Option to Purchase (OTP)
What is OTP (Option to Purchase)?
An Option to Purchase (OTP) is a document in which a seller gives a buyer the exclusive right to buy a property at an agreed price within a fixed period, in return for an option fee. If the buyer exercises the option in time it becomes a binding contract; if not, the buyer usually loses only the option fee.
Key facts
- What it does
- Reserves the property for one buyer at an agreed price for a fixed period
- HDB resale option fee
- $1 to $1,000, negotiable
- HDB resale option period
- 21 calendar days, expiring at 4pm on the last day
- HDB fee cap
- Option fee plus option exercise fee cannot exceed $5,000
- New launch OTP (from a developer)
- Expires 3 weeks after you receive the sale and purchase agreement and title documents; 25% of the booking fee may be forfeited if you don't exercise it
- Stamp duty
- BSD and any ABSD are due within 14 days of exercising the OTP
As of 5 Nov 2026. Source: HDB, URA, IRAS.
How an OTP works
An OTP turns a verbal agreement on price into a written commitment. The seller promises not to sell to anyone else for a set period, and the buyer pays an option fee for that promise. The buyer then decides whether to go ahead.
- Agree the price with the seller.
- The seller grants the OTP and you pay the option fee.
- Check your finances during the option period: loan approval, valuation and CPF use.
- Exercise the OTP by signing it and paying the option exercise fee before it expires.
- Pay stamp duty (BSD and any ABSD) within 14 days of exercising.
- Complete the purchase on the completion date set out in the contract.
HDB resale flats
HDB sets the rules for resale flat OTPs, and buyers and sellers must use the HDB-prescribed form.
| Item | HDB rule |
|---|---|
| Before the OTP | You must have a valid HDB Flat Eligibility (HFE) letter |
| Option fee | $1 to $1,000, paid when the OTP is granted |
| Option exercise fee | Any amount, as long as the two fees together don’t exceed $5,000 |
| Option period | 21 calendar days, including weekends and public holidays, expiring at 4pm |
| Bank loan | You need the bank’s Letter of Offer on or before the day you exercise |
Both fees form part of the resale price. HDB gives this example: an OTP granted on 1 April expires on 22 April at 4pm.
New launches from a developer
When you buy an uncompleted unit from a licensed housing developer, you pay a booking fee and receive the developer’s standard OTP, the form prescribed under the Housing Developers Rules. URA’s Controller of Housing sets these terms:
| Item | Rule |
|---|---|
| Option period | Expires 3 weeks after the sale and purchase agreement and title documents are delivered to you |
| How to exercise | Sign the sale and purchase agreement and return it to the developer before the OTP expires |
| If you don’t exercise | The developer may keep 25% of the booking fee |
| Extensions | Up to 12 weeks from the OTP date, only with the Controller’s approval and both parties’ agreement |
| Re-issue | A developer can’t issue a new OTP for the same unit to you within 12 months of an earlier one expiring, without the Controller’s consent |
Private resale homes
For private resale homes, the option fee, exercise fee and option period are not set by law. They are agreed between buyer and seller and written into the OTP. Have your conveyancing lawyer check the terms before you pay the option fee.
Example
You agree to buy an HDB resale flat for $650,000.
| Stage | Payment |
|---|---|
| OTP granted: option fee (HDB maximum) | $1,000 |
| OTP exercised: option exercise fee (up to the $5,000 cap) | Up to $4,000 |
| Within 14 days of exercise: BSD | $14,100 |
| On completion: balance of the price | Paid from your loan, CPF and cash |
Common mistakes
- Paying the option fee before checking your loan. If the bank lends less than expected, you may be unable to exercise and lose the fee.
- Missing the deadline. An HDB OTP expires at 4pm on the last day, not midnight.
- Forgetting stamp duty timing. BSD and ABSD are due within 14 days of exercise, long before completion.
Frequently asked questions
What happens if I don't exercise the OTP?
The option lapses at the end of the option period. You normally lose the option fee, but you have no further obligation to buy.
Do I need loan approval before getting an OTP?
For HDB resale flats, you need a valid HDB Flat Eligibility (HFE) letter before the seller grants the OTP, and a bank's Letter of Offer before you exercise it if you are taking a bank loan. For private property, get your bank's in-principle approval before paying the option fee.
Is the OTP the same as the sale and purchase agreement?
No. The OTP gives you the right to buy. Once you exercise it, it becomes a binding contract. For new private launches, a separate sale and purchase agreement follows.
Related terms
Sources
Every figure on this page was checked against the official government sources above on 5 Nov 2026. See our editorial policy.
This is general information, not financial, legal or tax advice.