Thursday, October 30, 2008

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Property Buying Advice: Confirm Bank Loan Before Putting a Deposit

A friendly advise for all buyers:
Get a confirmation from your banker about loan availability for desired amount for desired property before you put down any deposit. DO NOT under any circumstances put down a deposit hoping that your loan will be approved. Now a days bank's are valuing property very conservatively. For example - you are viewing a property worth 1mil (seller might tell you thats the valuation/or below valuation price). - So your estimate is that you need 200K cash/cpf and 800K loan (max 80% loan available these days). - You put in some token deposit to confirm purchase. - You check with your banker now. He values the property at 900K and approves 720K loan. - You suddenly find yourself in a position to put up 80K cash extra. - If you cant get that, you have to forfeit your deposit Please avoid such situation. Agents will always tell you to put a deposit, telling you that unit is hot and other buyers are also in queue. Dont believe them. Its better to let a unit go than to let your deposit go. Take your time before you confirm any purchase. Be financially prudent. God bless.

Posted by Anonymous in the Singapore Property Forum in the response to the article reproduced below:
He buys condo for a windfall but takes a big fall instead

AMONG the legion of burnt investors is a buyer of a million-dollar condo apartment who should have known better. He jumped into a then hot property market without weighing the biggest 'if' of all - what if you lack the cash to complete the purchase? Now Mr Byron Nifakis, 39, is bankrupt. He wanted to buy a $1.2 million four-room flat in the Casa Merah condominium, as an investment. The Singapore permanent resident was working as the IT director of a restaurant here, earning $10,000 a month. Now he is reminded of his bankruptcy whenever he peers out of his rented home, which faces the Casa Merah on Tanah Merah Kechil Avenue. He eyed the condo development to cash in on the rising property market last year. But, by his own admission, his 'naivety and -censored-' resulted in his owing the condo developers $18,000 for his botched purchase. Mr Nifakis, who came to Singapore from Canada in 2001, thought he was 'safe' as he had not signed any documents committing himself to the deal. But he had handed over a $60,000 cheque as deposit, and what he did not know was that this was sufficient proof of his option to buy the property. His cheque bounced, but lawyers and property agents told The New Paper he was still obliged to buy the unit. Mr Nifakis, who had only about $6,000 in his account then, could not proceed with the purchase because money he was counting on from overseas partners did not come in. He said: 'It was only because my property agent promised me that I could get more time to process the $60,000 payment that I even decided to go to the showroom that day to try my luck.' But by 4pm, he was unable to raise the money from his partners. So he returned to the showroom to back out of the deal and get his cheque back. When the agents refused to return the cheque, Mr Nifakis left the showroom. 'I thought they could keep my cheque, because they would not be able to use it against me,' he said. But he was wrong. A purchasers' particulars form he had signed stated that he had to pay 25 per cent of the $60,000, or $15,000, if he backed out of the deal. And, to his horror, he learnt later from his lawyer that the cheque could be used as evidence that the option had already been granted to him. He said: 'I should have refused to leave the showroom until it was closing time so that I could speak to someone who could return me my cheque. 'My agents kept telling me 'I'm sure you will find a way to get the money'.' Trying to make the best out of a bad situation, he 'scrambled' to get the money by applying for a bank loan, but failed to get approval. Desperate Desperate for more time, Mr Nifakis wrote to the developers, but failed to get an extension. They insisted that he had to pay the $15,000. Mr Ling Tien Wah, the lawyer acting for the developer, explained that since Mr Nifakis did not exercise his option to buy the apartment, the developer was entitled to 25 per cent of the $60,000 booking fee. In February this year, a judge ordered Mr Nifakis to pay the developer $18,000, including legal fees of $3,000. The developer took out a bankruptcy application against him in July when he failed to pay up. To make matters worse, his company laid him off the same month because it had run into financial difficulties and had shut down the restaurant. On 9 Oct, the court issued Mr Nifakis a bankruptcy order as he was unable to come to a compromise with the developers on a repayment scheme. He asked to pay them $300 a month over five years, but the developer rejected the offer, noting that if he wanted to, he could clear his debt in just 12 months. A bitter Mr Nifakis said: 'This is the biggest investment I have made; it is also the biggest lesson I have had to learn. 'I try not to think about it too much. There's a bit of resentment. After all, that property could have been mine.'

May also want to read:
Fire Sale: Owners Dump Condos
The days of Cheap, Easy Credits chasing after property is OVER!
When the bubble of greed and fear burst, guess who suffer?
Property Investment Tip: Don't put all your eggs in one basket
HDB Resales: West Sees Highest Price Increase


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The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.

Smart Buyer :)