A property auction is one of the best ways to invest in properties at below market value!
However, the auction process comes with risk if you are unsure how the auction market works.
In this article, we will share the key areas to note before you go for a property auction in Malaysia.
Let’s jump in!
Property Auction Stage
If the property is going for auction at Round 1, it’s better to avoid as the price won’t be too far off from the market value.
Go for those auction that are in Round 2 or later.
Owner Status
If the owner is currently staying in the property, there is a higher risk after you purchased the property as it might be a hassle to get the owner out of the property.
The owner might refuse to leave as they might not have a place to stay after this. You will then need to spend time and money to get the ex-owner out!
To avoid these type of headache, it’s better to purchase an auction property where it’s already vacant.
Ability to Obtain Loan
This step is crucial, check your loan capacity with the bank before going for auction.
This will help you understand your property budget and narrow down the types of property to go for.
Before going for auction, you have to first pay a 10% deposit. In the case where you can’t obtain the 90% loan, the 10% deposit will be forfeited.
Having the ability to pay the remaining 90% via cash or loan is something important to consider if you do not wish to lose the 10% deposit.
Hidden Cost
Find out the following costs so there will be no surprises after winning the auction:
- Outstanding maintenance fees
- Late interest payment
- Water and electricity bill
Years After Completion
There is no right or wrong on this, but it’s generally better to buy property that has been completed within 5 years as the property is newer and the risk of unknown hidden costs is lower with lesser wear and tear.
Compare Price with Subsale
Once you have obtained the price and sqft, compare the price on iProperty and Property Guru to have a feel of how much money are you saving when buying through auction vs subsale.
Generally if the price difference is 20-30%, you can consider to go for the auction.
Rental Yield
Check how is the rental yield for similar property so you can get an idea of your expected ROI.
If the expected rental yield is low, you can still buy it if you choose the property for own stay.
Proclamation of Sale (POS) and Conditions of Sale
This document will list out the details of the auction.
Read through all the conditions and terms before deciding whether to go for it.
Site Visit
Arrange for site visit to view the property from the outside and check the surrounding location.
If you are going for a condo, check the unit is facing where and what view do you get.
There you have it, the key checklists for a property auction in Malaysia. Goodluck and happy hunting!
