What are the implications of this new HDB rule that does away with COV?

For 2 decades now sellers and buyers have been using HDB valuation to determine the fair market price of a unit. Since Monday 10 March 2014, HDB announced that sellers and buyers will now make use of the last transacted price instead of the official valuation to determine the selling price. HDB will be updating sale prices as soon as resale transactions are registered on a daily basis so that sellers and buyers will be updated of the latest HDB  transaction price.

In the past, the normal practice was for sellers of HDB flats to first request for a valuation of their flat before they put in out in the market. Then based on factors like condition of the flat and proximity to the MRT etc, a cash premium is added on top of the valuation and this 2 figures will form the sale price.

I think the new HDB rules will give rise to the following:

Lower Option Fee

Now that HDB sellers and buyers need to sign the Option To Purchase first before requesting for the valuation, it is likely that buyers will ask to give a very small amount of money as the Option Fee. This is because they may or may not exercise the Option as the valuation may come out much lower than they agreed sale price and the buyers may not be able to come up with the cash. So they will have no choice but not to go ahead to exercise the option.

Will this new rule stem the fall in HDB resale prices?

I feel that this new rule in using HDB transacted prices instead of the valuation may stop the prices from falling as there will no longer be this term “how much below valuation”. In recent months due to the falling HDB resale prices, instead of asking “how much cash above valuation”, the buzzword among agents have been “how much below valuation” which suggests a free fall. So by doing away with valuation before the deal is closed and before HDB resale prices continue to fall any further, this could be a smart move to skilfully stem the drastic drop in HDB resale prices.

Have to check ethnic ratio closely as Option period is now 21 days

A point for all to take note is to make sure that the Option is exercised before the end of the month even though the option period of 21 allows the buyer more time.

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