Property auction is an event where foreclosed properties are sold to bidders, and it is managed by an auction house such as Property Auction House. Nowadays, it is one of the popular ways for a property investor in Malaysia to purchase property at much lower than the market price.
There are two types of property auction. The first type is Loan Agreement Cum Assignment (LACA) auction, and it is conducted by banks for properties without an individual or strata title. The second type is Non-LACA property where the auction is conducted by the High Court for properties with an individual or strata title.
For LACA property, the bidder must pay 5% of the purchase price as a deposit to the auctioneer and the balance must be settled within 90 days. For non-LACA property, the deposit is higher, at 10% while the balance should be settled within 120 days.
Before you go for a property auction, you may want to read the following guide:
- Identify - Identify the desired property and find the relevant information as per your preferred location and within your budget.
- Inspect - Conduct an external inspection of the said property to understand of the condition. If possible, do an internal inspection.
- Research - Make some general enquiries with the relevant Land Office, developer or management office. Also, seek some 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.
- Contact Auctioneer - Get additional information about the property by calling the auctioneer or agent.
- Preparation - Take note of the auction time, date and venue. Prepare a bank draft for the required deposit (either 5% or 10%) of the Reserved Price. 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.
- Registration - Register your details prior to the auction. You may also register on the actual day 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.
- Bidding Time - 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.
- Successful Bidder - 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.
- Sign 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 to 120 days. Contact the bank to arrange for financing.
- Legal Matters - 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 three to four weeks to process a distress order, which costs around RM1,500-RM2,000.
- Unsuccessful Bidding - 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.
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