How Do Property Auctions Work?
A property auction is an open market process built on the principle of competitive bidding. Rival bidders offer increasing prices to purchase a property, and the highest bid wins. In Malaysia, property auctions are a significant part of the real estate market, typically conducted by registered auction houses.
Properties are often auctioned due to financial difficulties faced by the previous owner, leading to foreclosure by the bank.
Types of Property Auctions in Malaysia
Malaysia has two primary types of property auctions:
Loan Agreement Cum Assignment (LACA) auctions
Non-Loan Agreement Cum Assignment (non-LACA) auctions
1) Loan Agreement Cum Assignment (LACA) Auction
Conducted by banks for properties without an individual or strata title.
Requires a 5% deposit of the property price, with the balance due within 90 days.
If no successful bidder, a subsequent auction can occur within a month, with a 10% lower reserve price.
2) Non-Loan Agreement Cum Assignment (non-LACA) Auction
Conducted through High Court auctions for properties with an individual or strata title.
Requires a 5% deposit, with the balance due within 120 days.
If unsold, the reserve price reduces by 10% for the next auction, typically held six months later.
5 Steps Before Joining A Property Auction
1) Research the Property
Investigate the property’s location, accessibility, and surrounding amenities.
Compare auction prices with market prices of similar properties.
Check if the property is freehold or leasehold.
2) Check With Developer & Land Office
Verify details such as:
Property lot number
Title status
Auction reserve price
Obtain the Proclamation of Sale (POS).
Ensure the developer is not bankrupt or difficult to deal with.
3) Inspect the Property & Locality
Physically visit the property and its surroundings.
Identify potential issues like poor maintenance, location disadvantages, or legal disputes.
Obtain a copy of the Sales Declaration.
4) Consult a Lawyer
Review outstanding maintenance fees, quit rent, and taxes.
Ensure no caveat (legal claim preventing transfer of ownership) exists.
5) Prepare for the Auction
Prepare the required bank draft for deposit.
Bring essential documents like identity card and proof of funds.
If bidding on behalf of someone else, ensure proper legal authorization.
What Happens at a Property Auction?
1) Registration Process
A) Physical Auction
Register with personal details and submit the deposit via bank transfer or draft.
If absent, a real estate agent can bid on your behalf.
B) Online Auction
Sign up on the e-auction portal.
Browse listings and check details like reserve price, location, property type, tenure, and size.
Register as a bidder and pay the deposit online.
2) Auction Commencement
Arrive early at the auction hall.
For online auctions, log in at least 10-15 minutes before bidding starts.
3) Bidding
Set a budget and stick to it.
Avoid getting carried away in competitive bidding.
4) Signing the Agreement
If successful, sign the Proclamation of Sale (POS) and pay the deposit balance (if any).
For online auctions, sign the Contract of Sale and complete the payment via bank transfer.
5) Payment of Balance Purchase Price
The remaining balance must be paid within 90 to 120 days from the auction date.
Buying an auction property can be an excellent investment if done correctly. Ensure you conduct thorough research, prepare your finances, and seek legal advice before bidding. Happy house hunting!