Shopping for a home can be exciting, exhausting and downright scary. For most people, the goal is to end up in a nice home that they love at a price they can afford.
According to the latest HDB figures, one in five new buyers of Housing Board homes chose a resale flat over a Build-to-Order (BTO) flat in 2016 – more than twice the number recorded five years ago. This is despite first-time home buyers getting top priority for new flats, with up to 95 per cent of BTO units reserved for them.
The HDB said it expects the trend to continue given the recently enhanced Central Provident Fund Housing Grant, which gives first-time buyers up to $50,000, against the previous cap of $30,000. However, your dreams of settling down or starting a family can be disrupted by the crushing realisation that you’ve unwittingly set yourself up for a bad investment.
Avoid getting sucked into a financial and emotional whirlwind by considering the following before you take the plunge into what could potentially be the biggest investment of your life.
1. Why is the owner selling?
This calls for some investigative journalism. You can start by asking your real estate agent. They aren’t obliged to answer, but if you’re real nice to them, they might just give you a hint of the circumstances.
It will probably help if you start treating estate agents as friends, instead of foes. Get them on your side. For instance, if you’re getting a cup of coffee on your way to a viewing, why not get one for the agent too?
Also, try talking to the neighbours to find out more about the home owner. You may discover that they have been recently retrenched and are desperate to sell. Or perhaps work is taking them out of the country and they may so, accept a lower price.
2. How did they set the asking price?
Many sellers rely on a real estate agent to sell their homes. Typically, an agent will perform a “comparable market analysis,” in which he or she will examine the recent sales prices of similar houses in the neighbourhood and the number of similar properties listed in the market to get an idea of what the market will bear.
A good agent will provide you with their justifications for the asking price, which you can evaluate and decide for yourself. If you’re lucky, the agent might tell you that they think the seller is overvaluing the house.
However, do bear in mind that an agent’s commission is tied to the final sales prices, so they have every incentive to sell a home for the highest possible figure.
In any case, you should look out for other homes for sale in vicinity to get a good idea of what properties in the area sell for. You can also figure out a pricing for a flat using the Resale Flat Prices e-service, which shows you the transacted prices for resale flats within the past two years.
3. How long has the property been on the market?
If the house you’re looking at has been on the market for a long time (more than six months), ask the agent why they think it isn’t selling. Is there a problem with the unit? Have other potential buyers discovered something that you haven’t? Or is it just overpriced?
Sellers usually hit the wall in about two months. The initial excitement of listing might have dwindled and they are tired of keeping their house looking like a model home. They could also be getting increasingly frustrated by the number of looky-look cases that come through the front door.
Generally, a property that has been in the market for a long time is an indicator that a seller has problems selling and would likely accept a lower price.
4. How long have the owners lived there?
If the sellers are moving out after a short period, it is important to find out why. Is a highway about to be built around their home? Do they have noisy college kids for neighbours?
A property that has changed hands frequently is usually a red flag for some serious problems. Find out why the previous owners moved out. Perhaps even try to contact them and try to find out why they did.
It is also worth noting the neighbouring properties and their conditions. The plus side is, with the advent of the internet and social media, your means of research and getting in touch with relevant parties are endless.
5. Is there anything you should know about the house you are buying?
People have been known to move into the homes built on burial grounds or convicted mass murderers without knowing – but you can bet that they wish they knew what they were getting into.
The biggest fear if you are buying is that you’re missing out on the gory details. Perhaps the local train station is about to close, a nearby sewerage plant is in the works or the cat killer lives right next door.
To get a clearer picture, it is advisable to drop by the neighbourhood at different times of the day to help you determine if there are any undesirable local activities. Also, you should always visit a property at least twice before making any financial commitments.
In addition to any expert or professional opinions you may require with regards to the structural condition or potential of the property, try to bring along a family member or a friend for a second opinion.
It’s no rocket science, but putting together all the relevant information you need when buying a house can make a world of difference between landing a hellhole or a happy home. So do your homework, fire away your questions and happy house hunting!