How does buying a private home in Singapore work, from the option to completion?
In a resale purchase, the seller grants you an Option to Purchase in return for option money, and the standard template CEA publishes, which the parties may change, keeps it open until a date the parties set or for two weeks. You exercise the option by signing it and delivering it to the seller's lawyers with a further payment; subject to one clause of the Conditions of Sale the template adopts, an option you do not exercise becomes void and the option money is forfeited. IRAS requires buyer's stamp duty, and additional buyer's stamp duty where it applies, no later than 14 days after signing, or 30 days after a document signed abroad arrives in Singapore. The sale completes on the agreed date, unless you rescind because the replies to the legal requisitions are unsatisfactory or the Government gives notice of acquisition. If you buy from a licensed developer, URA's Home Buyers' Guide sets out the steps, starting with a booking fee of 5% to 10%; and if you are not a Singapore citizen, you need SLA's approval to buy most landed homes, though not a condominium unit, a private flat, a strata landed house in an approved condominium development, or a lease of a landed home for no more than 7 years.
Checks before paying for the option
CEA's checklist for buyers of a completed private home lists what to verify before you pay for an Option to Purchase. The list includes the seller's identity, the ownership of the property and any caveats lodged against it, its approved use, and property tax the seller has not paid. It also includes your stamp duty and your own loan, CPF savings and cash.
URA advises you to check the approved plans, because you may be liable for unauthorised works after taking over the property. It also advises you to ask your bank about a loan early, preferably before you pay the deposit.
The option and its deadlines
The standard Option to Purchase that CEA publishes for private homes is not mandated, and the parties may change its terms. The seller's offer stays open until a time and date the parties fill in, or for two weeks from the option's date. The template leaves the amounts blank for the parties to agree.
Under CEA's template, you exercise the option by signing the 'Acceptance Copy' and delivering it to the seller's lawyers with a further payment. That payment and the option money together form the deposit. Once you exercise the option, it forms a binding agreement.
If you do not exercise the option as set out, it becomes null and void and the option money is forfeited to the seller. This is subject to one clause of the Law Society of Singapore's Conditions of Sale 2020, which the template adopts.
When stamp duty is due
IRAS lists the acceptance of an option to purchase among the documents on which buyer's stamp duty (BSD) is charged. You must pay BSD and additional buyer's stamp duty (ABSD) no later than 14 days from the signing of the contract. For a document signed abroad, the deadline is 30 days after it arrives in Singapore.
The duty cannot be deferred. IRAS's page on late payment of stamp duty sets the penalty for a delay of up to 3 months at S$10 or an amount equal to the duty, whichever is greater. For a delay beyond 3 months, it is S$25 or 4 times the duty, whichever is greater.
IRAS's BSD rates for homes from 15 February 2023 run in steps. They start at 1% for the first S$180,000 and reach 6% on the rest of the price or, if it is higher, the market value.
Since 27 April 2023, the ABSD rate is set by your status on the purchase date. A Singapore Citizen's first home carries no ABSD; a second carries 20%, and later ones 30%. For a permanent resident the rates are 5%, 30% and 35%, and a foreigner pays 60% on any home. IRAS notes that some buyers are treated as Singapore Citizens under a free trade agreement; its example is a permanent resident who is a United States citizen.
From exercise to completion
Under CEA's template, the sale completes on or before the scheduled completion date, when you pay the balance of the price. The home is handed over with vacant possession, or subject to an existing tenancy.
The template makes the sale subject to satisfactory replies to the legal requisitions your lawyers send to the authorities. These check whether the property is affected by government development plans. If the replies are unsatisfactory, or the Government gives notice of acquiring the property before completion, you may rescind, and the money you paid is refunded without interest.
Buying from a developer
URA's Home Buyers' Guide says a licensed developer must give you set information on the project and unit before taking a booking fee of between 5% and 10% of the price. The developer then grants an Option to Purchase, which cannot be assigned.
The developer delivers the sale and purchase agreement within 14 days of the option date. You exercise the option within 3 weeks after that, by signing and returning the agreement and paying 20% of the price less the booking fee. URA adds that the developer may allow you to pay the balance down payment within 8 weeks from the option date instead. If you do not exercise the option, URA says, the developer may forfeit 25% of the booking fee and refund 75%.
Foreign buyers, and the part a consultancy plays
SLA says a foreign person needs approval under the Residential Property Act before buying landed homes. A foreign person means any person other than a Singapore citizen or a Singapore company, limited liability partnership or society. Private flats, condominium units and strata landed houses in an approved condominium need no approval.
SLA weighs, among other factors, at least five years as a permanent resident and exceptional economic contribution to Singapore. CEA's checklist advises a foreign buyer to get approval in principle before signing an agreement.
A property consultancy can help you compare homes and keep track of these deadlines. SLA's approval, the duty IRAS charges and the lawyers' work lie outside its hands.