Nowadays, the auction house buying trend is gaining a place among home buyers. However, there are no less than the perception that the auction property is less valuable than the new home or secondary property, which is why auction houses are sold at cheap prices. Therefore, it is important for you to know some things related to auction real estate before you decide to buy auction house including auction type, auction houses, advantages and disadvantages of auction property and so on.
3 Things You Need to Know Before Buying an Auction House Malaysia
The auction house generally refers to a home sold by a bank or a third party with a license for auction. There are many things you need to consider before buying a auction house. You need the right knowledge and enough before deciding to buy this kind of real estate. Let’s read the complete guide on how to buy this auction house for your reference.
1. Types of Auction House in Malaysia
Basically, the auction house is a mechanism used to transfer property from one party to the other. There are many reasons why the house is auctioned, including the original owner failing to pay the house installment and the remaining arrears until they have to release home ownership at the bank’s direction. Before you find out the auction house process, it is important to know the type of auction house in Malaysia. The auction house is divided into two categories as follows:
Loan Agreement Cum Assignment (LACA)
As a result, it is done by the bank on property that has no individual or strata ownership. The amount of deposits payable to the auctioned parties is usually five percent of the property price. If the auction process is unsuccessful, the next auction will be done at a reserve price for each auction will decrease 10 percent of the previous price. Meanwhile, the remaining payment must be settled within 90 days after the bid successfully.
Non-Loan Agreement Cum Assignment (Non-LACA)
This auction process is carried out through the High Court for real estate with individual or strata ownership. If no bidders succeed, the next auction process will be held about six months later. Just like the LACA auction, the reserve price will decrease 10 percent of the previous price per auction. In contrast to the LACA auction, the balance of the payment can be settled within 120 days after the purchase.
2. Methods of Buying Auction House
For those of you who want to buy your first home or home through the auction market, you can consider two methods of buying auction house as follows:
The Physical Way to Buy An Auction House Malaysia
You need to register personal information and send deposits to the auctioned party. You have several ways to send a deposit, either by bank transfer or through a bank draft. If you choose to make a deposit payment through a bank draft, you will need to submit it to the auctioned party immediately within the specified time.
For the physical auction process, you can represent the auction agents or attend the auction house bid session. However, it is advisable to visit several real estate auction events before your ideal home bid. This allows you to identify successful real estate bids that match the area, budget and home specifications you want. Compare this successful auction price with the existing online home sale platform.
How to Buy an Online Auction House Malaysia
In addition to physically, the auction house buying process can also be done online. Basically, there are several websites and companies that offer online auction services such as e-acquisition and so on. To buy a auction house via e-acquisition, you need to register first before you are allowed to see the property listing. You can also find important information on the real estate you want to build such as reserve prices, locations, real estate, real estate, construction or land size.
3. Advantages and Disadvantages of Home Purchase in Auction Market
Before making any purchase, it is advisable to identify any advantages and disadvantages of buying a home in the auction market. Here’s a list of advantages and disadvantages of auction house for your guide:
|Auction house market prices are lower than subsale houses||The auction process can be canceled (unit called off) at any time even on the day of the auction because the owner has paid the remaining balance|
|There are no home purchase restrictions||The house price is auctioned above the market price, especially if no market price research is done|
|A wide selection of interesting locations||Potential mortgage disapproval|
|The price of the house can be chosen based on the suitability of the budget||Serious damage to the home unit or high arrears of utility bills by the old owner will have to be borne by you|
|Higher rental returns than subsale homes||The old owner refused to leave the house|
10 Easy Ways How to Buy Auction House in Malaysia
Basically, the process of buying a home depends on the type of home market you want to buy. This means that the process of buying a auction house is not the same as buying a subsale or a new home. How to buy a auction house? Here are 10 simple home auction buying procedures that you need to know for your reference and guidance:
Before Buying an Auction House
If you are interested in buying auction house, here are some of the steps you need to know before buying auction house:
1. Determine the Budget
The process of buying auction house requires you to pay for your home or home deposit at least 10 percent of your home price. However, you also need to consider the costs of buying other homes such as legal fees, assessment reports, renovate or repair costs and so on.
For the cost of repair, it usually depends on the current state of the auction house. There are some auction houses just to be re -painted or require re -wiring. If you are lucky, you are likely to have a auction house without being repaired. Therefore, it is important for you to determine your home budget and choose the type of home that suits the cash in hand.
2. Check the Loan Eligibility
If you want to buy a auction house in cash, a loan eligibility may not be a problem for you. However if you need to apply for a bank loan for your home financing, it is advisable to check your home loan eligibility first to avoid losing your deposit. You can check your credit eligibility at any bank offering a home loan to find out the amount of financing. Bring pay slip and related documents and ask for the amount that is eligible to borrow based on current commitment.
