Selling your property? Do OTP and option fee sound familiar? Simply put, as a seller, you are giving the prospective buyer an option to buy the property. In return, the buyer pays an option fee.
What is Option to Purchase (OTP)?
An OTP is a form of contract in resale transactions. You cannot enter into any agreement pertaining to the sale or purchase of a flat aside from OTP. Else, it will be and void.
But what if you have decided to sell on your own and you’re not experienced in making a contract? Don’t worry, there is an HDB-prescribed OTP form, Pursuant to the Housing and Development Act which you can use.
When to grant an OTP?
After you have started marketing for your resale flat, potential buyers will view your unit. The average days on market it takes to sell a flat is 134 days. Which means that if you start sourcing for buyers of your flat on 1 July 2019, you can find your buyer around 11 November 2019.
You have to take note that you must Register Intent to Sell in the HDB Resale Portal first, at least 7 days before you grant an OTP to the prospective buyer.
You also need to ensure that the prospective buyer has registered Intent to Buy. Ask for proof of the buyer’s registration.
So, when to grant the OTP? You grant an OTP once these four conditions are met:
- You have found a prospective buyer
- The prospective buyer has registered intent to buy
- You have registered your intent to sell at least one week ago
- You have met your Minimum Occupation Period (MOP), otherwise, the OTP will be and void.
How to grant an OTP?
Download the OTP form and use it when granting an OTP to a prospective buyer. No amendments shall be made to the prescribed form.
The prescribed option fee should not exceed $1000. You might wonder whether any sincere buyer would offer a $1 option fee. We would say, why not? You need to negotiate the option fee with the prospective buyer between $1-$1000.
What is option fee?
An option fee is not a deposit or down payment for the flat purchase. Its purpose is for a buyer to lock in your property for 21 days for his purchase. It’s non-refundable, which means that if a buyer decides after the option period not to proceed with the purchase of your flat, you can keep the option fee.
So, you may ask, “Is there a limit to the number of OTP that I can grant?” Nope. You can only grant an OTP once within the option period. If it lapses, then you can grant a new OTP to another prospective buyer.
Think of an option fee as a reservation fee. Once your home is reserved, no one else is allowed to buy it within three weeks aside from the one you’ve granted the option to.
What happens after granting the OTP?
After the action-packed marketing and sourcing for buyers, the deal isn’t sealed yet. Having the buyer exercise the OTP is the ultimate goal, hence, this stage is filled with questions such as “What if the buyer changes his mind?” Instead of sitting back and waiting for the end of the option period, we have compiled tips on what to do before the buyer exercises the OTP.
Unsure of how to continue with all the paperwork for the sale of your flat? Ohmyhome’s experienced agents provide documentation service at a fixed fee of $1,688. Call 6886 9009 to learn more.