Given that the property market is softening now, it is more common to see HDB flats selling near or at their valuation. In fact, it is possible to see that there are HDB flats selling below valuation. If you are contemplating to sell your HDB flat below valuation and you have used CPF funds to finance your HDB flat, do keep in mind that you may be required to refund back any shortfall in your CPF refund if the sales proceed is insufficient to pay back this refund. This CPF refund is the amount which you have drawn out from CPF to service your housing loan plus accrued interest. This can be illustrated by a simplified example below.Valuation : $400,000
Sale Price : $380,000
Outstanding Housing Loan : $300,000
Amount left : $80,000
CPF refund with accrued interest : $120,000
Shortfall : $40,000
The sales proceed received will be used to pay off the outstanding housing loan first, which can be from HDB or the banks. The amount left after paying off the loan will be used to pay off the housing levy if there is any to be paid before it is being used to pay the CPF refund as explained earlier. In the example, the seller of the flat was left with $80,000 after paying off the outstanding housing loan. However, the seller of the flat is required to pay $120,000 back to the CPF board. As such, there is a shortfall of $40,000. Since the flat was sold below valuation, the CPF Board may ask the seller to top up the CPF shortfall by the amount sold below valuation. Thus, do think carefully about the consequences and whether you will be affected by this if you are planning to sell your HDB flat below valuation.
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very informative piece as always
ReplyDeleteHi,
ReplyDeleteThanks for your compliment.
Kay
Even if sold at valuation, there is still a shortfall of 20k.
ReplyDeleteIs this a real example?
This comment has been removed by the author.
ReplyDeleteHi,
ReplyDeleteThis is a fictitious example. I came up with the figures as an illustration. My apologies if it is misleading.
Kay
My purchase price for my flat in 2001 was $338K.
ReplyDeleteHowever the HDB loan was ~$219K, my CPF lumpsum taken was ~$166K and my wife's CPF taken was ~$44K: total $429K?
why the discrepancy. I've sold my flat for $385K ($15K above valuation) but with CPF accrued interest to pay back, I'm still facing a shortfall?
Can anyone explain?
Hi,
ReplyDeleteI'm not very clear about what kind of explanation you are looking for actually. Perhaps you can provide more details.
Kay
Because everything is all based on sale price and valuation, can a person sell a property drastically below valuation, then privately settle the actual amount?
ReplyDeleteeg: seller wants to sell property at 400K. valuation is 380K.
recorded sale price is 200K.
stamp duty etc are all based on 200K.
buyer then gives seller 200K.
everyone saves money, "official prices" then do not go up and up and up.
??
Hi,
ReplyDeleteI'm not an real estate agent thus I'm not able to answer this. It will be suspicious if one sells way below the valuation price.
Kay