When buying from the Open or Resale market, a 1% Booking or Option Fee is required upfront and you are given a period of time, usually 14 days, to pay the balance 4% to exercise the Option to Purchase (OTP). In other words, you will need a minimum of 5% cash to pay the option fees, with the remaining 15% to be paid in cash and/or CPF (Ordinary Account) to complete the Option.

In the event you decide not to proceed with the purchase and do not exercise the Option, your 1% Option Fee will be forfeited by the Seller. The Seller is free to sell the property to another party when the Option expires.

When buying direct from the Developer, typically for a New Launch or Under-Construction Property, the booking fee to issue the Option to Purchase (OTP) is 5% to 10% (typically 5%). Upon signing the Sales and Purchase (S&P) Agreement, the payment would be 20% less the Booking Fee paid, typically within 8 weeks. Thereafter, the payment would be subject to the progress of the construction.

In the event you decide not to proceed with the purchase and do not endorse on the Sales and Purchase Agreement, 25% of the Option Fee will be forfeited by the Developer. For example, if you have paid the 5% Option Fee, then 25% of 5% = 1.25% of the Purchase Price will be forfeited.

By Eileen Tan and Ui Wei Teck, property investors and authors of Enjoying Mid-Life Without Crisis. This tip and dozens more are from their book.

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