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.
In Singapore property transactions, the Option to Purchase (OTP) is a legally binding agreement. Once a buyer exercises the OTP and pays the exercise fee, withdrawing from the transaction means forfeiting the deposit (typically 5% of the purchase price for private property). Due diligence — verifying all relevant financial, legal, physical, and regulatory matters — must be completed before the OTP is exercised, not after. Agents who help clients complete thorough pre-exercise due diligence protect both the client and the transaction.
1. Financial Due Diligence
Before exercising, the buyer must confirm they can afford the purchase on all dimensions:
- ABSD liability: Confirm the buyer's citizenship, residency status, and existing property count. ABSD is payable within 14 days of OTP exercise — there is no extension. Agents should run the ABSD calculation before the buyer grants or exercises the OTP, not after. For co-purchasers, the highest applicable rate among all buyers applies to the full purchase price.
- BSD calculation: Verify the BSD payable and confirm the buyer has adequate funds in their lawyer's client account or a clear plan to fund it within 14 days.
- Loan eligibility: Obtain an in-principle approval (IPA) from a bank before exercising. An IPA confirms the maximum loan quantum, interest rate framework (SORA-based), and estimated monthly repayment. Exercising without an IPA risks discovering TDSR issues after the deposit is at risk.
- CPF availability: Confirm the CPF OA balance available for the purchase. Check the Withdrawal Limit (based on remaining lease and valuation). For properties with short remaining leases, CPF usage may be restricted or disallowed entirely.
- Cash at completion: Model the full cash requirement: 5% deposit + BSD + ABSD + conveyancing fees + any Cash Over Valuation (for HDB) + balance purchase price net of CPF and loan proceeds. Buyers who discover a cash shortfall after exercise have limited options.
2. Title Due Diligence
A title search via the SLA Integrated Land Information Service (INLIS) reveals the legal state of the property. Key things to check:
- Registered owner: Confirm the seller is the registered proprietor. A person who has signed an OTP but is not the registered owner cannot legally complete the transfer.
- Outstanding mortgages: Check for registered charges. The seller must discharge the mortgage at completion — verify the outstanding loan amount to assess whether the sale proceeds will cover it.
- Caveats: Any caveat lodged against the property must be withdrawn before the title can be transferred. Investigate the basis for any unexpected caveat — it may indicate a disputed ownership claim, an unresolved co-owner dispute, or a contractual right from a prior transaction.
- Easements and covenants: Check for registered rights of way, drainage easements, or restrictive covenants. A right of way over a landed property means the burdened land area cannot be blocked or built on without affecting third-party rights.
- Government notifications: Verify whether any part of the land is within a road reserve or compulsory acquisition notice. URA road line plans are accessible via the URA Space portal.
3. Physical Due Diligence
Physical inspection before exercise protects the buyer from post-purchase surprises:
- Floor area verification: For private property, cross-check the strata area stated in the OTP against the Building and Construction Authority (BCA) records or the unit floor plan from the developer. For HDB flats, the floor area shown in HDB records is the floor area of the flat.
- Known defects: Inspect the property personally or engage a professional building inspector. Look for cracks, water seepage, plumbing or electrical issues, and signs of subsidence. Sellers are required to disclose known material defects, but the buyer's independent inspection provides a further layer of protection.
- Unauthorised structures: For landed properties and some condominiums, check for unauthorised additions or alterations (A&A works) done without BCA approval. These may need to be demolished at the owner's cost and can affect the resale value.
- MCST arrears: For strata-titled properties, request confirmation from the MCST or managing agent that there are no outstanding maintenance fee or sinking fund arrears. Arrears transfer to the new owner unless resolved before completion.
4. Regulatory and Planning Due Diligence
- Approved use: Confirm the approved use of the strata lot via URA. This is particularly important for serviced apartments (residential vs hotel/commercial approved use) and mixed-use developments. Approved use determines ABSD, CPF eligibility, and LTV.
- URA Master Plan zoning: Check the URA Master Plan to understand what is planned for the surrounding area — commercial development, transport corridors, or green zones can affect amenity and value.
- Conservation status: For conservation buildings and shophouses, confirm any restrictions on renovation, use, and external alterations imposed by URA.
- Short-term rental eligibility: Confirm whether the property can be rented short-term (under 3 months). For private residential properties, short-term rental is generally not permitted without URA approval. Buyers intending to use a property as a serviced apartment or Airbnb must verify the legal basis for doing so.
5. HDB-Specific Due Diligence
For HDB resale flat purchases, additional checks apply:
- Register intent to buy on the HDB Resale Portal and complete the eligibility check before granting or receiving the OTP.
- Confirm the seller has satisfied MOP — an HDB flat that has not cleared MOP cannot be sold on the resale market.
- Check the remaining lease. A flat with 50 years remaining has CPF usage restrictions and potentially limited bank loan availability for future buyers, affecting resale liquidity.
- Confirm the flat is not subject to any court order, legal charge, or HDB restriction on transfer (e.g., from a previous divorce settlement or SERS exercise).
- Verify the Ethnic Integration Policy (EIP) and Singapore Permanent Resident (SPR) quota for the block and neighbourhood. An SPR buyer cannot buy in a block that has reached the SPR quota.
The Agent's Role in Due Diligence
Agents are not lawyers or valuers — they cannot certify a title or provide legal advice. However, the CEA's Professional Conduct Rules require agents to disclose all material facts they are aware of, and to advise clients to seek appropriate professional advice (legal, financial, structural) before committing. Practically, this means:
- Recommend a conveyancing lawyer before OTP exercise, not after.
- Suggest a building inspection for landed properties and older condominiums.
- Run stamp duty and ABSD calculations before the OTP is granted — not when the client asks after exercising.
- Check the HDB Resale Portal eligibility check is completed before any HDB OTP is granted or received.
- Flag any unusual title entries, short remaining leases, or regulatory concerns to the client and their lawyer, even if the client did not specifically ask.
A buyer who is blindsided after exercise — by an unexpected ABSD bill, a CPF restriction they were not told about, or a caveat that delays completion — is a client who was not properly served. Thorough pre-exercise due diligence is part of the agent's professional obligation, not an optional extra.
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.