An Insight On Property Auction

Impacting your dream plans in more ways than one

Purchasing properties through auction is an enticing prospect; as soon as the hammer falls, the property is yours. The upside of getting property via auction includes securing below market deals. The entire process can take a month or less, which gives you ample of time to gauge rival bidders’ interests and the prevailing market value. On the downside, auctions are often associated with ‘problematic’ homes resulting from poor maintenance, stubborn tenants and other unpleasant ‘backstory’ behind the foreclosed house. Therefore, it is important to execute due diligence to ensure you don’t fall into any pitfalls and make the auction a success.

FOR THE BRAVE

Why would anyone venture into buying a property at auctions? In theory, an auction provides first chance to snap up certain properties. Property investor Dr. Peter Yee said: “rundown properties located at prime locations can be enhanced by cosmetic renovation which would significantly increase the value and purpose of the property.”

Purchasing at fair market value is a smart investment; you essentially determine the price as the lenders are not allowed to profit from the sale. In addition, you can avoid the tiring process of long drawn negotiations with sellers via auctions. Auctions not only saves times when purchasing properties, the purchasing and closing dates are also known.

REASONS TO BE CAUTIOUS

According to Dr Yee, presence of syndicates and display of favouritism by unscrupulous auctioneers may occur but the best practice is to ignore such unethical individuals. Intimidation tactics include calling bidders through leaked information and posing as bidders at the auction to ward off genuine buyers.  Meanwhile, the property’s reserved prices can be manipulated by cartels as they pay off bidders to maintain a low-selling price hence depriving the owner off the actual value of the property. Kit,Au-Yong, a valuer from Laurel noted that one needs to study the properties individually by taking into consideration of the reserved prices when purchasing. Well-located properties are still highly in demand regardless of how it is sold.  

Dr. Yee added that if the highest bidder who has placed 10% deposit is unable to pay the remainder 90% within the stipulated period of 90 or 120 days from the initial deposit, the deal is then, forfeited. There are no systematic schemes available for new home buyers or developers scheme to cushion the financial capacity of purchasing a property.

AUCTION SCENE

Sally Lee from auction228 mentioned within Greater KL, several areas are designated as hot market areas. The auction properties in Puchong, Keramat, Kepong and Subang still appreciates in value only trailing behind market value between 10% and 20%, depending on the types of properties.

Foong Chon Wai, the chief operating officer of Ng Chan Mau indicated that auction properties this year would witness a rise of pricier properties as home buyers will not be able to service their loans upon completion of projects. This is becase some had purchased properties on developers’ interest bearing schemes (DIBS).

Furthermore, increasing cost of living has seen a rise in people renting away from the cities, leaving buyers and investors vulnerable to not get rental returns as planned and this affects their monthly mortgage.

SIMPLE TIPS

The first impression is always key to creating a perception that you have a large budget and you can beat the rest.

Be vocal and firm in the tone of your voice to ensure everyone know you mean business.

Do not get carried away with the hype agents try to create, come in with a game-plan and stick to it. Have a limit to how much you are willing to spend and not suffer a bad investment by getting too emotional.

Once the auction begins, break down your bids to purposely slow the bidding process. Start at the lowest amount possible to observe other buyers.