is not covered by the sales proceeds. If your outstanding home loan amount exceeds S$2,000,000, including all fees and interest, but you transact at S$1.8million, you will need to pay the rest of S$200,000.

If you fail to make this payment on time, the bank can foreclose your home as collateral for your loan. This could set off a series of events that can lead to legal action by the buyers against you, especially if they have already taken your option money and you are unable to sell the property.

Tips for Sellers

This happens more frequently in DIY transactions. Property agents almost always alert buyers and sellers to this problem.

Your bank should be contacted if you have to sell your property for a significant discount. Your bank must know that you will be selling your property for less than what you owe and that you will make up the difference. They will give you all the details about when and how to pay it.

It is important that you are ready to meet the demands of the buyer’s agent. Most cases will require that the OTP deposit be made by the buyer to their lawyer.

3. After burning your CPF, negative cash proceeds

You must repay all amounts that you have used from your CPF accounts including the 2.5% interest it would have accumulated. The CPF money would have been used primarily for the following:

• The down payment for the first flat
• Legal fees
• Monthly loan repayment

Let’s say, for example, that you have used approximately S$350,000 of CPF money before you sell your house. You’ll need to return approximately S$450,000 to your CPF, if you include the 2.5% CPF Interest. If you sell your house for S$430,000 you will receive negative cash proceeds.

You don’t need to “top it off”; just return the S$430,000 back to your CPF account. This CPF money can be used to finance your next property purchase, if that’s any consolation.

However, cash flow problems can arise when you are in the middle of condo renovations. You might find you don’t have enough cash to pay the down payment. This could make it impossible for you to sell the condo.

99.co tip to sellers

Be aware of how much CPF money you are using. To avoid this, some buyers prefer to pay cash for their home loans instead of CPF.

You’re likely counting on the sale proceeds of your flat to buy your next home. Before you decide to make a move, find out how much CPF you “owe”.

You may also be interested in How CPF accrued Interest can impact your property sale proceeds.

4. To bypass agents, the buyer pretends to “back out”.

Some buyers will go to any lengths to make a sale. This includes telling you privately to quit the agents. e.g. You can drop your agent and they will drop theirs. The deal is done without the need to pay any middlemen. They pay less and you avoid the agent commission, which is usually 2% of the sale price.

(But, if you have signed an exclusive agreement with the agent and did not close the deal through them then you will still need to pay them commission.

They might back out if you insist that they don’t do this because you were properly raised. This could lead to a lot wasted time, especially if they didn’t negotiate with you and you excluded other buyers.

99.co tip to sellers

It is probably better to let them go. If the agents learn of the deal and decide to pursue it, they could get in trouble.

It’s also dangerous to do business without an agent. You have alreadyseen buyers who can be shady. Do you really want to transact business with them without the professional assistance? This is one case where you need to be aware of the potential savings and not the red flags.

5. The property undergoes significant changes during the transaction

This is one of the most common situations: If a tenant breaches the lease, it can lead to the property being sold. If the buyer was expecting rental income immediately after they bought the property, this is a significant change they need to deal with.

Another possibility is damage that happens while the transaction is taking place (e.g. The kitchen may be destroyed just as the buyer is about exercise their OTP. This can cause the buyer not only to back out but also to try to get their deposit back since the kitchen was not a charred mess of burned cabinetry when they signed it.

It is important to note that even though the property may be insured, buyers will likely insist that all details are in order before they sign the contract.

Your conveyancing lawyer will be needed to help you with the sale due to exceptional circumstances. In most cases, the sellers may agree to lower the price to an acceptable level for the buyer. The home insurance payout to the sellers will help soften the blow of a lower selling price.

A new value for the property is required in any event. This can impact the amount of financing your buyer will receive.

There isn’t much that you can do except negotiate to reach an acceptable agreement.