Disclaimer (Block 1): This article is for educational purposes only and is intended to assist CEA-registered property agents in understanding regulatory frameworks. It does not constitute financial, tax, or legal advice. LEVR's calculations are indicative only. Always verify rates and eligibility with your bank, HDB, CPF Board, or a licensed financial advisor before advising clients.
Why Due Diligence Matters
Exercising an Option to Purchase (OTP) commits the buyer to completing the transaction. If material problems are discovered after the OTP is exercised, the buyer faces a difficult choice: proceed despite the issue, or walk away and forfeit the option fee. Systematic pre-OTP due diligence minimises this risk.
For CEA agents, guiding buyers through due diligence is both a professional obligation under the CEACC (duty to act in the client’s best interest) and a practical safeguard against complaints. An agent who advises a buyer to exercise an OTP without flagging a known defect or encumbrance faces significant professional liability.
1. Legal Due Diligence
Title Search
Before the OTP is exercised, the buyer’s solicitor should conduct a title search via SLA’s Integrated Land Information Service (INLIS). The title search confirms:
- The registered proprietor — verify that the seller is the legal owner and has the right to sell
- Ownership shares — if jointly owned, confirm all registered owners are party to the sale
- Existing mortgages or charges — the seller must discharge all mortgages at completion; confirm no undisclosed charges exist
- Outstanding caveats — a caveat from a prior buyer whose transaction has not been properly closed is a red flag requiring investigation
- Notices of attachment or prohibitions — court orders or creditor actions against the property that may prevent transfer
Lease and Title Type
- Freehold vs leasehold: Confirm whether the property is freehold (999-year or estate in fee simple) or leasehold, and the remaining lease duration. For leasehold properties, verify CPF usage eligibility and bank tenure limits (see Leasehold Depreciation article for the CPF pro-rating formula)
- Strata title (for condominiums): Confirm the strata lot number and share value. Check whether the strata development is properly constituted (Management Corporation Strata Title in place) and whether there are any pending MCST legal actions
- Landed property restrictions: For landed properties, confirm whether any restrictions apply under the Planning Act (e.g., conservation status, black-and-white colonial restrictions)
Approvals and Permissions
- Confirm Temporary Occupation Permit (TOP) has been issued for new developments, or Certificate of Statutory Completion (CSC) for older properties
- For landed properties with extensions or additions, confirm that approved plans were submitted to URA/BCA and that works comply with approved plans
- For properties used for non-residential purposes (e.g., home-based business), confirm the use is permitted under URA zoning regulations
2. Financial Due Diligence
Stamp Duty and ABSD
Calculate the buyer’s total stamp duty liability before committing to the OTP:
- BSD (Buyer’s Stamp Duty): Applicable to all purchases. Rates are tiered from 1% to 6% depending on the purchase price
- ABSD: Applicable to Singapore Permanent Residents, foreigners, entities, and Singapore Citizens purchasing a second or subsequent property. Confirm the buyer’s ABSD profile — any undisclosed private property owned by the buyer or their spouse will affect ABSD liability
- SSD: If the buyer intends to sell within 3 years of purchase, SSD applies at progressively lower rates. This is relevant for investment buyers who anticipate a short holding period.
Financing Verification
- Confirm bank AIP (Approval-In-Principle) or HDB HLE (HDB Loan Eligibility) letter is in place before exercising the OTP
- Verify the buyer’s TDSR position — confirm that the new mortgage repayment does not push total debt servicing above 55% of gross monthly income
- For HDB purchases, verify MSR — ensure the HDB mortgage repayment does not exceed 30% of gross monthly income
- Confirm the buyer has sufficient cash and CPF OA funds for the downpayment and stamp duty. For private property: at least 5% cash + 20% cash or CPF downpayment (on an 75% LTV loan)
Agent note: Never proceed to OTP exercise without confirming the buyer has a valid AIP or HLE letter. An AIP lapse after OTP exercise but before legal completion can leave the buyer unable to complete, resulting in forfeiture of the deposit.
Outstanding Maintenance Fees and Sinking Fund
For condominium and privatised EC purchases:
- Verify there are no outstanding management fees, sinking fund contributions, or special levy arrears on the unit. Outstanding amounts become the buyer’s liability post-completion unless adjusted at completion
- Review recent MCST Annual General Meeting minutes if available — check for planned major upgrading works that will require additional sinking fund contributions from owners
- For HDB: check that there are no outstanding HDB conservancy and service charges arrears on the flat
3. Physical Due Diligence
Property Inspection
- Conduct a thorough physical inspection before OTP exercise — check for water seepage (ceilings, walls, floors), structural cracks, mould, and visible defects
- For older properties, consider engaging an independent building inspector or structural engineer, particularly for landed properties with previous renovation works
- Verify that all fixtures, fittings, and appliances included in the sale are in working order and present. Document the agreed inclusion list in the OTP
- For condominium units, inspect common property areas (lobby, lifts, pool, gym) to assess the development’s overall maintenance standard
Floor Area Verification
- Verify the strata area or floor area stated in the sale listing against the approved floor plan and title documents. Discrepancies in stated floor area are a common source of disputes
- For HDB resale, cross-check the advertised floor area against HDB records — HDB flat areas are fixed and publicly available in HDB resale transaction data
4. HDB-Specific Due Diligence
For HDB resale transactions, additional checks apply:
- MOP status: Confirm the seller has fulfilled the Minimum Occupation Period (5 years from key collection for most standard flats). A flat that has not completed MOP cannot be sold on the open market.
- HDB resale eligibility: Confirm the buyer meets all HDB resale eligibility conditions before committing to a purchase — citizenship, family nucleus, income ceiling (for grant purposes), and ownership restrictions
- Ethnic quota: Check the Ethnic Integration Policy (EIP) quota for the block and neighbourhood. If the quota for the buyer’s ethnicity is full, the buyer cannot purchase that specific unit
- HDB Flat Portal listing: Verify the flat’s details match what the seller has represented. HDB resale transactions are listed on the HDB Flat Portal with verified information.
5. Neighbourhood and Planning Due Diligence
- Check the URA Master Plan for adjacent land use — an adjacent site zoned for industrial, commercial, or high-density residential use may affect the buyer’s future living environment or the property’s value
- Review LTA and URA transport planning maps for planned MRT or bus routes — proximity to new MRT stations typically enhances future value
- Check for planned road widening or infrastructure projects that may affect the property (e.g., SLA land acquisition notice in the title documents)
- For landed properties, check proximity to petrol stations, industrial sites, or other potentially undesirable uses
Using LEVR in the Due Diligence Process
LEVR’s calculators support the financial component of due diligence. Before the OTP is exercised, use:
- Stamp Duty Calculator: Confirm BSD + ABSD for the buyer’s profile and the property purchase price
- Home Loan Calculator: Confirm the buyer’s monthly repayment and total financing cost at the prevailing interest rate
- TDSR Calculator: Verify the buyer’s TDSR position, incorporating all existing debt obligations
Disclaimer (Block 3): LEVR's calculator outputs are estimates based on inputs provided and current regulatory parameters as known at time of publication. They are not a guarantee of borrowing capacity, stamp duty liability, or CPF eligibility. Regulatory thresholds and rates may change. Always verify with IRAS, your bank, or a licensed financial advisor before making financial decisions.