These days one will notice many Proclamation of Sales being advertised in the newspapers. Although on one side, this is a sign that the general economy is not doing so well, but on the flip side it can be an opportunity to get the property you had been eyeing for a really good price. Here are some pointers for those of you who may be contemplating buying a property from the Auction market.
Choose the property carefully. It is tempting to put your money in something which just seems too cheap to resist. Don’t be impulsive. I notice that prudent clients are patient and will only “pounce” when they are absolutely sure that the property is what they want. For example, if you have for some time wanted to have an apartment in Cyberjaya, now is the time for you to scan through the advertisements for apartments on auction in Cyberjaya.
Inspect the property. The good thing about auction is that you may have the chance to view the property. If you are diligent enough, you can find out a lot of information about the property which brings me to my next point…
Do a thorough due diligence. In an auction, the buyer takes the property on an “as is where is” basis. The bank has no obligation whatsoever to reveal to the buyer anything other than the address. So, as a potential buyer, it is up to you to find out the details. Check out the latest outstanding on the maintenance, assessment and utilities. If the owner has defaulted in his loan, high chances that he will not be on the ball with the bills as well. You can check the mail box and also ask the management office if they can provide you with the latest bills.
You must also check if there is an occupant in the property, either a tenant or the owner or even an illegal occupant, because in auction cases, the bank has no obligation to deliver vacant possession. This may be tricky and will be the deal breaker. If you find a difficult occupier who doesn’t seem to understand that he has to vacate, you may be stuck in a legal battle to “evict” him.
Check the title to the property. In some cases, the title may have been issued, but it is not perfected, meaning it may be still in the developer’s name. In this case, the successful bidder is looking at a double transfer which means double stamp duty and legal costs.
Factor in all the costs before you plunge into the bid. You have to take into account the outstanding payments which I have mentioned in paragraph 3, the stamp duty in paragraph 5 and also the legal costs involved in the transfer and your bank loan. Usually the bank will give you 3 months with a month extension with interest to complete the payment of the full purchase price. However, if there is an issue with the title and you are relying on a bank loan, you may need more time which will mean an interest at 8 to 10 percent per annum on the balance purchase price to the bank for the extension of time.