Property auction is an event where foreclosed properties are sold to bidders at a price that is much lower than the market rate. Property auction is fast gaining popularity among investors in Malaysia.
To facilitate the auction, auction houses will manage the auction events and assist the direct transactions between buyers and sellers.
In Malaysia, the supply of foreclosed properties comes from the Loan Agreement Cum Assignment (LACA) auction. A LACA property auction is conducted by banks for properties without an individual / strata title while a Non-LACA property auction is conducted by the High Court for properties with an individual / strata title.
It is crucial to find out whether the property that is going under the hammer is a LACA or non-LACA property because the bidding procedures are different.
For LACA properties, a potential bidder must pay a 5% deposit to the auctioneer, while a 10% deposit is imposed on non-LACA properties. After a successful bid, the balance of the purchase price of LACA properties is normally settled within 90 days, while the balance for non-LACA properties should be settled within 120 days.
Before you go for a property auction, you may want to follow this step-by-step guideline or tips before making your bid.
Identify your desired property and take note of relevant information according to your preferred location and budget.
Understand the state and condition of the desired property. Conduct an external inspection of the property to ascertain the condition.
Conduct a thorough research with the relevant Land Office and make general enquiries with the developer or management office. Seek independent legal advice on the property. A common problem is evicting occupants from the property, so be prepared to spend time and effort on this.
|4||Call the auctioneer||
Call the auctioneer or agent to get additional information about the property.
Take note of the auction time, date and venue. Prepare a bank draft or cashier’s order for the deposit amount equivalent to either 5% or 10% of the Reserved Price before the auction date. Also, prepare additional cash on the auction day to top-up the difference on the deposit sum between the successful bidding price and the reserved price. The sum must be paid immediately after the auction.
Register your details prior to the auction. You may also register on the actual day itself before the auction. You have to get a copy of the Proclamation of Sale (POS) and Condition of Sale (COS). Make sure you understand all the terms and conditions.
The auctioneer will announce the commencement of the auction, and then provide a briefing on the bidding process. He will then read out the important clauses in the COS and the property information. After the auctioneer announces the starting price, the bidder should raise his/her bidding card to signify interest and also to indicate the bidding price.
The bidding process will stop when the highest price is called out three times by the auctioneer and no further bids can be made. At the fall of the hammer, the property is sold.
|9||Signing the contract||
The successful bidder is required to sign the Contract of Sale and pay the remaining difference on the same day itself if there’s an increment to the successful bidding price. The balance of the purchase price must be paid within 90 days from the auction day. Contact the bank to arrange for financing.
Once you officially own the property, you can apply for a distress order on the occupants through a lawyer before you get a court order. It takes about 3 to 4 weeks to process a distress order, which costs around RM1,500-RM2,000.
If you are not the successful bidder, you may redeem your bank draft or cashier’s order at the registration counter immediately after the auction.