Some Important Points Regarding Property Auction That You Should Know in Malaysia.
Recently I was being introduced to the idea of buying properties through auctions. Here is what I learned about the important things of auction property.
A way to buy a property below market value is by buying it through a property auction. You can find plenty of deals priced below RM 100 000. However, most them are only eligible for people with low income. If you earn more than RM 3000 and above per household, then you are not allowed to buy those low-cost properties.
There is one exception to that: if the property was from High Court auctions, then anyone could buy the property regardless of low-cost property or tenure. These auction events are only held during weekdays and you are required to dress formally while attending them. Not convenient for those who need to work during weekdays.
Other that High Court auctions, most banks have private property auctions too. These auctions are different from High Court auctions in a way that they are held also during weekends and there is no formal dress code to follow. As indicated above, certain low-cost properties in bank auctions are only eligible for people with low income. Therefore, even if you won the bid, you could not legally own the house. So do your homework or consult your agent before you made your decision.
Why properties are selling below market price in an auction?
Firstly, the banks or state government are only interested to get their loans or taxes back in case the house owners default in their mortgage or tax payments. Banks are not allowed to profit from the auctions. Excess cash gained from the auction is returned to the previous owners.
Secondly, sometimes, the properties are priced at a loss just to stir the bidding process. It could attract more bidders to participate in the auctions.
Not everything that is bought below market price is a good thing. The property might have some hidden issues that only the owner knows. There might be a reason why the owner stops paying his/her mortgage loan.
Another thing to be aware of is that once you buy the property through the auction and become the new owner, you need to bear the utility bills, charges, etc that were owed by the previous owner.
Normally banks won’t lend you money buying auction properties. You need to have enough cash available so that you can buy and own the property without borrowing. However, there is always an exception.
So do your homework thoroughly before buying your first property through auctions.