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Old 01-09-2003, 09:59 PM   #33
sunsetbay
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here's the text version of jq75's post.

Fm TODAY, Monday, 1 Sept 2003

'Cash back' is illegal

HDB warns those who over-declare value of resale flats

by Lee Yew Meng
yewmeng@newstoday.com.sg

THE Housing and Development Board (HDB) has warned flat owners not to over-declare the value of any resale flat transaction. It said that, if an over-declaration is discovered, all parties and the property agents involved will be prosecuted.

The warning comes at a time when a practice known as "cash back" has surfaced in recent months because the prices of HDB resale flats have fallen below valuation levels.

A board spokesman said that it had received a few anonymous tip-offs of suspected "cash back" cases but that there was no evidence to show that the parties involved had over-declared their resale prices.

However, some housing agents said they had encountered more "cash back" demands from flat buyers recently.

Mr Chris Koh, vice-president of Dennis Wee Realty, said: "One of my agents lost a deal because he was not willing to do it. In the end, the buyer went to buy another unit where the owner agreed to offer 'cash back'."

He added that, on the telephone, agents representing buyers ask if there is any "cash back". "The moment you say 'no', they will not arrange for the buyers to view your flats."

The "cash back" practice works like this: For example, the owner of a five-room HDB flat has tried unsuccessfully for six months to sell his unit at the valuation price of $300,000. He then gets desperate and is willing to part with the flat at below valuation price. The buyer, on the other hand, is willing to buy at $280,000 but he is keen to declare the sale price with the approval of the seller at $300,000.

In return, he will get $20,000 (the difference between $300,000 and $280,000) from the seller in cash after the latter collects his final payment from the HDB.

According to Mr David Huan, managing director of the housing agency, Rainbow Cottage, who has advised his agents against the "cash back" practice, the liberalisation of HDB loans has unwittingly lent support to this practice.

According to several property agents, due to a competitive market, banks often value HDB flats five to 10 per cent higher than HDB-approved valuations.

"As long as the buyer's debt ratio does not exceed 35 to 40 per cent of his income, the banks will be willing to lend," said Mr Huan.

Under the current resale procedure, buyers and sellers of HDB resale flats are required to declare in the application form their particulars and information relating to the resale transaction, including the transacted price and the amount of cash deposit.

Housing agents who broker the resale transactions are required to declare the price and the amount of cash transacted.

Under the Oaths and Declarations Act, any person who makes a false statement in a statutory declaration is guilty of an offence that carries a penalty of up to three years in jail or a fine, or both.

Under the Housing and Development Act, any person convicted of making a false statement can be fined up to $5,000 or be imprisoned for up to six months or both.

The HDB said that, if the information was found to be false before transaction was completed, it would cancel the application.

"Where the offence is uncovered after the purchase of their flat, HDB may compulsorily acquire the flat under its Act," it said.
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