The procedure of selling HDB resale flats is undergoing major change as the Housing Development Board (HDB) wants sellers and buyers to move away from using cash-over-valuation (COV) when negotiating resale prices. COV is the cash above the market valuation of the property that buyers pay to the seller.
The change will require buyers to obtain the option to purchase (OTP) before requesting for a market valuation of the unit from HDB. Sellers will not be able to request for the valuation of their property in future. This change in sequence will influence buyers and sellers to negotiate base on the latest transacted prices of HDB resale flats instead of using COV as the reference point.
Minister for National Development (MND) said that this will bring back the aim of valuation to help buyers to obtain a housing loan. Mr Khaw added that this will take some time for the buyers and sellers to adapt but this is good for long term market stability. The change also aligns the HDB resale market with the private housing market in terms of resale procedure.
The existing practice of using COVs as a benchmark when negotiating for the resale price started when HDB began publishing the overall median COVs in 2007. The intention for publishing the COVs was to improve market transparency and help buyers to find flats with lower COVs. Due to the COV data, sellers would first request for HDB valuations and use the published COV to negotiate for the resale prices with prospective buyers.
Together with the change, the number of days for buyers to exercise the OTP is increased to 21 calendar days, up from 14 days. HDB will post daily prices of resale transactions as soon as they are registered in order to facilitate the change and to keep the resale flat transactions up to date. HDB will continue to publish the COV but will monitor market reactions to the new changes in order to assess if COV data is still relevant after the change. HDB will work together with the Council for Estate Agencies (CEA) to deal with salespersons who try to obtain the valuation report.
Industry experts welcome the change and noted that it is a good time for changes in the resale procedure. There will not be strong protest from the sellers as the COVs is currently at a very low quantum. However, possible implication is that buyers may have to pay a more cash outlay if there is a huge difference between the agreed purchase price and the valuation price.
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