By Willy Wilson | Oct 16, 2009
Never Been to A Property Auction?
Don’t worry! Gary Chia of Auction Data Sdn Bhd is here to give you an idea of what to expect.
Property auction, which is traditionally practised by financial institutions and the court, is fast gaining popularity among investors in Malaysia. It is all thanks to the mushrooming property auction houses that are playing a bigger role than ever these days.
Auction houses facilitate foreclosed properties that have been taken over by banks and the High Court, as well as assist in direct transactions between buyers and sellers. A property auction is an event where these properties are sold to bidders at a price that is much lower than the market rate. But is it really that easy and clear-cut?
Property Auction 101: What, Why & How?
There are many things you should look for when buying a property that is on auction. Bad feng shui, unplanned construction and unsafe location could be the contributing factors that land these properties on the auction list. While they may seem like age-old stereotypes, some of them ring true.
“The feng shui superstition is not as strong a determining factor as it used to be,” says Chia, director of Auction Data Sdn Bhd.
He also maintains that although feng shui is a major influence for many when buying a property, there will always be those who do not believe in such superstitions.
Chia explains that many properties end up in auction houses because the owners need to liquidify their assets. This could be a gold mine for buyers because typically, the asking price for these properties is much lower than the market price.
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.
Also, potential buyers are encouraged to do research to find out whether the property has been issued an individual/strata title. If you discover that the owner’s name is already registered under an individual title but the property is being auctioned at a LACA auction, you should alert this matter to the auctioneer.
 
Auction check-list:
Before you go for a property auction, Gary Chia suggests that you follow this step-by-step guideline before making your bid:
1) Identify
Take note of the description, address and the relevant information about the property you are interested in.
2) Inspect
Make sure you understand the condition and state of the desired property.
3) Independent research
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.
5) Prepare a bank draft
Make sure you are equipped with a bank draft that is equivalent to 5% or 10% of the reserve price. If you are determined to own the property, then it is crucial that you prepare enough funds to close the deal (5% or 10% of the final selling price). The sum must be paid immediately after the auction.
6) Registration
Register yourself on the day of the auction and get a copy of the 'Terms and Conditions of Sale' form. The registered bidder will then receive a card with a number on it. The card will be used to identify the registered bidder during the auction. Make sure you understand all the terms and conditions.
7) Bidding
After the auctioneer announces the starting price, the bidder should raise his/her hand to signify interest.
8) The successful bidder
The successful bidder is the person who offers the highest price during the bid and bidding comes to a close when the auctioneer's hammer falls.
9) Sign the contract
The winning bidder is advised to collect the stamped Contract at a later date. Contact the bank to arrange for financing.
10) 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 3 – 4 weeks to process a distress order, which costs around RM1,500-RM2,000.
Auction Data Sdn Bhd
1-7, 1st floor, Jalan Ampang,
50450 Kuala Lumpur
Tel: 03-2070 6262, 2070 7171
Fax: 03-2072 9557
Website: www.auctiondata.com.my
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