Plan the Exit Before You Plan the Entry

The question that gets skipped

Most property conversations run forwards. What’s the price, what’s the total outlay, what might it be worth in five years.

All fair questions, and all of them depend on one that hardly ever comes up.

Who buys this from you?

Picture a specific household. What’s their household, what do they need, and what else are they viewing that same afternoon?

If you can’t describe that person, you can’t sensibly guess what the place will be worth; a future price is just the amount one buyer was willing to pay.

Describe the buyer out loud

Try it on something you’re considering. Finish this sentence: the person who buys this from me is...

A good answer sounds like a real household. A family who need a third bedroom and want to stay in this school catchment. A couple selling a landed house who want something smaller nearby.

A weak answer sounds like this: someone who wants capital appreciation. An owner-occupier may need more space or a shorter commute. An investor will also compare likely rent, holding costs and resale demand.

If the only person you can picture buying it is another investor betting on the same price rise you are, you don’t have a buyer waiting. You’ve got someone who needs prices to keep climbing as badly as you do.

What makes a place hard to sell

These are the ones that catch people out, and none of them show up in the asking price.

• A layout only you would like. Odd room shapes, or a bedroom you walk through to reach another room. Fewer buyers want it, so it sits longer and usually goes for less.
• The wrong unit in the right project. Same size, same building; one faces a quiet garden and the other faces the car park ramp. They don’t fetch the same price and they don’t sell at the same speed.
• Priced above everything around it. If your place costs more than clearly better options a few streets away, buyers go there instead. You’re not competing with your neighbours; you’re competing with everything else they could buy.
• A lease that’s running down. Leasehold value doesn’t drop off a cliff. What shrinks is the group of people who can buy it, and that happens earlier than most owners expect. Banks and CPF treat a shorter lease differently. Check the current rules before you rely on this.
• New buildings finishing just as you sell. If a lot of similar units are handed over nearby around the time you want to move, your buyer has more choice and less reason to hurry.

The problem with buying below valuation

The usual advice is to buy below valuation and wait. I think that advice is incomplete.

A place is normally cheap for a reason, and the reason usually stays with it. If a unit is cheap because it faces a main road, the road is still there when you sell. A lower purchase price may reflect that drawback. Future buyers may expect a similar discount.

The discounts worth having come from the seller’s situation rather than the property. A divorce, a posting overseas, an estate being settled. Those reasons disappear the moment you own it; a main road doesn’t.

How this changes your shortlist

Once you ask the exit question first, the shortlist changes shape. Two places at the same price stop looking alike. You’re no longer comparing what you pay; you’re comparing how many people will want it, and how quickly, on the day you need to sell.

That’s a harder question, and it’s why two units in the same building at almost the same price are often not the same decision at all.