Common Pitfalls to Avoid When Buying Property in Singapore – IPA, Valuation, OTP & More

Purchasing property in Singapore is a significant endeavour that demands meticulous planning and informed decision-making. The journey to homeownership is fraught with potential pitfalls that can lead to financial strain or legal complications if not navigated carefully.

This comprehensive guide aims to illuminate common mistakes in the property buying process and provide actionable advice to ensure a seamless and successful transaction.

1. Overlooking Credit Score Health

A robust credit score is paramount when securing a loan for property purchase. Many prospective buyers underestimate the importance of their credit history, only to face challenges during the mortgage application process. In Singapore, financial institutions assess your creditworthiness through reports from the Credit Bureau Singapore (CBS), which detail your repayment habits and existing debts. A less-than-stellar credit score can result in higher property loan interest rates or even loan rejection.​

Proactive Measures:

• Regular Monitoring: Obtain and review your credit report well in advance of your property search. This proactive approach allows you to identify and address any discrepancies or areas of concern.​

• Timely Debt Management: Consistently pay off outstanding debts and avoid accumulating new liabilities, especially in the months leading up to your mortgage application.​

• Seek Professional Guidance: Engage with financial advisors or mortgage brokers to understand the implications of your credit score on loan eligibility and to strategise improvements if necessary.​

• Misinterpreting In-Principle Approval (IPA)

Securing an IPA loan provides an estimate of the loan amount a bank is willing to offer based on your current financial standing. However, it's crucial to recognise that an IPA is not a binding commitment. Changes in your financial situation, such as job transitions or additional debts, can lead to a reassessment and potential alteration of the initial approval.​

Key Considerations:

• Maintain Financial Stability: After obtaining an IPA, avoid significant financial changes that could impact your debt-to-income ratio.​

• Regular Updates: Keep open communication with your bank, updating them on any material changes to ensure the IPA remains reflective of your financial position.​

• Understand Limitations: Recognise that an IPA is a preliminary assessment; final loan approval is contingent upon comprehensive evaluations closer to the purchase date.​

• Navigating Property Valuation Discrepancies

In the Singapore property market, it's not uncommon for a property's selling price to exceed the bank's valuation. This discrepancy means that the loan quantum is based on the lower valuation, leaving buyers to cover the shortfall out-of-pocket.​

Strategies to Mitigate Shortfall Risks:

• Multiple Valuations: Consult various banks to obtain multiple valuations, as assessments can differ between institutions.​

• Financial Buffer: Set aside additional funds to address potential valuation shortfalls, ensuring you're prepared for any financial gaps.​

• Informed Negotiations: Use valuation reports as leverage during price negotiations with sellers to arrive at a fair purchase price.​

• Mismanaging the Option to Purchase (OTP)

  
  

The Option to Purchase is a pivotal document in property transactions, granting buyers exclusive rights to purchase a property within a specified time frame, typically 14 days for private properties. Failing to exercise the OTP within this period results in forfeiture of the option fee, often amounting to 1% of the property’s price.​

Best Practices for Managing the OTP Period:

• Have Financing Ready: Before committing to the Option to Purchase, ensure your Singapore home loan is fully approved—not just under IPA status. Avoid relying solely on pre-approvals.

• Legal and Administrative Preparedness: Engage your lawyer early to vet the OTP terms and begin conveyancing checks immediately. Any delays, even due to public holidays or slow documentation, can cost you dearly.

• Avoid Rushed Decisions: Don’t issue an OTP just to “secure” the unit if your loan for property purchase isn’t settled. This is one of the most common traps in any home buying advice list.

• When the Bank’s Valuation Undercuts Your Offer

  
  

It’s a classic scenario: you’ve agreed on the purchase price, but the bank’s valuation comes in lower. The result? You need to pay the difference in cash, and this shortfall cannot be covered by CPF or loans.

This is more common than buyers expect, especially in hot markets or with older properties.

To protect yourself:

• Compare Bank Valuations: Each bank uses different valuation metrics. A mortgage broker can help compare these to ensure you’re getting the best deal and property loan interest rate available.

