Buying auction or foreclosed property is regarded as a way where people can
create a stream of income according to some famous authors. But buying an
auction property is by no mean easy, there are many things one should look for
when buying an auction property. Normally a notice for an auction sale is
advertised in the local newspaper two weeks prior to the actual auction date and
buyers are to do the necessary inspection before going to the actual auction.
When the property is to be auctioned off, normally some of them are already
abandoned by their owner and locked and this make inspection rather difficult
unless the buyer want to enter the property in an unauthorised manner. Another
possible case is that the owner is still occupying the property and inspection
under this circumstances is rather impossible as normally owner would not
welcome buyer to enter their property knowing well that if a successful sale
occur, they will have to move.
Prospective buyer is also advised to do the necessary search at local land
office to confirm the rightful owner of the property. To qualify for the
auction, prospective buyer are required to prepare a bank draft or banker’s
cheque equivalent to 10 percent of the reserved selling price.
During the actual auction day, if the property is priced at a very attractive
figure, prospective may have to fight with others by bidding for a higher figure
where quick decision are required at the auction hall.
If there is no bidder on that faithful auction day, then the property will be
auction again with a cheaper price, normally 10 percent below the previous
tender price. So if there is no bidder, you may want to wait for the next
auction but bear in mind lower price may attract more bidders.
Successful bidder is normally given 90 to 120 days to settle the balance of
purchase price. Sometime for a property to reach a stage of it being auctioned,
there may be many outstanding bills like assessment, quit rent, maintenance
charges or utilities bills that have yet to be settled. Apportioning those
outstanding payment between yourself and the financial institution that called
for the property to be auctioned may take some time. This coupled with some
other red tape may make release of payment from your financing bank rather slow
and make 120 days seem like a very short time. So it would be easier if
prospective buyer has some kind of financing ready like having some other
property to charge to the bank for ready financing in which case the purchaser
would be able to purchase with cash obtained from the other financing taking the
burden off the purchaser to obtain financing using the auction property itself
within the very short time frame of 120 days.
Another thing the buyer should take note of is that if the buyer is buying
the property for trading purposes with the intention to resell it to third party
for a profit, then the buyer should take note that the transfer of the auction
property cannot be transferred to the third party directly. The auction property
must be transferred to the name of buyer first by the court before the buyer who
is now the new owner can transfer the property to whoever that buy the property
from him which mean that buyer who buy the auction property for trading should
take into account the government stamp duty and legal fees involved in
transferring the property into his name first. The transferring process can take
quite a long time too therefore if the buyer of the auction property resell it
to third party, he will probably have to wait quite a while before full payment
eventually materialised. Because the long period of time involved, interest and
financing charges have to be taken into account too. Otherwise the person who
trade the auction property may find that trading auction property is not as
profitable as he initially thought.
As there are difficulties involved in inspection of the auction properties as
mentioned above, prospective buyer who want to buy the property for whatever
purposes has to allow for repair cost as sometime the exact condition of the
property cannot be ascertained.
Prospective buyer should also check whether there is a caveat on the property
as removal of caveat may require court order and therefore incur cost.
If the original owner is occupying the property, there could be a case
whereby the owner may refuse to vacate the property when the bidder has
successfully bought the property in which case, court order may be required to
evict the occupier and therefore the cost involved.
It is because of the uncertainty and hassle involved in buying the auction
properties that make the general public reluctant to even try, therefore
sometime even when the property is priced very cheap, there may be not many or
no taker. However for those who are daring, with strong heart and financially
sound, the auction may just present an irresistable opportunity for fantastic
return on investment.