Also, make sure you are not blacklisted and CCRIS records, your CTOS is in good condition. If you make a hurry decision and do not check the loan eligibility in advance, you can lose the deposit that has been paid as the balance of the payment must be cleared within 90 or 120 days from the date of the auction. Your deposit will not be returned if the loan is not approved by the bank even if you have won the auction.
3. Find More Information About the Auction House and Identify Locations
Regardless of the auction house purchased for your own home or as an investment, you are advised to do a home -related survey. You can find home information that is auctioned through an online platform or through newspaper ads. Also, consider aspects of location selection before buying the appropriate auction house. Identify whether there are basic facilities such as schools, public transport, safety aspects and so on. Then, compare these aspects to the true goal of the property ownership.
For example, if you want to make a auction house purchased as your own home, locations close to work and basic facilities such as mosques, supermarkets and so on can be a key factor in decision making. If this house wants to be invested as an investment, there are many other aspects that need to be taken into account such as home locations near educational institutions, factories or public transport facilities such as MRT, LRT and so on.
4. Review Market Price
To ensure that you do not make any harmful purchases or buy a home beyond the budget, make a market price review first. You can review the market price through the online real estate selling platform to get the latest price price. The auction house market value is usually 30 percent lower than the new home market price depending on the location.
Make careful calculations, and set the maximum price of your bid. This way, you can prevent yourself from bidding auction house prices too high or more expensive than market prices that can harm you. There are also auction houses offered by a decrease of up to 50 percent. If you are interested in this property, it is advisable to check the physical condition of the home first. Usually, the auction house for sale is too cheap to suffer serious damage that requires you to spend other additional expenses to repair the house.
5. Do a Site Visit
Auction real estate is usually sold ‘as it is’. This means that you will find the same home as the home condition you see during the survey. Therefore, you are advised to first see the home you want to buy before making a bid. Visit to an important location to enable you to evaluate your own damage and current conditions. Any damage to the house must be borne by you and you cannot make any damage claims. Therefore, do not make decisions without thinking long and deceived at the cheap price offered.
Additionally, request a copy of the Proclamation of Sale (POS) and Condition of Sale (COS) for reference to the property you want to buy. Both of these documents describe the declaration and state of the property you want to bid. In addition, you can also do the following for more information on the property to be sold:
- Identify unit environment area;
- Other units around the unit to be purchased;
- Review of maintenance bill, previous owner utility bill.
6. Make Sure There Are No Caveats
Many of the auction house buyers overlook matters related to the caveat. What is a caveat? Caveat or caveat comes from Latin which means “warning someone”. From a real estate standpoint, the caveat is a temporary step to protect the rights of the individual under the sale and purchase agreement and prevent any process from registration to the exchange of ownership during the caveat.
Auction house has the potential to have a private caveat. This means that even if you have won the bid of the house, you still need to challenge a third party to register a caveat to cancel the caveat. In addition, a auction house with a private caveat also means you cannot finance the purchase of the house with a home loan. This is because the Bank will not approve a loan if a private caveat is registered for a property.
7. Provide Deposit, Additional Cash
Basically, buying auction houses requires a lot of cost and expenses. Here are some of the things you need to provide and the costs you need to consider before deciding to buy a auction house:
- Photocopy of identity card;
- Home deposit 10 percent of the price of the house purchased (bank draft or bank check);
- Additional cash (if there are other costs payable or inadequate).
While Buying an Auction House
The following are some of the important steps when buying auction house for your reference and guidance:
8. Come Early
You are advised to come early on the day of bid. If it’s too late, you may miss the opportunity to bid your ideal home. In addition, coming to the bidding location also allows you to prepare to facilitate the registration and submission of the bid document.
9. Bidding Process
Before the bid process begins, the staff at the auction location will hand over the bidder card that will be used during the auction process. Usually, only individuals with this bidder card are usually allowed into the bid room. You need to raise this bidder card if you want to make a bid against the auction house unit. The unit will be sold to the bidder at the highest price.
After Buying an Auction House
After completing the auction house bid process, here are some of the last steps you need to take:
10. Win or Lose the Auction
Once the bid process is completed and you win your ideal unit bid, you will need to sign a sales contract form or COS. You also have to pay the difference in the amount if the end of the auction is higher than the original price. In addition, you will also be given time by the auctioned parties between 90 and 120 days to explain the remaining 90 percent of the home price. Apply for housing financing immediately to allow you to be eligible for the auction house. However, if the auction of the bid unit loses, your home deposit will be returned.
Hopefully this partnership can help you if you want to apply for a government housing loan to buy your new home. If you want the best and cheap home insurance, get it from Qoala today! Also, if you are considering car insurance, cheap motorcycle insurance or best health insurance and comprehensive for you, visit Qoala website, the best insurance platform in Malaysia for more info.