Just received a circular from CPF regarding CPF refund rules upon property sales and thought it would be worthwhile to share as many sellers and even property agents may not know about this rules.

CPF has recently encountered cases where sellers faced difficulties completing their housing transactions as they were unable to make the required refunds to their CPF accounts upon the sale of their property. Some sellers reported being unaware of the CPF refund rules despite having engaged a property agent.

Upon the sale of a property, if the selling price (including the option monies) after paying the outstanding housing loan is not enough to make the required CPF refund, sellers do not need to top up the shortfall in cash provided the property is sold above or at market value. However, in such cases, any option monies (e.g. option fee and option exercise fee) received from the buyers in cash upon the sale of the property are considered part of the selling price and need to be refunded to the sellers’ CPF accounts before the transaction can be completed. The refunded amount will be returned to all the sellers’ CPF accounts in the proportion of CPF they had used towards the property.

Example

Mr and Mrs Tan are selling their property.

Selling Price $400,000
Valuation Price $390,000
Outstanding Loan $30,000
Mr Tan’s CPF principal amount withdrawn plus accrued interest (“P+I”) $450,000
Mrs Tan’s P+I $20,000
Option monies already received in cash from buyers $5,000

In this situation, the total required CPF refund is $470,000. The sales proceeds after paying off the outstanding loan is $370,000 ($400,000 – $30,000). As the property is being sold above the market value, the sellers do not need to top up the shortfall of $100,000 ($470,000 – $370,000) in cash.

However, Mr and Mrs Tan will have to refund the option monies of $5,000 in cash into their CPF accounts before the transaction can be completed, as it is considered part of the selling price. Thereafter, the CPF refunds credited to Mr and Mrs Tan’s CPF accounts will be as follows.

CPF refund formula.

Hope the above information is useful to you.

Frequently Asked Questions:

Q1) What happens if the property is sold below the market value? Does the seller has to top up the shortfall of S$100,000 in cash? Or pay back the option monies?

A1) If the property is sold below market value, the sellers will need to fully refund their respective CPF principal amount withdrawn plus accrued interest. This will be $450,000 for Mr Tan and $20,000 for Mrs Tan, totalling $470,000, based on the example in the circular. Hence, Mr and Mrs Tan will have to top-up the shortfall of $100,000 in cash in addition to the $5,000 option monies.

Q2) If sellers need to top up the shortfall in cash and are unable to do so, what recourse do they have? Can they back up from the property sale? This is because of the valuation of HDB is done after the sellers have issued the OTP.

CPF understand the concern about determining the selling price of the flat, as only the buyers may obtain a valuation report after the sellers have sold their flat. Sellers can use the following to help them set a price:

i. The recent selling price of properties sold in the vicinity of the flat. This helps the sellers estimate the market value of their flat/property. For HDB flats, this service is available at http://www.hdb.gov.sg/.

ii. Outstanding housing loan and if the seller needs to pay any resale levy.

iii. The amount that the sellers have to refund to their CPF accounts. They can check their housing withdrawal information at http://www.cpf.gov.sg. 

If the sellers find that their selling price is below the market value despite their best efforts to sell at market value, they can write to CPF. CPF will assess if they can waive the top-up of the P+I shortfall in cash. However, do note that even in the situation where CPF waive the top-up of the P+I shortfall in cash, any option monies received from the buyer in cash will still have to be refunded to the sellers’ CPF accounts as it is considered part of the selling price of the property.

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