Auction can simply be described as the sale of a property to the highest bidder. They are conducted to enable banks or other financial institutions to recover the loan granted to borrowers who have defaulted under the terms of repayment by selling off the properties that have been charged or assigned to them as security for the loan. Auctions may be conducted by the banks’ themselves at the auctioneer’s office or by the courts and land offices.
Auction sales are commonly perceived as opportunities to acquire properties at a bargain or under market value. Since banks are not in the real estate business, they will not want to hold the property for long and are willing to dispose of it as long as they can get their money back as quickly as possible. That is why you can find good deals in auctions sales.
Auction properties are sold on an “as is, where is” basis. Also known as “in its present condition”, auction properties are sold without any warranties as to the condition of the property nor the suitability of the property for a particular use. As such, it is important to examine and inspect the property before the bid.
We do acknowledge that auction properties sometimes can be very cheap and we are tempted to buy it. So, the question, Should we buy auction properties?
Sometimes, I received email from my viewer saying they are interested of buying an auction property. This is their first house and since the property price is cheap, so why not?
From my years of experience in doing loan, my advice will be unless you are an experience investor or you have knowledge in property and mortgage loan line or you are able to fully settle the house in cash in the event the late penalty kicks in, then you shall proceed with the purchase.
I have many stories and experiences in seeing some of the clients crying or in a deep trouble when they purchased the auction properties. So, many issues can be arise along the process of disbursement.
Unless, you did some checking on the property, the property title and developer as well. In the same time, you should also ask some legal advice from your lawyer, they know better than us.
I would like to share some of the step by step process of buying an auction property. However, this is only some brief steps.
Win your bid in cheap price with following tips:-
Step 1: Check the Property
• To conduct on-site inspection
• To check on encumbrances
• To check on the outstanding maintenance charges / rates / taxes / utilities charges and vacant possession
• To consult a valuer to get indication of the property price and compare with the reserve price
Step 2: Prepare Yourself for the Auction
• Organize your finance (include preparing document needed for loan application)
• Set on the maximum price that you are willing to bid
• Bring extra money with you during auction
Step 3: Familiar on the Auction Procedures
• Think twice and get used to auction first before put up your hand for an auction
• Talk to agents, talk to friends, talk to lawyers, talk to valuers
Step 4: Bidding Process and Procedures
• Register with the agent for Proclamation of Sale and Condition of Sale.
• Confirm with the agent that the property still under available for auction
• Be aware the property may withdraw last minute
• Register your name and prepare 10% or 5% bank draft on the reserve price
Step 5: Start Biding (The games is on)
• Be there 30 minutes earlier to get yourself ready for the battle
• Don’t influence by others people
• Be focus and be clear with your objective
• Be clear on your objective to win property that you are target for
• Be clear on your bottom line
• Listen carefully on the terms and conditions (as they might change it)
Start biding only when the property you target is on auctions. Be firm with your bottom line. Stop when the price is over the bottom line that you set earlier. Remember there are plenty of auctions or opportunities out there.
Step 6: Win or Lose the Bid
Congratulation, if you win the bid:
• You are required to sign the Memorandum at the bottom of the Proclamation of sale (or the Sales of Contract)
• Pay the balance of the 10 % or 5% if the price is higher than the reserve price
Don’t be upset, if you lose the bid:
• The streets are full of them and there are plenty of opportunities or auctions out there
• Don’t forget to claim back the 10% or 5% deposit that you have submitted
For more home loan information, please feel free to contact us