What’s the different between purchasing normal property compare to purchasing auction property?
Let’s start with, what is auction property. You can only purchase auction property via bidding at licensed auction house center, such as MNP Auctioneers (Central) Sdn. Bhd which is one of many licensed auction center.
1. How did Auction property stray at these center?
– Auction property came to be auction property is due to previous borrower who default on their housing loan. When borrower default on their housing loan 6 months max, bank would consider them to be arrears, hence stated the house as defaulted property.
Bank would try to mitigate their loss and resell it at licensed auction center to recover the outstanding balance owed by the defaulter!.
However, they would need to resell it at lower than normal market price at auction house.
Buyer would visit the center bidding at fixed session, they need to prepare cheque or banker’s cheque to pay for the down-payment of the auction property once they successfully bid the property.
In licensed auction center, buyer need to bid with all other buyer to booked the property they want, with a starting price of RM5K,10K,20K etc every raise of hand.
Example MNP Auctioneers (Central) Sdn. Bhd” a one-time lump sum of Ringgit Malaysia Three Hundred Only (RM300.00), and the Bidder will be entrusted with a paddle affixed with number for bidding purpose. For payment via credit card, a surcharge of 2.5% will be imposed.
When the purchaser successfully bid the property, they would need to pay the Down-payment 10% right away.
2. Where do I get the list of auction property lists?
-Well, you can visit licensed auction house website to see the listing, or you can visit nearby bank branches to get brochure of auction property.
3. What’s so different with auction property financing compare to other normal property financing?
- The difference with the loan application are: the documents you required to sign for booking the unit is called proclamation of sales, instead of normal booking document.
- After bid completed, you need to sign the document and pay 5-10% of the down-payment right away to secure the booking.
- You need to get the loan disbursed in 90-120days time, else, you need to pay for the outstanding 90% amount to the bank after expiring 90-120days, while waiting for the bank to disburse the loan. Hence timing is very important for auction loan.
- If the property is a low cost flat with problems, 120 days is definitely insufficient, as the purchaser will be required to apply for consent of the appropriate authority, which usually takes more than 90 days to be obtained. Having to pay interest for an extension will be an additional cost.
- What is LACA?
- LACA is loan agreement cum assignment Auction. Which is a document to be done by banks for properties without an individual/strata title. Borrower would need to pay 5% downpayment fees only. Usually balance purchase price need to be settled in 90days time frame.
- Non LACA auction is properties with an individual or strata title. 10% downpayment have to be placed and usual balance purchase price need to be settled in 120days time frame.
- NON LACA is given more time than LACA, because title transfer from individual borrower will take more legal time than direct transfer from developer.
Since the title has not been issued, the developer’s consent is important so that when the title is finally issued, the developer will know who should receive the transfer.
Nearly all Proclamations stipulate that it is the purchaser’s responsibility to obtain the developer’s consent and to pay any fee charged by the developer. In some cases, the developer may appoint a solicitor to handle the consent, and the purchaser may be liable to pay the said solicitor’s fees. Such fees will be an additional cost. Developers do not usually grant its consent unless all outstanding service charges are settled.
Some Proclamations are quite fair in that any arrears of service charges, quit rent and assessment up to the date of sale shall be paid out of the purchase money. Many Proclamations stipulate that arrears of service charges and utilities bills (water, electricity and sewerage) shall be borne by the purchaser.
In one case, a purchaser successfully bid for a property at RM128,000, and outstanding service charges was about RM40,000. These outgoings will be an additional cost.
- Why auction loan disbursement take lesser time than normal residential loan?
Because release of loan (disbursement) can be done before present of memorandum of transfer to land office. Hence, the process is expedited.
- When there’s no title, how auction property are being charged to your name as buyer the owner?
When there’s no title, the loan is being granted on the basis of loan agreement and a deed of assignment. The lender is entitled to dispose of the property on the strength of power of attorney.
- Type of auction. Judicial auction and Non-judicial auction
Judicial auction is regulated by National land code (NLC). This only applied to property with title and are charged to a bank. If borrower ever fail to pay the loan and defaulted, bank have the authority to apply to the high court or land administrator for an order to sell the property to the public auction.
Non judicial auction is not regulated by any legislation, for property without title. Since there’s no title, no charge can be created under the NLC. For security reason, borrower/purchaser will assign the absolute right of the property to bank. If seller ever default, bank contractually entitled to sell the property via public auction without having to apply order for sale.
- vacant possession
Borrower need to be aware whether the property they are bidding to acquire are in vacant or occupied state. Because they might still be previous owner staying in the property and refuse to vacate the said property, as it is stipulated in the proclamation of sales contract, bank has no obligation to give vacant possession and purchaser shall take possession at their own cost. Means, additional cost to vacate the owner.
To visit the property and check and ask around whether this property has any issue.
If there’s still previous owner, easiest is to just contact TNB or Water department to cut the electricity and water to force them to leave, else take this to court matter.
Make sure the property has no caveat. Caveat is someone who hold power over the purchasement of the property itself via legal right and power of attorney. Hence, purchaser can’t charge the property to their name due to caveat issue
To get the lawyer to check on the land and caveat status, before proceeding to bid for this property.
Always do your own due diligence before purchasing any said property.
Any inquiries, do drop down at comment section! 🙂