Investing in Property - Part 2

Step 5: Appoint a lawyer to help in the coordination of your purchase

You will need to appoint a lawyer to act for you in the purchase of the property.

The Bank will also need to appoint a lawyer for the mortgage documentation relating to the bank loan.

Minimise your legal costs by engaging a lawyer who can act for both the purchase of the property and mortgage documentation for the Bank. After securing a suitable candidate, get him to assist with the following:

  • Title search on the property to determine if the seller is in fact the rightful owner
  • Bankruptcy search on the seller to ensure that he is not a bankrupt
  • Requisition searches (e.g., road lines, drainage etc. which may affect the value of the property)
  • Vetting through the Option to Purchase (OTP) to ensure that it is in order

Most banks do provide legal subsidy for mortgage packages. Do check with your Home Advice Agent for more details.

Home Advice Tips
Can I appoint any lawyer for the mortgage documentation for the Bank?

Banks have their own approved panel of lawyers who can act for the mortgage documentation on their behalf. Generally, most of the law firms are listed on the approved panel. Do note, however, that the law firm's insurance indemnity must be sufficient to cover the loan amount requested. Do check with your bank for a listing of its approved panel.

You may wish to get your lawyer to ensure that the clause, which allows valuers to enter the unit and its premises for valuation checks, is included in your Option to Purchase (OTP). This is important as valuers need to submit the formal valuation of the property prior to any loan disbursement, and for submission to CPF Board for the release of CPF funds towards your purchase of the property.

Step 6: Make an offer to the seller

By exercising the Option to Purchase (OTP), you enter into a Sale and Purchase (S&P) Agreement. The S&P Agreement is a valid and enforceable sale contract that is drafted by your lawyer.

How does a buyer exercise the OTP?

An OTP can be exercised in two ways:

  • By signing the "Acceptance Copy" of the option (to indicate acceptance of the offer) within a given time frame and putting up another 4% or 9% of the sale price depending on the OTP. This is usually held by the vendor's lawyer as stakeholders*; or
  • By entering into a S&P Agreement if the seller has earlier stipulated that in the OTP. Otherwise, its acceptance automatically renders it a sale contract.
* A deposit held by the vendor's lawyer to assure the purchaser that the deposit will be kept safely until completion of the purchase.

Step 7: Formal loan application to the Bank

For the bank to process your loan, you will need to submit these documents:

  • Application Form:
    • Mortgage Loan Application form
  • CPF Documents:
    • Transaction History up to the last 15 months
    • Contribution History up to the last 15 months
    • Yearly Statement of Account for the previous 5 years
  • Income Documents:
    • Latest Income Tax Notice of Assessment OR
    • Latest computerised playslip OR
    • Latest 2 years Income Tax Notice of Assessment (Only applicable to self-employed/commissioned based customers)
  • Option to Purchase (OTP) or Sale and Purchase (S&P) Agreement

Upon approval of your application, the Bank will issue you a Letter of Offer (LO)*, stating details such as loan amount, loan tenure and the terms and conditions. It is in your best interests to understand its contents entirely before accepting it, as it becomes legally binding upon acceptance.

Once you have accepted the LO, the Bank will then instruct the law firm and valuation company to proceed with the necessary mortgage documentation and valuation report respectively.

A caveat^ will be lodged by your lawyer with the Singapore Land Authority against the property owner. Do note that diligence checks such as title and bankruptcy searches can commence before or after lodgement of the caveat.

* An LO is a formal housing loan contract offered by the bank with all the terms and conditions governing the housing loan offered therein.
^ A caveat serves as a notice that the bank has an interest in the property and will lapse 5 years from the date of lodgement, unless it is renewed.

Step 8: Meet with your lawyer

You should expect to meet your lawyer at least twice in the process of purchasing your property.

First meeting

Your lawyer will help you exercise your Option to Purchase (OTP) / Sale and Purchase (S&P) Agreement and apply to the CPF Board for the use of your CPF Ordinary Account savings towards the purchase of the property, monthly instalments for the housing loan including legal fee and stamp duties.

Second meeting

Your lawyer will go through the mortgage documents in order to ensure that you fully understand all the terms and conditions stated therein.

Step 9: Assist the Bank in obtaining valuation

  • Upon instruction by the Bank, valuers are required to conduct a formal valuation of the property via physical inspection
  • You need to inform the seller or the housing agent to allow the valuers access to the property for inspection
  • The valuers will then submit a copy of the valuation report to the Bank
  • The Bank will then forward a copy of the valuation report to the lawyers as they will require it for CPF applications

Step 10: Pay legal fees and collect your keys

Before the date of completion, your lawyer will prepare (i) completion statements and (ii) transfer documents after the following:

  • Upon ensuring that the title is in order
  • Upon satisfactory replies to legal requisitions to the various government departments
  • Upon the discharge of encumbrances like mortgage and CPF charge

The legal fees are usually payable at this stage.

Completion Statements

The completion statement will show you the balance of the purchase price that you must pay after deducting any deposit, pro-rated property tax and utility charges, maintenance charges, and other applicable charges as well as any fees payable to the agent and the lawyer.

It is usually sent to you a few days before the legal completion date together with instructions on the mode of payment.

Transfer Document

After you have settled the outstanding balance of the purchase price, the seller's lawyer will hand over the house keys and Transfer Document to your lawyer. Upon receipt of the Transfer Document, you assume the title of Owner.

Issuing of Certificate of Title (CT)

Your lawyer will apply for the CT to be issued by the Singapore Land Authority on the same day. He will safeguard the CT until it is handed over to the mortgagee (the financing bank) if the property is mortgaged.

Collection of Keys

Collect the keys to your new home from your lawyer upon completion of your purchase, and upon receipt of TOP for uncompleted properties.

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Hans Chee
Senior Associate Director
Apex Link Properties Pte Ltd
hanschee@gmail.com
CEA Licence No.:
L3009377I / R002058G
+(65) 9786 8860