Buying Guide
Option to Purchase (OTP) Explained: Deadlines, Deposits, and Walking Away
The Option to Purchase (OTP) is the document that turns "I'm interested" into a binding countdown. Once you pay the option fee and the seller signs, you alone have the exclusive right to buy that property within a fixed window. Miss the deadline, and the fee you paid is gone, with the seller free to sell to someone else.
This article covers what it actually locks in, what it costs, and what your options are before the clock runs out.
What an OTP actually is
An OTP is a legal contract where the seller grants you, the buyer, the exclusive right to purchase their property at an agreed price within a set period. In exchange, you pay a non-refundable option fee. During that window, the seller cannot sell to anyone else or back out, though you can, at the cost of forfeiting the option fee.
It is not the same as "exercising" the option, which is the separate step that actually commits you to the purchase.
Fees and timelines: HDB vs private property
| HDB resale flat | Private resale property | |
|---|---|---|
| Option fee | Between $1 and $1,000, negotiated between buyer and seller | Customarily 1% of purchase price (market practice, not set by law) |
| Option period | 21 calendar days, including weekends and public holidays | Customarily 14 days (negotiable) |
| Exercise fee | An amount that, with the option fee, does not exceed $5,000 | Customarily 4% of purchase price (market practice, not set by law) |
| Total locked in at exercise | Up to $5,000 | Customarily 5% of purchase price |
Model your own OTP deposit and timeline with PropLeh's Option Analysis tool.
The two decision points
1. Paying the option fee. This secures your exclusive right to buy but does not commit you to the purchase. You can still walk away before the option period ends, simply losing the option fee.
2. Exercising the option. This is the point of no return. You sign and return the OTP with the exercise fee within the option period, and the sale becomes a binding contract (an Agreement for Sale and Purchase). After this, you are bound by the contract: if you do not complete, you risk losing the full deposit paid so far (option fee plus exercise fee), not just the option fee, and may face further claims under the contract.
Between these two points is your window to arrange financing, get an in-principle loan approval, and confirm your maximum loan amount, not after you've exercised.
For an HDB resale flat, HDB also expects you to have a valid HDB Flat Eligibility (HFE) letter before the sellers grant you the OTP. If you are using CPF savings or taking a housing loan, you must submit a Request for Value to HDB by the next working day after the option date (processing fee $120 including GST), and the flat value must be available before you exercise the OTP.
What happens if you don't exercise in time
If the option period lapses without you exercising:
- The seller keeps the option fee.
- You lose all rights to the property, and the seller is free to grant an OTP to another buyer.
- No further money is owed by either party; the matter simply ends.
This is why confirming your loan eligibility before paying the option fee, rather than during the option period under time pressure, matters. A rushed in-principle approval that later falls through at exercise can cost you both fees.
Worked example
A buyer pays $1,000 for the option fee on a $550,000 HDB resale flat. The 21-day option period gives them time to finalise their home loan. On day 18, they exercise the option, paying the remaining $4,000 to complete the $5,000 deposit cap. The sale is now a binding Agreement for Sale and Purchase, and the resale completion process (HDB's standard timeline) begins.
Had they not exercised by day 21, they would have forfeited the $1,000 and the flat would have gone back on the market.
FAQ
Can I negotiate the option fee amount?
For HDB resale, yes, it's agreed between buyer and seller, up to a combined $5,000 cap with the exercise fee. For private resale, 1%/4% is customary but not legally fixed, and can be negotiated.
What if I exercise the option but then can't get my loan approved?
Once exercised, the contract is binding. Failing to complete can mean losing the deposit and further claims from the seller under the contract, which is why loan pre-approval before paying the option fee is strongly advised. For an HDB resale flat, HDB's OTP notes say buyers taking a bank loan must have a valid Letter of Offer from the bank when they exercise the OTP.
Does the option period differ by property type?
Yes. 21 calendar days is standard for HDB resale; private resale commonly uses 14 days, though this is negotiable between parties.
Is the option fee part of the purchase price or an extra cost?
It's part of the purchase price. It's credited toward the total amount owed at completion, not an additional fee on top.
Figures current as of October 2026. Always verify against the live HDB page before relying on them.
Working out how much deposit you'll need to exercise, or what happens to your timeline if financing takes longer than expected? Try PropLeh's Option Analysis tool, or message us on WhatsApp before you pay any option fee so we can check the numbers with you first.