Money Mysteries: What Happens to Your Money During an En-bloc Sale?

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Money from HDB en-bloc sale

Selling your property through an en-bloc sale is not as straightforward as having it sold on the open market. Here’s what you can expect during the process. 

Money Mysteries is a column by Ryan Ong that explores the odd world of money. Where does it all go when you give it to a bank? Why does a potato sometimes cost S$200, or shipping a sofa sometimes cost S$1.99? Why is art so expensive, and how do people (legally) rip off casinos? Every week we answer these questions and investigate a new Money Mystery.

En-bloc sales are all the rage right now. Developers – mainly foreign ones – are throwing monster bids at old properties, and land is now being sold at 29 per cent higher than in 2015. But amid all the hoo-ha, a lot of owners are still confused as to how the money part works. How do you get paid, and when?

Calculating how much you can get from HDB en-bloc sale

Who Decides How Much Your Old Property Will Sell For?

When an en-bloc attempt is made, the owners who are for the sale will form a pro-temp committee. This is a group of owners who want the sale, and who go around rallying others to agree to the collective sale.

It is the job of this pro-temp committee to hire select professionals, who oversee different parts of the en-bloc procedure. One of these professionals is the property consultant.

The property consultant will analyse the surrounding properties, and the development potential of the land. They will then come up with the reserve price, or minimum price, that the property should be sold at. The property consultant also suggests the distribution method of the proceeds.

When the Collective Sale Agreement is Drafted, You’ll Know How You Stand to Gain

Under advisement by the property consultant (and some other professionals), the pro-temp committee will draw up the collective sale agreement. This will highlight, among other things, how much each owner will get, and how the proceeds will be distributed.

You may find, for example, that you’ll be getting S$2 million for your property, but that the proceeds will only arrive six months after you vacate the house.

During the Extraordinary General Meeting (EGM), you’ll have the ability to protest that sum if you find is unsatisfactory. It’s up to the pro-temp committee to tweak the deal, until you agree.

How much you get, ultimately, comes down to the back-and-forth negotiations of the collective sale agreement. Things can get pretty heated, so get ready to stand your ground.

Once the owners of 80 per cent of the property share value (90 per cent if the property is less than 10 years old) agree to sell, the deal goes through.

We stress that it’s 80 per cent of the property share value, not 80 per cent of the owners – an owner who has five units will outvote an owner who only has one. You can check with the Building Construction Authority (BCA) website, to work out what your share value is.

board meeting to decide on en-bloc sale

If There’s No Unanimous Vote, the Strata Title Board Comes Into the Picture

Even if the 80 or 90 per cent majority is reached, Strata Title Board must still give its approval. The only time their approval isn’t needed is when there’s a unanimous (100 per cent) decision to sell.

If you’re still unhappy about the price, you have one last chance to object.

The Strata Title Board will look for anyone who makes a financial loss. This is defined as getting less from the sale of the property (factoring in relevant costs, such as Sellers Stamp Duty if you bought it in the past three years), than you would get from selling it.

Note, however, that it’s not considered a financial loss if you make less than someone else.

For example, say you bought the property for S$1.8 million. if you’re getting S$ 2 million for your property (after deducting costs like taxes), it doesn’t count as a loss, even your neighbour is getting S$2.1 million.

However, if you are getting only S$1.7 million from the sale, that counts as a loss, and you should notify the Board.

Usually, the Strata Title Board will refuse the application to sell, if anyone would end up selling at a loss. If you’re in such a position, this gives you leverage to ask for money – only settle for the proceeds once you’re spared from a loss.

en-bloc property

The Money Comes After the Handover of the Property

You will usually be given three to six months to vacate your property. As to when the proceeds arrive after that, it’s down to the deal with the buyer.

In many cases, you’ll receive the proceeds within three to six months. In worst case scenarios however, some owners have received their proceeds only after a year. In the meantime, you’ll either have to find temporary accommodation, or buy a new house (if you can afford to do so before the proceeds come in).

As an alternative, if the money will arrive in six months or less, you can use a bank bridging loan. Banks can extend you a loan of up to 15 per cent of your new property’s value, at rates of around 6.5 per cent per annum. This can be used to cover the costs of buying a new house, until the proceeds from selling your old home arrive.

Read This Next:

Why is Singapore Seeing Record-breaking En-bloc Prices?
How Can Singaporeans Buy A House Without The Bank’s Help


Ryan
By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.