In this blog series, we invite real estate industry professionals to share their personal experiences. Names and identifying details have been changed to protect the privacy of individuals.
As a real estate agent, I face different client scenarios daily. I had a client by the name of Ms C, who approached me in January 2017.
She was initially rather secretive at first but after much follow up, she revealed that she is going through a divorce and has intention to sell her share of her current HDB flat to her ex-spouse.
At that point of time, she had already filed for a divorce and was pending for the final judgement and the court order to allow her to do so.
She has a young child with her and a new partner at the point we had met.
She wavered over a few options after selling the share of her HDB to her ex-spouse:
1) Purchase an older HDB
In light of the recent news about the decay of HDB flats due to their 99-year tenure, she was certainly concerned of the future value of the HDB which she has intention to purchase. She is afraid she will be unable to sell it down the road due to the falling lease tenure.
2) Purchase a private property
One of the option was to purchase a private property but my client also expressed her intention and interest to purchase 2 properties if possible, one which she could stay and another she could lease out.
Guess what… she ended up with not just one, but 2 private properties! How is that possible? Read on to find out how we managed to restructure her portfolio for her…
Purchasing a BTO/Executive Condominium
According to the HDB website, you need to fall into one of the schemes above in order to apply for an executive condominium (EC).
An executive condominium was introduced in 1996 to cater middle income home buyers (the “so-called” sandwich class); especially young graduates and professionals who can afford more than a HDB flat but find private property to be out of their budget.
An EC is similar to private condominiums in terms of facilities and amenities, but priced about 60-70% lower than the price of a condominium nearby.
After a 5 year minimum occupancy period, it can be sold in the open market to Singaporeans and Permanent Residents, and at the 10 year mark, it is fully privatised and can be sold to foreigners as well.
Divorcees are able to purchase an Executive Condominium under the “public scheme” with children under legal custody, care and control.
However, should the care and control be shared with their ex-spouse, they need to obtain consent from their ex-spouse before they can submit an application together with their child(ren) for the EC.
These rules also apply for a new Built to Order (BTO) flat. They can also execute this only after their final judgement is out.
Choice of EC
After the final judgement was issued, my client and her ex-spouse went ahead with the transfer of the HDB to him.
They went to the HDB branch to perform the transfer, which would take about 3 months before she would receive her cash proceeds and the refund of the CPF funds with accrued interest which she had used for the HDB flat.
Her ex-spouse also needed to produce proof of ability to sustain the loan for the valuation of the house.
It is treated similar to an open market purchase and her husband would have to pay for the flat at its current market value (not the value they had purchased directly from HDB years ago).
She intended to use the cash proceeds to pay for the reminder downpayment of the EC.
We managed to seek an extension of time from the developer to pay the remainder of the 15% to exercise the EC Sales and Purchase agreement only after she had received her cash proceeds from the transfer of her flat.
My client wanted to move in with her child as soon as possible.
She had the option of purchasing a BTO but she felt the time required to wait for a BTO (estimated 3 years) would be too long.
After sourcing around, she decided to settle for a 2 bedroom EC which was attractively priced around 650k.
Furthermore it is located at the doorstep of an upcoming MRT station.
With the cash proceeds from the sale of HDB flat, we now work on restructuring my client and her partner’s property portfolio.
Part of the cash proceeds were used to the pay the 15% downpayment of the EC, which was about S$96,000.
She had about S$200,000 as cash proceeds, so she decided to channel the remainder of S$104,000 to assist her partner in the purchase of his property which would now be under his name.
She is unable to put her name in the private property because she has already bought an EC and there is a 5 year minimum occupancy period (MOP) where purchasers are not allowed to purchase a private property.
They found a freehold property below 1.2 million located right next to an MRT which they happily booked. The downpayment amounts to about S$240,000.
With Ms C’s partial cash proceeds and her partner’s savings, they were able to “own” 2 properties by restructuring their portfolio.
They currently reside in the EC and are able to use the rental from the “second” property to pay for part of the mortgage of the private property and the EC.
They were able to own an EC, and also a freehold property which Ms C intends to leave to her child in future.
I went to visit Ms C at her EC recently. Her unit has a direct view of the pool. The facilities are well spaced out and the gym is well equipped and faces the pool.
Divorce, as painful and unpleasant as it can be, does not signal the end of the world.
Ms C’s scenario may not be reflective of the general public and her scenario may not be similar to others.
Nevertheless, I see a large desire of most divorcees to be able to provide for their children, and yet at the same time invest and grow their assets.
Ms DT is a practising real estate agent for more than 7 years and has extensive experience assisting clients in the upgrade of their HDB to their private property. For an in-depth discussion or questions on divorce of purchasing of an EC/private condominium, you may drop us a message below