Resale Condo Checklist: Review these 4 Items Before Buying an Older Condo
For buyers looking for a resale condo, review this resale condo checklist before putting up your offer.
Table of Content
- Land Owner & Lease Start Date
- Check Sinking Fund
- Any En Bloc Attempts?
- Look Beyond Market Valuations
📌1. Land Owner & Lease Start Date
- Lands in Singapore are sold as: Freehold, 999yrs and 99yrs lease
- All land will be returned to the government when the lease expires
- However, there are cases where developers sold their freehold land as leasehold projects
- Shore Residences is originally a freehold land sold on a 103 years lease Tenure
- Spring Grove is a 99yrs condo on a Freehold land plot, owned by the American Government
- “Can these condos go through a successful collective sale like other condo?” is a very tough question to answer
- Before offering for an older 99yrs resale condo, check who is the real land owner
- Most condos in Singapore will be completed within 3- 5 years in normal circumstances
- There are a number of condos in the Pasir Ris area that have a longer-than-normal gap between lease starts date and completion dates
- For example, this gap for Coco Palms is 10 years
- Therefore, it is important to check the tenure start date and not just focus on the TOP (Temporary Occupation Permit) date
📌2. Check Sinking Fund
- Many buyers will ask about the condo maintenance fee before buying.
- But many will forget to check how much sinking fund is available.
- Condo owner will pay maintenance fees (or MCST fee) on a quarterly basis.
- Part of this fee will go into a sinking fund, which is collected for future major repairs.
- Older condos are expected to incur more repair expenses as they age.
- Many years ago, I invested in a freehold 2-bedroom apartment that TOP in 2008.
- I was shocked when I asked by the MCST to pay a special levy of $3,600 for a special repair.
- When condos with low sinking funds face unexpected repairs or major equipment replacement, they may need to impose a special levy.
- This levy will need the approval of the condo management council run by the residents.
- Therefore, it is always better to have rich sinking fund
📌3. Any En Bloc Attempts?
- Before buying, always ask if there were any previous en bloc attempts?
- A recent study observed a price increase when condominiums reach 31 to 40 years old.
- This is when the en bloc potential of properties grow.
- While en bloc is not guaranteed, not many condos in Singapore survive beyond 40 years.
- After the first failed attempt, that condo will attract more buyer investors who hope to end up with a collective sale (en bloc) one day
- A veteran en bloc agent once shared with me that a collective sale usually needs 3 attempts to be successful.
- The first two times usually fails because of owners’ unrealistic expectations or unfavorable market conditions.
- Developers will pay 50 -100% higher than market rate to residents for an en bloc to happen.
- Majority of residents will be happy but not these 2 groups of new owners.
- (1) Those who bought within 3 years and are subject to Seller Stamp Duty
- (2) New owners who renovated their home extensively recently
📌4. Look Beyond Market Valuations
- Market valuations are average numbers based on recent months sales in the entire condo
- They do not take into account the interior conditions of the unit unless you engage a professional valuer to do a physical evaluation
- You may want to an in-depth search into the recent transactions that have similar attributes (e.g., stack/ facing) as your shortlisted unit
- If you see higher than average prices for these “similar units”, you may want to find out the reasons
- They may have been sold at higher prices because of premium renovations
- Make an effort to check out these sold units
- If the unit that you have wanted is in original condition, then you know you can bargain with the seller
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