While buying auction property seems to be a great cost-effective idea, aspiring home buyers might need to think twice. Here are some important things you should know about real estate auctions in Malaysia.
An auction property is a property that has been foreclosed on and repossessed by a court or the bank, usually due to the previous owner’s inability to pay monthly instalments, property tax, income tax, or other outstanding property payments.
An auction property could also be property that was either abandoned by the owner or seized by the government due to illegal activities. Auction property usually offers good deals for potential homeowners who are willing to put the time and effort required for an auction.
Potential buyers can get a larger home at a possible saving of up to 10% - 20%. This way, you can use the saving for renovating and decorating your new house or on other projects.
2. Owning a property quickly
Bidding on a house through an auction is one of the fastest ways to acquire an asset
Once you sign the necessary agreements, you are already am owner as the parties involved will be legally bound until the end of the transaction.
Auction Property Cons
1. Paying for costly repairs
Houses are prone to damage, wear, and tear. Homeowners who fail to critically inspect the property before bidding should get ready to pay for costly repairs if the property is not properly maintained.
You may not get the opportunity to view the property’s interior so it can be impossible to see the damage left behind by the previous property occupants.
Meanwhile, the cost of repair may be so high that the overall expenditure will equal what a property developer in Malaysia would demand for a brand-new unit.
2. Unexpected complications
Auction properties are known to have a lot of complications than the ones purchased from property developers.
Some common complications may include a caveat placed on the house by a third-party or your bank’s refusal to extend your preferred financing options due to lease type on the property.
In case you are wondering, a caveat is a legal document filed by a third-party on a house. This can hold up the sale for months and make a home loan
3. Evicting tenants or occupants can be troublesome
Evicting tenants or occupants can be strenuous and overwhelming. In most cases, an auctioned property has people occupying the home.
So you’ll need to bear the stress and trouble of getting them to leave. According to Malaysian law, you must first be the owner of the property before legally evicting occupants out of it.
Even after getting a court order, the process can be lengthy especially if the occupants are uncooperative.
4. Requires immense research
Potential homebuyers need to do a lot of research
especially if they know nothing about the Malaysian’s housing market.
You will first need to understand the type of lease the house is under, the history of the property, the legal aspects, and perform inspection tasks before purchasing an auction property. Wait, there is more.
You will need to research the owner
of the property before requesting the proclamation of sale to get the full details on the property and sale. This complex process further increases the risks of buying an auctioned property in Malaysia.
An auctioned property can be a lucrative way to acquire a property. Typically, the prices are lower than market value, but the risks involved outweigh the benefits.
We hope this blog post can be a useful guide for homebuyers who are still deciding between the new property and auction property.