It’s not everyday you walk into a makeshift building, and walk out with a seven-figure bill that’ll take you 25 years to pay. But you know what? That’s exactly what happens at show flats. Here’s what buyers, especially first-time buyers, should do to minimise your chances of regret and wasting money on a deposit.
Step 1: Prep yourself (before you step into the lion’s den)
It’s incredible what you can be convinced to buy if you don’t prepare yourself before stepping into a show flat. Remember, everything in that makeshift building is finely calculated to make you take leave of your senses, and lull you into a sense of complacency.
To avoid being entrapped by a clever sales pitch, prepare the following:
#1: A definite budget
We know that you can blow up to 60% of your monthly income on loan repayments (including mortgage) under TDSR rules, but ideally you’re advised to spend 10 times your annual income on a property or less. This is in addition to whatever you have in your bank (minus emergency funds) and CPF Ordinary Account that’s needed to pay the 25% downpayment.
So, if your combined household income is $15,000 per month (or $180,000 per annum), the prudent price for your house should be around $1.8 million. That way, when taking a bank loan with a 25-year tenure and a ‘stress-test’ scenario of 3.5% interest rate, you’ll pay a $6,760 in monthly home loan installment, which works out to about 45% of your combined monthly income.
That being said, consider reducing your budget by 30% if you’re employed without CPF contributions, and further if you have dependents to take care of (such as ageing parents or kids). The prudent advice, then, would be to spend about five to seven times your monthly income on a property.
Play around with the 99.co mortgage calculator, just to be sure.
#2: Approval in Principle (AIP) from the bank
An AIP states how much a bank agrees to lend you, if you buy a house. AIPs are usually valid for up to two weeks.
Get the AIP from the bank first, because you don’t want to end up putting down a non-refundable deposit, and then being unable to get a loan.
#3: Data on sale prices and rental rates of nearby properties
Visit 99.co and check the location of your desired property on the map. Take note of the median average prices in the area, such as in condos across the street, as well as competing new launch condos. Also take note of the rental rates.
This helps you to make a fair comparison of prices; a new condo is typically priced at 10 to 15% more than its older counterparts in the area (but at times at a lower per square foot price). If it costs much more than that, make sure the developer has a justification you can accept.
You can also use the data as a bargaining chip (e.g. point out that nearby condos have been falling in prices, when trying to negotiate for a lower price).
Step 2: Leave the cheque book in your car, or with a family member who isn’t with you
If you’re new to all this, we suggest you leave the payment methods out of arms length for now.
This will prevent you from being fast-talked or pressured into putting down a deposit. Never underrate how much pressure you can fall under; you’re dealing with professionals who have often spent years fine-tuning their methods.
Outside of the show flat, and away from the sales rep and glitzy interiors, is the best place to consider your options.
The only exception to this is if the property really is selling out fast. Otherwise, you’ll get that precious few moments to mull over your decision if, say, you leave your cheque in the car.
In any case, we suggest you give yourself at least two to three days to think things over, before you make your deposit. Do this even if you’ve already viewed other properties and narrowed it down to “the one”.
Step 3: Prepare the questions you want to ask the property agents
Write down your main concerns, be it the distance to the nearby schools, or the noise pollution in the evenings. Take special note of things you won’t be able to detect at the show flat, such as:
- Noise pollution from MRT tracks (ask which blocks are closer to the tracks)
- Construction work going on nearby, and for how long it will continue
- Changes to the area marked on the URA Master Plan, over the coming years (your “quiet enclave” might become a roaring business hub five years from now)
- How the carpark is laid out
- The likely maintenance fees
The list goes on, but you get the idea: write down the questions so you don’t forget to ask them later.
Step 4: Pack water, a sandwich, and a power bank
Ok, you can ignore this during the Covid-19 period as all show flat viewings are by-appointment-only. But, in pre-pandemic days in a property bull market, a lot of first-timers are caught off-guard by how long the wait can be, and how ulu the location of the showflat might be (we’ve seen a few where the closest 7-11 is a 10-minute drive).
Also, if there’s a big rush, you don’t want to give up your spot in the queue to go buy water / food.
Incidentally, what we’re suggesting here is not a trivial comfort issue. When you’re thirsty or starving, you’re not as sharp. It makes you more prone to mistakes, especially when a non-stop sales pitch is levelled at you.
And if your phone is dead, it severs your ability to call your property-savvy friend for advice, or look up information on the condo when you need it.
Step 5: Know how to really view the showflat
Do the following the first time you view the showflat:
- Ignore the furniture. Try to visualise where your stuff will be, in the bare bones apartment. For example, work out where your children’s bedrooms will be, where your study will be, which room you’ll use for storage, etc.
- When there are mirrors positioned in the room, it tends to look bigger. Try to block out the mirror from your vision (raise a hand to block it if you need to), and then try to get a sense of the real room size.
- Illumination is never accurately reflected in a showflat. Be wary of areas with no window access, such as connecting corridors – these are likely to be much darker in the actual unit.
- Note the labels on any appliances. Developers will usually label an item that’s included, such as the fridge or washing machine. If you don’t see the labels, ask the agent.
- Check if the surfaces and finishing in the showflat are what you’re actually getting. If the flooring is parquet, check with the agent that it will be in the actual apartment. Never assume that what you see is what you’ll get.
Step 6: Be prepared to have alternative payment schemes offered to you
When you view condos that are already completed, you may be offered alternative payment schemes by the developer such as stay-first-pay-later or even in-house financing. These alternative schemes can be quite complex, and end up costing you far more than you expect.
If you feel at all confused, don’t sign anything – give yourself time to look over the schemes, and come up with questions. We know that some mortgage brokers will go out of the way to offer you extra insight, and compare what you’re paying to a regular bank loan if you ask them for help. Consider doing that before putting your money down.
Step 7: Ask for a short break before you sign, if you feel hesitant
If you feel uneasy at all, don’t hesitate to ask for a short break before you sign anything. Ask for a few minutes to take another quick look at the showflat, and use this time to think it over.
Sometimes, for instance, you might realise that another unit configuration is better for you, saving you a five-figure sum.
If you find you’re still doubtful, then it may be a better idea to hold off on the deposit (remember, the deposit to secure the Option to Purchase is non-refundable). Never rush into purchasing a house.
Finally, take some pictures of the showflat, and email the agent with any of your key questions.
This is so that you can check the actual apartment once you get the keys, and look for discrepancies with the showflat (e.g. different flooring materials being used).
As for emailing the questions, you’re not simply doing it to repeat them. This provides written confirmation of what you were told by the agent, which will be useful in the event of disputes later.
Have condo show flat viewing tips to share? Let us know in the comments below!
If you found this article helpful, 99.co recommends New launch vs. Resale condo payment schedules: What’s the difference? and Property lawyer in Singapore: How to choose the right one
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