• Set Aside Emergency Cash: Always budget for a valuation gap—even if it doesn’t happen. It’s better to be prepared than to scramble at the last moment.

• Keep Negotiation Room: Don’t offer top dollar unless the property has verified valuation backing. Remember, emotion should never drive price.

• The Perils of Late Completion

If the seller can’t move out on time, you may be entitled to Late Completion Interest (LCI)—but chasing it can be frustrating. Delayed handovers can throw your renovation timeline, moving dates, or even temporary housing plans into disarray.

Here’s how to protect your timeline:

• Add Clear Terms to the Sales Agreement: Include an LCI clause that ensures compensation if handover is delayed.

• Have a Backup Plan: Always have short-term housing options or storage solutions ready. Delays, though rare, do happen—especially with resale properties.

• Don’t Cut It Too Close: Don’t plan to move in on the exact day of completion. Allow a buffer in case of hiccups.

• Ignoring Legal Due Diligence

One of the most overlooked things to do before buying a house in Singapore is ensuring the legal title is clean. Some properties, especially older or inherited ones, come with issues—like outstanding caveats, divorce-related disputes, or bankruptcy complications.

Always work with a conveyancing lawyer who will:

• Do a full title search

• Check for encumbrances or caveats

• Ensure no third-party claims exist

• Confirm the seller’s legal right to sell

Legal landmines are rare, but costly when missed. And they’re not always visible from a clean façade and a staged living room.

8. Believing Verbal Repair Promises

Many buyers fall into the trap of trusting sellers who say, “Don’t worry, I’ll fix it before you move in.” Then comes handover day, and that leaky tap, faulty air-con, or yellowing wall is still exactly the same.

This is where the “as is, where is” clause hits hard.

Don’t fall for it:

• Document Everything: Get every promise in writing. Include it in the OTP or Sales & Purchase Agreement with timelines.

• Do a Final Inspection: Revisit the unit before completion and flag any unfulfilled repairs.

• Leverage Legal Tools: If the seller doesn’t meet agreed conditions, your lawyer can withhold completion or seek compensation.

• Hidden Bills: A Common Post-OTP Headache

Even after the Option to Purchase is exercised, surprises await—like unpaid conservancy fees, property taxes, or overdue utilities.

This can cause delays in getting possession or even lead to unpleasant notices arriving after you move in.

How to prevent this:

• Ask for Clearance Letters: Your lawyer should request proof that all bills are cleared before completion.

• Ensure Tax Settlement: Property tax obligations must be settled before title transfer, even if you’re not legally liable.

• Utility Transfer: Coordinate closely with the seller for timely termination and transfer of services.

• Falling for the “Nice Unit, Nice Seller” Illusion

  
  

Even the nicest seller can become a problem if they refuse to vacate the unit on time. Overstaying after completion is not just frustrating—it’s a breach of contract.

Protect yourself:

• Include an LCI Clause: Ensure your Sale & Purchase Agreement entitles you to late completion interest.

• Know Your Legal Rights: If necessary, your lawyer can serve formal notices or even seek a court order to remove an overstaying seller.

• Keep Plan B Ready: Have a backup place to stay, just in case. A short-term rental is better than a full-blown moving day meltdown.

  
  

Final Thoughts

There’s a reason seasoned professionals always stress due diligence—it prevents expensive regrets later. From securing a rock-solid IPA loan to understanding how home loan bank interest rates fluctuate, every step in a property transaction has its own risks.

Learn how to estimate your property's value in Singapore like a pro. This DIY guide covers key factors, tools, and tips every buyer and seller should know

So if you're buying a home in Singapore for the first time or upgrading from an HDB, take time to prepare. Get your financing in order, seek expert legal help, and don’t let emotions cloud your judgment. The checklist of things to do before buying a house might seem tedious now—but it’s what keeps your future home from becoming your biggest liability.

In the end, smart decisions made early will ensure you spend your weekends enjoying your dream property—not untangling legal battles or nursing financial wounds.