A
uctioned
ByMichele Theseira
So,
you’ve prettymuch exhausted
yourself on research and done your
‘homework’ on the piece of property
you set your eye on that will be
auctioned (refer sidebox for step by
step procedures if not). Although,
not all properties sold at auctions are
those owned by individuals with
financial problems, thorough
inspection of it and carrying out a
title search is still important.
This should be done, as far
as possible. Do take note
that not all prices of
property at auctions are
below themarket price. Still,
the bidder has the upper
hand as “those ‘forced’
sellers have to sell their
property at the best possible
price to recover their
money,” statesMilanDoshi
in his book ‘HowYou Can
Become AMillionaire Real
Estate Investor’.
Valuable Tips
The renowned property
and investment guru
who has authored
several books, advises
one to take the following long
statement seriously. “Prospective
Bidders are advised to inspect the
subject property and check on the
issuance of separate individual titles/
strata titles, seek Legal Advice on the
Conditions of Sale, conduct official
parent Titles search at the relevant
Land Office andmake the necessary
enquiries with the Developers and/
or other relevant authorities on the
terms of consent to the sale prior to
the auction sale”.
He says that auctioned property
comes with all its associated
problems like caveats, unpaid bills,
hostile occupiers, leaking roofs, etc.
“Don’t expect the banks to remove
these impediments out of your way.
Auctioned properties are sold on the
basis: ‘as is, where is’. The bank’s
main focus is to get rid of the
property and recover their money
back. Hence, it is extremely
important to study and understand
this document very carefully as
terms and conditions of the sale are
non-negotiable in an auction.” He
suggests passing the proclamation of
sale to your experienced and
trustworthy lawyer to do the
necessary. (Read chapter 14 of
Milan’s book for additional tips on
how to purchase a property with
Zero Down Payment or 100%
Bank Financing.)
Another tip fromMilan is not to
join in the initial stages of the
bidding process. He says that this
is when the auctioneer will try to
entice the early bidders to bid higher.
If you’re out-bidded, Milan suggests
you congratulate the winner, give
himyour business card and let him
or her know you’re still interested
in the property. “If for some reason
he or she can’t raise the balance
payment or complete the transaction
in time, or if he or she decides to sell
in the future, guess who’d be the first
person he’d/she’d call?”
And another big tip that might
save you some moolah is to check
the price of the property and never
assume that the reserved price set at
the auction is belowmarket price.
Prices of property at its first
auctionwill usually be reduced at
the next auction, if it has no takers.
Your best bet is to bid for properties
at its second or third round at the
auction house.
Bills, bills, bills
As if our lives can be free of bills,
buying property at an auctionwill
definitely incur additional bills for
the buyer. Fromutility bills, sewage
charges, quit rent, assessment fees
and condominiummaintenance
debts, don’t forget to check on
caveats and any other prohibitions
on transfer of ownership.
If you didn’t know, auctioned
properties may not be vacant
properties. It might be tenanted or
the owners themselves might still be
residing in the ‘soon-to-be-yours’ or
‘already-your’ property. “On eviction
of the occupants of the premises, it
becomes the task of the purchaser.
He or she can acquire legal aid,
which will then add to the accrued
bills,” informs LeongWye Hoong of
Leong Auctioneer Agency.
Another very important area to
look at is the time frame the buyer is
given to complete all necessary
documentation, payments and
transfers. The standard time period
usually given stands between 90 and
120 days. Hence, it is proposed that
youmake sure your lawyer is VERY
efficient or you’ll end up losing your
10%deposit, and/or any other bills
you’ve paid, and the property
re-auctioned. Experienced hands
will harp on the importance of
quickly submitting your loan
documentation papers to your
bankers and instructing your
lawyers to start the necessary
legal paperwork.
Under the National Land Code of
theMalaysian law, there are four
types of caveats: Registrar’s Caveat,
Private Caveat, Lien-holder’s Caveat
and Trust Caveat. In short, a caveat is
a formof statutory injunction under
property law, that if lodged, it
prevents the registration of any
dealing on the property until it is
withdrawn, removed, lapses, or the
caveator consents to dislodge and
such. And guess who has to pay to
get the caveat ‘lifted’.
Now, if you think that’s it on
payments and bills, think again. It is
apparently advisable to buy
insurance on the auction property
you’ve put a deposit on. As you have
‘insurable interest’, some
proclamation of sale states that the
bidder is responsible with regards to
theft, fire, flood, etc. although the
property is not legally yours yet.
Advantages and
risks
Like any other method of
buying or selling property, it
pays to do one’s homework.
Still, Leong adds, “You have to
make sure all angles are
covered and go through the
right channels.” The good
point he says, is that, “If the
first time round,
there is no bidder
for a property, then
the price goes down
by 10% the next
round. You also
get to view the
property (most
times) compared to new
developments where you
only get to see your purchase
in the brochure or in an
artist’s impression.”
