According to a recently published property report, there are currently over 22,000 foreclosure residential properties in the market. Understandably so, the highest numbers of units were in the southern states of Melaka and Johor, which incidentally has the highest number of overhang/ unsold units.
Although the overall number was lower than what was registered in 2019, market sentiment dictates there will likely be an increase of foreclosure properties in the months ahead. A significant reason for this is due to the current state of the economic, which is still struggling to find its footing due to the pandemic.
The surge of foreclosure properties is also expected due to the loan moratorium ending late last year. With business and income adversely affected, many will struggle to keep up with their payments.
As more properties are foreclosed, the overall value of some of these units will naturally dip below the market rate. For buyers, this presents an opportunity to purchase a piece of real estate at good value, provided you know how to navigate the auction field.
Avoiding Problems, Capitalising On Appreciation
The first rule of thumb is to know where to search. Currently on Mudah.my there are a total of 1439 properties listed at auction. In terms of searches, within the last three months there has been 0.8% of listings of houses and apartments being listed on the site.
Identifying the area is also key for buyers. According to Mudah.my’s search parameters, the central region of Selangor is the most searched region for auction properties. Following this search and if a suitable property does appear that is within your budget then its best to proceed with these steps.
First, refer to the Proclamation of Sale (POS) published by licensed auctioneer for full information. Read this and the conditions of sale carefully and seek legal assistance for checking on property documents for transfer of ownership. This is to avoid any issues such as outstanding bills or utilities still listed to that property.
Thereafter, from the info gathered, one can begin doing some legwork to verify the property. In most cases access will not be provided in viewing the inside of property. As such, it pays to try to visit the property itself to view the condition of the property and perhaps to also gain some information from the residents in that neighbourhood. How long the unit has been vacant will also bear some effect to the condition of the property.
It also helps to find out the transacted prices in the area. This is to ascertain if the neighbourhood has a stable capital appreciation. Finally, search for any further development in the area that may impede or enhance the value of the property.
Entering The Auction Process
In terms of value, auction properties can sometimes be listed as much as 30% off its market value. But do take note, oftentimes when a lower reserve price is listed, then it has the tendency to attract a bidding competition which results in more up bidding.
The first auction will normally be held at the OMV (Open Market Valuation) of the property. If there are no takers or successful bids, each subsequent auction will see the reserve price of the property lowered by 10%. This does not mean that it is a complete walk in the park for bidders.
Although most successful buyers are bidding for the property for their own use, there are bidders who will want to capitalise on the lower auction price to buy cheap and sell higher later under private treaty sales.
If everything checks out and if you are keen to enter the bidding process, then it is time to contact the auctioneer or bank. Upon online registration, the bidder needs to submit proof of identity and prepare the deposit for the bid in the form of a bank draft. This is usually 10% of the reserve price.
Bidders will need to submit both details and deposits on the day of the action. For online bidding or Court e-lelong, the bidder must submit the registration at least one working day before the auction. If your bid is unsuccessful, the deposit will be refunded between one to three days after the auction.
For successful bids, you must settle the balance of the purchase price within a 90-day time frame. Naturally with this time frame it is best to engage a lawyer to expedite the transfer. It also pays to have the necessary paperwork and documentation ready prior to the bid so that the loan application can be initiated swiftly and efficiently. We hope that helps!