I've some cash on hand and a fairly stable job. My friends said properties, especially those who are going to TOP soon, will be very cheap as many buyers will need to sell them before full payment.
Is this true?
Really good time to invest?
Bro,
if you have cash on hand to spare, now is a good opportunity to take note of the property you are going to buy. However, if you are not experienced, you need a good conveyancing lawyer to help you manage your S&P which is (Sales and Purchase).
Remember do not depend on the housing agent to know this, because a lot of housing agents are ignorant about this. When things happened, we don't say it's agent fault this and that, because we must take care of our own interests and not depend for people to take care for us.
During the 2007 period, a lot of developments were launched. Example a developer could have launched a 3 bedroom unit at 1.5million. Then a lot of people were buying with deferred payment. However with deferred payment, these buyers still have to fork out an initial payment of 10% or 15% or even 20%.
Now 2009, the very same property that the buyer has bought, he decides to go for loan.
Let's say then he paid up $225K which is 15%.
Now upon TOP, he need to pay up 65% or 70% and then the rest upon collection of keys.
65% of 1.5million = $975K
He needs to get financing from the bank. Bank gives him a valuation of 1.2million (very normal or even less)
With this valuation, bank loans him 70% which amounts to $840K. So now this fella has to fork out extra $135K for the 65% payment which on top of his $225K which he paid up before.
I can tell you a lot of people will not be able to get so much cash as there is still that final payment of 20% to think about.
What he can do now is to sell off as to not incur loss on top of losses and further losses of interests on his bank loan. That means his initial 15% of $225K is already in the drain.
If you buy the property from him at 1.2million, you might not even need to put a deposit of 1% because his is a negative sale. By giving him a 1% deposit, when he is in a negative sale position, there will be a lot of complications relating from the sale. That is why a proper S&P document instead of the standard OTP has to be drafted by the conveyancing lawyer to proceed the deal without complications.
Remember, if the property you are buying is a negative sale, take note, you are in a good position whereby he has absorbed the full impact of the reduce in valuation, and you are in a better position as you are putting in 0 dollar down for your property.
But not all situations are like this.
A lot of buyers, agents, sellers are ignorant of this and may demand a 1% option money, but this may not be necessary. So the 1st owner not only forfeits his initial 15% and with the sale of the house, he may have to top up the deficit.
I am not sure whether they can use CPF to top up deficit, but in a no way to run situation, the chances of them letting go at 1.2mill is very high as they want to cut their loss rather than hold on and lose more facing bankruptcy.
So who say property market cannot play. It just depend on how you play it. Everyone say price soft, this and that, but they don't know how the fundamentals really work. For those who buy, working thru the loops with lawyer support, its a good opportunity.
Good time everyone play property market, bad times also can play. When no one dare to play, then that's a good time to do what others do not dare.