Stephen Soon, chairman of the
Penang Auctioneers Association
feels that although there is an
increase in the number of people
interested in auctioned property,
many are still skeptical due to
negative perception. “The majority
still prefer to purchase properties
by way of sub-sales or through
developer launches. Sadly, theymiss
out on the ‘big jewel’ they can attain
from auctions.” Soon claims that
people are just not making the effort
to understand the ropes of buying
property at auctions. “Most people
follow the usual or traditional
method of purchasing property. If
you askme, whatever method you
use in buying property, there are
different sets of procedures involved,
imposing different risks, especially if
you don’t understand them.” Still,
Soon doesn’t deny that the numbers
have increased in terms of bidder’s
participation. “The only difference
between Penang and other regions is
the number of foreclosed properties.
There are five to 10 times more in the
central region compared to Penang,
except for some prime properties
that sometimes attract a particular
set of buyers fromother states.”
With all these tips and advice,
on-going property seminars and
workshops at major cities in
Malaysia, easy to followproperty
investment books, and of course
interactive modern day gadgets
that provide almost instant
information – profit is yours for the
taking, when buying auctioned
property. Provided you’ve learned
the ins and outs of this ballgame
from the industry experts.
>Knowwhat you’regetting intobefore youbid
and sign thedotted line for your auctioned lot. Here
are valuable tips and insights from industry experts
residential
buys
PART 2
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ON
friday
sept 20, 2013
Step by step procedures to
take before, during and after
an auction
Before the auction
a) Ask for a copy of the Proclamation of Sale and Conditions of
Sale from the auctioneer
b) Confirm with auctioneer whether there are any restrictions in
interest eg. Bumiputera unit
c) Inspect the property – check the physical condition and
whether the property is being occupied
d) Check with neighbours, if internal inspection is not possible
e) Check with developers on any outstanding sums owed
f) Check with auctioneer on who is responsible for payment of
outstanding sums
g) Carry out a title search, if possible
h) Verify address and other property details against POS
i) Check on transacted prices as well as current asking prices of
similar properties as well as estimated cost of any repairs
required so as to determine your maximum bid price
j) If you are an investor, check on market prospects for similar
properties and ease of resale and rental, and work out your
possible returns based on your intended bid price
k) If you are buying for own use, check quality of neighbourhood
and amount of repairs needed to bring property to your
desired standard
l) Check with bank on your loan eligibility, if financing
is required
m) Work out your finances to ensure that the purchase is within
your means & that you have the required funds to make full
settlement before the completion date
During the auction
a) Only registered bidders are allowed to bid
b) Bidders can register by paying the requisite deposit, typically
at 10% but sometimes can be as low as 5%
c) Deposit is payable usually by way of bank draft or cashier’s
order (personal cheques are not accepted). Sometimes,
payment by credit card is accepted
d) Interested bidders must register before the
registration closes
e) Those who are bidding on behalf of another must bring along
a nomination letter signed by the actual purchaser
f) Bidders must bring along their IC for identification purposes
g) Bidders must bring along sufficient funds to pay the top up
deposit ie. difference between bidding deposit and 5% / 10%
of the successful bid price. Payment may be made via credit
card where credit card payment is accepted
h) Before bidding starts, auctioneer will invite registered bidders
to come up front
i) Each registered bidder will be given a numbered paddle
j) Bidders can seek clarifications from the auctioneer before
bidding begins
k) Auctioneer will begin by inviting bids at or above the
reserve price
l) The increment in bid price is usually set at RM1,000 although
this may be varied
m) After a bid price is received, the auctioneer will call for a bid
at a higher price
n) If bidder is willing to make an offer at that price, bidder shall
raise his bidding paddle to signify his offer. Bidder can raise
his offer any number of times
o) Bidding shall stop when no bidder is willing to offer a higher
price than the previous bid
p) The bidder who has offered the highest price shall be
declared the successful bidder by the auctioneer
q) Before bidding starts, size up your competition
r) Set a realistic target price
s) If there are a lot of competitive bidders, you may want to
revise your target price if you want to secure the property
t) Be calm and avoid being emotional. Your target is buy the
property, not to defeat the other bidders in battle
u) Be disciplined. Once bidding has exceeded your target
price, stop unless it is a special property that you must buy
at all costs
v) If you are bidding through an agent, give clear instructions to
him and stay in communication until bidding ends.
After the auction
a) Unsuccessful bidders should proceed to obtain a refund of
their bidding deposits from the designated counter
b) Unsuccessful bidders may re-register as a bidder for another
property, if desired
c) The successful bidder should proceed to pay the top
up deposit and to sign the contract of sale at the
designated counter
d) Successful bidder should appoint a solicitor to represent him
in the sale transaction
e) He should formally apply for his loan, if required and execute
all required loan documentation to enable speedy release of
his loan
f) He should make the necessary arrangements to settle the
balance of the purchase price within the stipulated period
g) If State consent is required (leasehold properties), to get
solicitors to submit application
h) If State consent cannot be obtained or if sale cannot be
completed (with valid reasons) within stipulated settlement
period, should write to Assignee to ask for extension of time
i) Insure your property against fire
j) Change the locks to protect your property
k) If previous owner or tenant is still occupying property, appoint
a lawyer to issue eviction notice
(Recommended by Tang Chee Meng of Henry Butcher Asset
Auctioneers Sdn Bhd.)
AUCTION
INSIGHTS
CUT AND KEEP
