Once we were invited to a friend’s housewarming party. The young couple was pleased to show us around. We were impressed by the great efforts they made to decorate their new home.
Suddenly, the wife lamented that they were upset about the agent who sold them the flat and the contractor who renovated it. After she finished her stories, the husband shook his head and added,
“Do you know that, from the time we started planning our wedding, to buying this place, doing renovation, and finally moving in, almost every service we engaged we found ourselves being cheated every step of the way?”
We all burst out laughing. We were not mocking the poor couple. We laughed because what they just said had struck a chord with us. We all shared similar experiences.
CASE (Consumers Association of Singapore) received 15,744 complaints in 2017. The top three complaints are about motorcars (15 percent), beauty services (9 percent) and contractors (8 percent). The findings are not surprising.
What makes first-timers vulnerable?
In my new book Behind The Scenes of The Property Market, I mentioned the fact that people tend to make big financial mistakes when entering a new phase in life, especially for newly-weds and new parents.
Why are we being exploited when we begin our new chapter in life? Because when we are doing something for the first time, it is difficult to know all the ins and outs, tips and traps to make sensible decisions.
Not many will go to a wedding planner or a bridal studio telling them that you need their service again because this is your second or third marriage. And unless you are somebody like me who take buying properties as a hobby, you are most likely buying or upgrading to a private home for the first time. When it is your first time getting married, buying a home, using an agent, engaging a lawyer, borrowing a loan, or renovating a flat., you will be an easy target for exploitation compared with other experienced customers.
If not you, who? If not now, when?
Chances are, after you have been overcharged or short-changed, you might not even know. Or you think it is unavoidable and everybody experience similar things. Afterall, this is a once in a lifetime thing, so it is acceptable to have a few hiccups. You have budgeted for it anyway and you don’t mind parting with more of your hard-earned money.
The breaking point comes when you find out one day that there are people who make much better decisions than you in similar situations. Then you lament all the wrong decisions you have made and all the money you have wasted.
Very often, people who make wiser decisions are not wiser than you. They are just more informed than you. They learn somewhere or from someone all the dos and don’ts in order to make better choices and avoid repeating other people’s mistakes.
How to get it right the first time
Whether you like it or not, your life can be completely changed by a few defining moments: You go along with others to a gathering and there you meet the one with whom you are going to spend the rest of your life. You step into a sales gallery by chance, book a unit on impulse and spend your next 25 years paying the mortgage.
We all spend 15 to 20 years to go through the local education system to get the necessary qualifications for work. But unfortunately, we haven’t spent a single day learning how to buy a home or get the necessary qualifications before taking the plunge.
A private property can easily cost you a million dollars these days. You’d better know how to get it right the first time. I am going to share with the participants the tips and traps of buying or upgrading to private properties in next Saturday’s How To Buy First Private Home Workshop. Let me give you a preview below.
1. Do your due diligence
In my blog post “The 7 deadly sins of Singapore property buyers”, one of the seven sins I pinpointed is avoiding legwork.
Some people can spend hours doing online research and test-driving when shopping for their next car. But when it comes to buying a home, the only research they have done is listen to the sales pitch of an agent and ask him/her some simple questions. Their so-called research can be limited to what the industry stakeholders want them to know – from advertorial-style property articles published in local papers and on real estate portals.
Many know that a project’s past transactions in the last five years can be found online on the Urban Redevelopment Authority (URA) website. But they have no idea where to check transactions earlier than that. For the quarterly URA real estate statistics, local papers can use biased headlines to conclude what they want readers to believe how the private residential market is performing. But the different sets of data can give us a lot of hints about the sales/rental trends, vacancy rate, supply pipeline and the best time for homebuyers to enter the market.
Another important set of URA data “Prices of Private Residential Units Sold By Developers” can also disclose key information of new launch projects, including the number of unsold units left on the shelves and the number of returned units every month.
2. Be smart when buying your private home
Over the years, I have picked up a few tricks to negotiate with buyers or sellers for a better deal. I am happy to share with fellow homebuyers and property investors. I also have tons of stories about dealing with property agents. Fortunately, today I no longer need to depend on luck to find a good agent.
You have to kiss many frogs before you find a prince. You must learn how to find the prince, how to tell a real prince from a fake one, and how to tell a good prince from a bad one.
Don’t engage any agent because of kinship, friendship or referral. Always check references. Offer a small task first before you commission any big job.
I admit that I have made some mistakes financing my properties in the past. There was a lot of trial and error along the way before I learned how to get the most from bank financing, including when to use cash or CPF, which bank to use, what package to take, how to do re-financing, etc.
3. Avoid falling into after-purchase traps
It is never an easy job to manage vendors. In my new book Behind The Scenes of The Property Market, I highlighted the sad truth that owners can pay a high price to engage the service of property agents, conveyancing lawyers and renovation contractors, but they can get shit in return. In this market, many vendors don’t believe in repeat business. They are only interested in getting the most from you in one transaction.
For example, for the five private properties I bought, I had to do small to big renovations after handover of the place. Frankly, over the years I have yet to find a good contractor that is honest, professional and punctual, that prices competitively, completes the job within budget and finishes all the work on time. It is important to be realistic about your expectations.
After you collect the key to your new home, if you are not working in the construction industry, don’t try to spot developer defects and workmanship problems by yourself. It is silly to be penny wise pound foolish – spend a million on a condo unit and hundred thousand more on renovation, but save a few hundred bucks to engage professional home defects inspection service. You may be planting a timebomb that will explode a few years down the road.
I don’t want to be negative. But as a fellow homebuyer who has dabbled into private homes for almost two decades, I want to alert you all the possible bad things that may happen to any homebuyer. Are there any happy encounters? Of course there are. But that is provided that you are really lucky or you know how to make them happen.
How To Buy First Private Home Workshop will be held at Hilton Singapore on 23 January 2021 (Sat). Click here to find out more.
“I admit that I have made some mistakes financing my properties in the past. There was a lot of trial and error along the way before I learned how to get the most from bank financing, including when to use cash or CPF, which bank to use, what package to take, how to do re-financing, etc.” You are a true practitioner of Nassim Telab’s Antifragile advice! I have deep respect to what you say. I have been recommending your blog to all my friends who are getting a house.
Yes, we all learn through trial and error. I wish there were more fellow homebuyers and investors come forward to sharing their experiences.
Thank you for your kind words. Besides recommending my blog, can recommend my book to your friends as well 🙂 http://propertyclubsg.com/books