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Buying process · OTP

What happens if you forfeit your OTP deposit?

By Winfred Quek, Associate Marketing Consultant · CEA R073319H · Crestbrick Pte Ltd (L31010886H) · Published 13 July 2026

Facts verified: 13 July 2026 · Specific forfeiture outcomes depend on the terms of each option and sale agreement · Sources attributed below

I have sat across the table from buyers at both ends of this conversation, the ones asking before they sign and the ones asking after something has already gone wrong. The second conversation is always harder, because by the time you are asking what happens if I forfeit, the clock is usually already running. So let me lay out the mechanics clearly, before you need them rather than after.

The two stage structure that decides how much you risk

A Singapore property purchase, whether HDB resale or private, runs through two distinct stages, and your exposure changes sharply between them. Stage one is the option period. You pay the seller an option fee, commonly around one percent of the purchase price for a private resale, in exchange for the Option to Purchase, a document that gives you the exclusive right to buy the property within a set window, usually a couple of weeks. During this period you are deciding, arranging financing, and doing final checks. You have not committed to buy.

Stage two begins when you exercise the option. At that point you pay the further sum that brings your total deposit to the agreed level, commonly around five percent for a private resale, and a binding sale and purchase agreement comes into existence. From this moment you are contractually obligated to complete the purchase by the agreed date. The distinction between these two stages is the single most important thing to understand about forfeiture risk, because the cost of walking away is dramatically different on either side of it.

Scenario one: you let the option lapse without exercising

If the option period runs out and you never exercise, the option simply expires. The seller is now free to market the property to someone else, and the option fee you paid is forfeited to the seller as compensation for having taken the unit off the market during that window. This is the cleanest, lowest cost way for a deal to fall away, and it is exactly why the option period exists. You are not on the hook for anything beyond that initial fee, because no binding contract was ever formed.

Scenario two: financing falls through after you exercise

This is the scenario that catches buyers off guard, and it deserves its own detailed treatment, which I cover in a companion guide on what to do when your loan is rejected after exercising the OTP. In short: once you have exercised, you are contractually committed, financing included. If your loan approval does not come through in time and you cannot complete by the agreed date, you are generally treated as being in default under the sale and purchase agreement. The seller can typically forfeit the exercised deposit, and depending on the specific terms of the agreement, further remedies against you may be available to the seller as well. This is not a minor setback. It is a serious financial event, and it is why pre approval and a realistic financing runway matter enormously before you exercise, not after.

Scenario three: you simply change your mind

Cold feet is treated no differently from any other failure to complete once you have exercised. The contract does not distinguish between a buyer who could not get financing and a buyer who just decided against the purchase. Both are a failure to perform, and the seller's position on forfeiture is generally the same either way. This is worth sitting with before you exercise: the option period is your window to be genuinely certain, because that certainty is exactly what the binding contract assumes from you afterward.

How this differs when the seller is the one who backs out

Forfeiture is not a one way street. A seller who has accepted an option fee and granted an Option to Purchase is generally expected to honour it if the buyer exercises within the valid period. If the seller then refuses to proceed, the buyer's position is different from a simple deposit forfeiture scenario, and the mechanics of that situation are worth understanding on their own terms rather than assuming forfeiture rules run symmetrically in both directions. I unpack this side of the relationship in a separate guide on what happens when a seller backs out after accepting an offer.

How to protect yourself before you sign anything

1. Do not pay the option fee until you are reasonably certain. Treat the option period as your genuine decision window, not a formality before a decision you have already made emotionally.
2. Get financing pre approval before exercising, not after. The exercise date is when your commitment becomes binding, so your financing confidence needs to be solid by then.
3. Understand the exact deposit structure in your specific agreement. Percentages and terms can vary, so read the option document itself rather than relying on general expectations.
4. Have a lawyer review the sale and purchase agreement before you exercise if there is anything about the terms you do not fully understand.

Frequently asked questions

What is the difference between the option fee and the exercised deposit?

The option fee is the small deposit, commonly around one percent of the purchase price, paid to the seller in exchange for the Option to Purchase, which gives you the exclusive right to buy within a set period. The exercised deposit is the further sum, commonly bringing the total to around five percent for a private resale, paid when you exercise the option and the contract becomes binding. Before you exercise, you risk only the option fee. After you exercise, you risk the full exercised deposit.

What happens if I simply do not exercise the OTP in time?

If you let the Option to Purchase lapse without exercising it by the deadline stated in the option, it simply expires and the seller is free to sell to someone else. In this scenario the option fee you paid, typically around one percent, is forfeited to the seller as compensation for taking the property off the market during the option period. You are not exposed to any further deposit, because you never exercised and the sale contract never became binding.

What happens if my financing falls through after I exercise the OTP?

Once you exercise the option, a binding contract exists and you are expected to complete the purchase, financing included, by the agreed date. If your loan is not approved in time and you cannot complete, you are generally in default under the sale and purchase agreement, and the seller can typically forfeit the exercised deposit, commonly around five percent for a private resale, as compensation. Some agreements allow further remedies against the buyer depending on the specific terms, so this is a serious financial event, not just a lost deposit.

Can I get my deposit back if I just change my mind?

Generally no. Once you have exercised the Option to Purchase, the contract is binding on both sides, and simply changing your mind is treated the same as any other buyer default. The seller is typically entitled to forfeit the exercised deposit. Before exercising, walking away only costs you the option fee, which is exactly the protection the option period is designed to give a buyer who is still deciding.

Is forfeiture different if the seller backs out instead of the buyer?

Yes. A seller who has accepted an option fee and granted an Option to Purchase is generally bound to honour it once the buyer exercises within the valid period. If a seller then refuses to complete, the buyer's remedies are different from a simple deposit forfeiture, and can include claims against the seller rather than the buyer losing money. The mechanics differ from a straightforward buyer default, which is why it is worth understanding both sides of this risk before signing.

Winfred Quek is Associate Marketing Consultant at Crestbrick Pte Ltd, advising Singapore upgraders, investors and families. CEA R073319H. The information on this page is general and does not constitute legal or financial advice. Forfeiture outcomes depend on the exact terms of the Option to Purchase and sale and purchase agreement in each case; consult a qualified conveyancing lawyer before signing or exercising any option.