Know Your Stuff: How to Buy Property at Auction


More Malaysians are starting to consider buying properties at auction, as prices can be cheaper than those in the primary and secondary markets. However, auctions can seem intimidating, as it means buying a property without inspection. The relatively attractive prices also come with the risk of not knowing the exact condition of the property.

Additionally, many people do not understand the process of buying a property at auction and what they need to know and do before bidding.

An auction is a public sale in which potential buyers attempt to outbid goods. An auction is concluded at the fall of the hammer and the goods are ultimately sold to the highest bidder. In Malaysia, there are two types of auctions for foreclosed properties: judicial and non-judicial.

The Executive Director of Property Auction House Sdn Bhd, Danny Loh, notes that judicial auctions are judicial auctions, governed by the National Land Code. Judicial auction goods are those whose title has been issued in the name of the borrower and whose charge is created and made perfect. If the person does not repay the loan, the bank will apply to the High Court (land registry title) or land administrator (land office title) for an order to sell the property.

Meanwhile, non-judicial auctions, more commonly known as loan agreement with assignment (LACA) cases, are not governed by any legislation and title to the properties has not been issued.

“Even if the title was issued, it would still be under the developer’s name. The loan would be guaranteed by LACA; thus, if the person defaults on their loan, the bank would not need to ask for a sell order and the bank would have the right to sell the property, ”he explains.

Know the why

Loh believes that, as with any property purchase, it is important that bidders know the goals of buying property at auction – whether they are buying for their own occupancy, rental yield, or speculation.

“Bidders need to do their homework and understand their financial situation. In some cases there may be caveats about properties that will take longer to remove. Thus, banks may not be able to release financing and bidders must be prepared to pay in cash, ”he warns.

“Also, find out about the legal fees that will be involved. When the balance of the purchase price is paid, the bank will sign a deed of transfer for the benefit of the purchaser. Most auctions require the buyer to pay the bank’s attorney’s fees for verifying or preparing for the assignment.

What should potential buyers do if they are interested in auction properties?

Loh said, to begin with, these bidders should get more information about the properties. Since properties at auction are sold “as is, where they are,” he advises bidders to inspect the property to better understand the condition and assess the costs of repairs and renovations.

“Go knock on the door and see if there’s anyone there.” Chances are, if it’s rented out, tenants may allow you in if you tell them you’re interested in purchasing the property. Also, talk to the neighbors.

He believes bidders should also do a price comparison in the neighborhood and, if possible, hire a professional to determine the property’s value. Bidders are advised to buy something from a place they are familiar with.

The auctioneers will prepare the proclamation of sale (POS). Loh says it’s important for bidders to read it carefully and research with the proper authorities and the management office to see if there are any caveats or overdue payments on the property.

It is also important to check any limitations of the property through the point of sale, for example if it is a lot of bumiputera, its intended use of the property, height restrictions and remaining tenure.

He notes that although a point of sale usually indicates that any arrears of service, rent and appraisal fees up to the date of the sale would be paid out of the purchase price, successful bidders will be required to pay the arrears. utility bills.

Next, bidders must prepare a bank draft representing 10% of the value of the reserved price.

On auction day, bidders must arrive early, as courts may stop accepting bank drafts half an hour before the auction begins. Loh says it’s important to check the description listed in the point of sale and make sure they’re looking at the right property.

Immediately after the auction, successful bidders must complete the difference between the initial deposit of 10% and the 10% of the final sale price. They can then hire their lawyer to facilitate the transfer and apply for a loan.

“They are required to sign the sales agreement on the spot and cannot change their mind. They have to pay the remaining sum within the stipulated time frame, which is usually between 90 and 120 days. Therefore, it is important that bidders discuss with the banks beforehand and check if they are eligible for funding, ”he says.

“Lately, due to the pandemic, many auctioneers have switched to online auctions, where interested people can bid from anywhere. Bidders should understand the terms and conditions of the online auction, especially the mode of auction and digital payment of the deposit.

However, bidders should be aware that in the event of an LACA auction, they would have to obtain the promoter’s agreement as the title has not been issued. Loh cautions that some developers do not allow a direct transfer. They also usually do not give their consent unless all unpaid service charges have been paid.

In the absence of a direct transfer, the successful bidders will have to make a double transfer, which results in a delay in the process and may result in the successful bidders not respecting the payment deadline.

“In addition, if the bid is successful, it is the duty of the bidders and at their expense to evict anyone occupying the premises. What they can do is go there to find out. If there are tenants, you can let them know that you bought the property and suggest signing a new rental agreement. If it’s occupied by the previous owner, talk to him nicely. If that doesn’t work, then ask for a court order.


Source link

Previous Emphasis is on PPP forgiveness
Next Devastated Leeds residents lose thousands of pounds overnight as Football Index goes into administration

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *