What is Negative Sale and How to Resolve it | Singapore Real Estate


What is Negative Sale? And how can you resolve it If you are a property agent, should you handle
it? Learn more about Singapore Real Estate with
GC. A negative sale occurs when the sale proceeds
are not enough to cover its outstanding loan, and, or required CPF Refund. Required CPF Refund includes CPF Housing Grants,
and accrued interest you would have earned if you have not withdrawn your CPF to service
your housing loan. A negative sale can occurs both in HDB flat
as well as in private residential. For those who bought their houses in 2013,
especially for resale HDB flats, where the prices are at its peak, will find that if
they were to sell their flats today, very likely, they will have a negative sale. Chances are, they will not have enough sale
proceeds to cover their required CPF refunds, after paying off their outstanding housing
loans. However, they may not necessarily need to
top up the difference back to their CPF account, as long as they sell their houses at market
valuation. If they sell below market valuation, then
they will have to top up. Whatever is the case, the option fee, including
the exercise fee, which forms part of the sale proceeds, still have to refund to the
CPF account in a negative sale. If a negative sale occurs in a private residential,
it is more complicated. It depends on whether is the private residential
bought or refinanced, on or after 1 Sep 2002. This date is significant because it is the
date the rules have changed, in priority ranking for CPF withdrawals and bank loans, after
a review by the Economic Committee set up to re-look at the CPF system. For private residential bought or refinanced,
on or after 1 sep 2002, the sale proceeds will be used to pay the outstanding loan first,
then the required CPF refund. For private residential bought before 1 Sep
2002, or not refinanced after this date, the sale proceeds will be used to pay:
firstly, CPF savings withdrawn up to 80% valuation limit, plus cpf savings used for legal and
stamp duties; secondly, on pari passu or equal ranking basis,
remaining 20% cpf valuation limit and, bank loan and interest;
then thirdly, CPF savings withdrawn beyond valuation limit and accrued interest. For this latter case, in a negative sale,
you may not even have enough to repay your outstanding bank loan after the sale proceeds
are used to pay off the cpf 80% valuation limit first. For CPF refund, you may not need to top up
in cash if you sell at market valuation. But for bank loan, you definitely need to
top up, as bank won’t write off your debt. Now the more important question is, how can
you resolve a negative sale situation? Firstly, if you are a property agent, especially
if you represent the buyer, be aware that some negative sales can be a bankrupt situation. When the bank enforces a foreclosure, and
freezes any money, your buyer may lose his option money. Secondly, try to sell your property at market
valuation, so that you do not need to top up your cpf in cash. Nowadays, a lot of HDB flats are sold below
valuation. One way to sell at a higher price is to enhance
your house value, by doing a home staging to make it look nicer. Another way is to talk to your valuer to see
if the valuation can match your selling price. Thirdly, do a refinancing. Especially for private residential bought
before 1 sep 2002, and not refinanced after this date. By doing a refinancing, your outstanding bank
loan now ranks first, followed by your cpf refund. And as long as you can sell at market valuation,
you do not need to top up your cpf refund in cash. If you enjoy this video, give me a like, click
on the subscribe button, turn on the notification, and comment below. If I see any interesting comment, I may do
a video for you. If you need more personal advice, click on
the whatsapp link in the description. Learn more about Singapore Real Estate with
GC.

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