Most buyers tend to relax after the OTP has been signed, or exercised. It is completely understandable to assume that, at this point, everything has been settled. In my experience however, this is precisely the point at which things might go wrong.
Here are some things that could derail an otherwise smooth transaction!
- Check if promised repairs are done
- Be informed of any major changes
- Ensure the sellers / existing tenants are vacating
- Check that nothing is owed to the management
- Make sure there’s no dumping
- Check if promised repairs are done
The Option To Purchase (OTP) that you sign should contain the following clause, or something to this effect:
On Completion, the Vendor must deliver the Property in the same state and condition as it was at the date of the option or the date of the contract, whichever is earlier, (save for fair wear and tear) unless otherwise agreed to by the parties.
Under this clause, the seller has the obligation to hand over the property in the right state. This is especially important with regard to repairs. For example, if the seller agreed to repair a leaking ceiling as part of the sale, and you signed the OTP with this understanding, they are obliged to do so.
If the seller has failed to rectify any issues, or you spot damage that wasn’t there before, now is the time to say something. Even though you’ll have legal recourse when you spot the issue later, it’s much better to resolve it right away. Otherwise you might spend a few months with a leaky ceiling after moving in (and waste time chasing the seller to fix it).
As an aside, you should avoid signing an OTP without the above clause. Such an OTP would work on the “As Is Where Is” principle. That means you have to accept the property as it is when you receive it (a very bad idea, as things can go seriously wrong…like in this next point).
2. Be informed of any major changes
In one of my previous cases, my client had signed and exercised the OTP on a landed property. Fortunately, I revisited the neighbourhood to check on it shortly after.
I saw a few piles of packing boxes in front of the house, so I contacted the seller’s agent to ask what was happening. I was told they were preparing to move out, but I felt something else was up; so I took a walk around the property to check.
And it was a good thing I did, because the rear of the house was blackened and charred like a badly managed barbeque. It turned out there was a fire, which started from a malfunctioning appliance; and the damage was extensive enough that it could have cost my client a fortune to repair.
In this case we got lucky; I think the seller at least had home insurance to cover the damage – and no one was hurt in the fire. But it goes to show how quickly the state of a property can change; if I hadn’t happened to check, we may not have found out till it’s too late.
So stay informed of any major changes by dropping by to check, or by getting a real estate agent who has a habit of doing so. 🙂
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3. Ensure the sellers / existing tenants are vacating
Don’t assume every seller is responsible. There really have been cases where the buyer arrives to take possession, and finds the seller hasn’t so much as moved out their furniture.
This can also happen if you’ve bought a tenanted property, and are expecting the existing tenant to move out by a certain date. Sometimes the old landlord no longer bothers to follow up with the tenant, figuring it’s your problem now (they’ll tell you they already informed the tenant, they don’t know what he’s still doing there, etc. before leaving you to deal with it).
Sometimes this is due to delays affecting the other party; for example, the seller’s renovations is taking longer than expected due to Covid-19, and they need more time before they can move in.
Yes, common sense dictates they should have told you this earlier; but as the saying goes, common sense is not always very common. So it does pay to check early, and start asking questions if – close to your date of possession – it doesn’t look as if the previous inhabitants are moving.
You may have to contact your conveyancing lawyer; you have legal recourse if the seller / existing tenants are refusing to move out on time.
4. Ensure that nothing is owed to the management
If you’re buying a resale condo, be sure to drop by the management office and ask if the seller is in arrears.
The last thing you want is to take over the property, and then be hit by two quarters worth of unpaid maintenance fees (often with interest rates as high as 15 per cent per annum).
There are even cases where the previous sellers have owed fines to the management for various reasons (e.g. damaging common property), which they’ve avoided paying.
It’s perfectly possible to deal with all these even after you move in; but I always suggest you know about it and settle it early. Otherwise, you might face the stress of management repeatedly sending you bills and banging on your door.
5. Make sure there’s no dumping
Some sellers or previous tenants will leave their junk for you to clear; especially if they’re flying overseas and not coming back.
You might find the property crammed with broken beds, unusable desks and cabinetry, piles of computer CPUs, etc. Some of the larger pieces may cost you money to cart away. At that point, they may be long gone from Singapore or no longer answering your calls.
You can usually guess at this intention, if you see lots of bulky, trash items that don’t seem to be moving. As with everything else on this list, it’s a good idea to address it before the sellers move on.
Don’t underestimate what can go wrong, during the process of the property handover
It can range from nuisances like recent pest infestations, to fires like the one I found, to members of the seller’s family purposely vandalising the property (this has happened before, when the family member was very unhappy about the sale).
Besides dropping by yourself, a real estate agent can help you keep an eye on things, and handle any issues with the seller. I’m here to save you time and stress, as well as providing you with sound property advice.
You can get more updates on home ownership and property investment at Ron Chong.net, or just contact me directly on Facebook.