Understanding the Option to Purchase (OTP) in Singapore Property Deals

The Option to Purchase (OTP) is a key legal step in Singapore property transactions. Learn what it is, how it works, and what you need to know before signing.

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Jul 14, 2025 - 16:01

Understanding the Option to Purchase (OTP) in Singapore Property Deals

In Singapore, the process of buying a property—whether HDB or private—includes a legal document known as the Option to Purchase (OTP). This agreement is often the first formal step in the property transaction and serves as a legally binding commitment between the buyer and seller. Misunderstanding or misusing the OTP can result in lost money or legal complications. In this article, we’ll explain what the OTP is, how it works, and what to look out for before you sign one.

What is an Option to Purchase (OTP)?

The Option to Purchase is a legal document granting the buyer exclusive rights to buy a property at an agreed-upon price, within a specified period. In exchange, the buyer pays an option fee.

During this period, the seller cannot offer the property to anyone else. The buyer then decides whether to proceed with the purchase by exercising the option.

OTP for Private Properties vs. HDB Flats

Private Property:

Drafted by the seller’s lawyer or using the standard Law Society OTP template
Option period: typically 14 to 21 days
Option fee: 1% of the purchase price (non-refundable)

HDB Resale Flat:

OTP is obtained through the HDB resale portal
Option period: 21 days
Option fee: between $1 and $1,000
Exercise fee: up to $5,000 (inclusive of option fee)

Key Terms in the OTP

1. Option Period

This is the time frame (commonly 14–21 days) during which the buyer decides whether to exercise the option. If the buyer does not act by the deadline, the seller keeps the option fee and the deal is void.

2. Option Fee

An upfront payment made by the buyer to secure the option. It’s usually 1% for private properties and up to $1,000 for HDB.

3. Exercise Fee

The remaining deposit (usually 4% for private, up to $5,000 total for HDB) paid when exercising the OTP. Together with the option fee, this forms the 5% down payment.

4. Purchase Price

The mutually agreed sale price stated in the OTP. This is legally fixed once the OTP is signed.

5. Completion Date

The date when the sale is legally completed, and ownership is transferred.

The OTP Process Step-by-Step

For Private Property:

Offer and Negotiation
Buyer and seller agree on a price and terms.
Seller Issues OTP
Buyer pays 1% option fee.
Buyer Secures Financing
Within the option period, the buyer arranges bank loans and conducts due diligence.
Buyer Exercises OTP
Pays additional 4% exercise fee to seller’s solicitor.
Sales & Purchase Agreement Signed
Legal contracts are exchanged, and transaction progresses to completion.

For HDB Flats:

Buyer and Seller Use HDB Resale Portal
Login using SingPass to generate and accept OTP digitally.
Buyer Pays Option Fee
Up to $1,000.
Buyer Exercises OTP
Pays remaining exercise fee (total not exceeding $5,000).
Submit Resale Application to HDB
Both parties submit within 7 days of each other.
HDB Processes Transaction
Completion happens in 8–10 weeks.

Can the OTP Be Cancelled?

Buyer backs out: Option fee is forfeited, but no legal action if within option period.
Seller backs out: Seller may be legally liable if buyer has exercised the OTP.
After OTP is exercised: The agreement becomes binding. Backing out could result in lawsuits or loss of deposit.

Always seek legal advice before cancelling any OTP agreement.

Legal and Financial Considerations

Once exercised, the OTP forms a legally binding contract
Stamp duty (BSD and ABSD) must be paid within 14 days of exercise
OTPs can include special clauses (e.g., subject to valuation or financing)
Banks require a copy of the OTP to process loans

Common Mistakes to Avoid

Paying the option fee without securing loan pre-approval
Missing the exercise deadline
Failing to verify property details before signing
Assuming HDB and private OTPs work the same

Tips for Buyers

Always get an Approval in Principle (AIP) from the bank before committing
Ensure you’re financially ready for BSD, legal fees, and loan repayments
If unsure, ask your property agent or lawyer to review the OTP terms
Be cautious of deadlines—missing one can cost you thousands

Conclusion

The Option to Purchase is a crucial component of any property transaction in Singapore. Whether you’re buying a resale HDB or a private condominium, understanding how the OTP works ensures you stay protected and in control of the process. Always read the terms carefully, consult professionals when needed, and make sure your financing is in place before committing. With a well-handled OTP, your property purchase can proceed smoothly and confidently.