1. Learn the basics

An auction property is real estate that has been foreclosed by a bank or the High Court, mainly because the owner has failed to settle the payment for mortgages or quit rent.

 
2. Identify the right property

For those who are new to property auctions, they may not know how to find a foreclosure property with good investment potential and whether the reserve price is attractive enough for them to bid.
For a start, Twincrest Properties Sdn Bhd principal Betty Chan recommends keeping an eye on properties located in established areas, such as Mont’Kiara, Kota Damansara, Cheras and Seri Kembangan, as these locations have a ready demand for renting and buying.
Subsequently, one should compare the reserve price against similar properties in the area.
 

3. Inspect the neighbourhood

Your next step is to visit your targeted property to inspect its condition and the surrounding area.
According to AuctionGuru.com.my executive director Gary Chia, it is also crucial to be familiar with the location and conduct a comparative study of the potential appreciation of the property with those in the primary and secondary markets while taking the rental market in the area into consideration.
Although the interior of an auction property is usually inaccessible, potential bidders can conduct an external inspection and find out the details about the previous owner and the history of the property from neighbours. Also try to find out if the property is still occupied.
 

4. Do your research

One headache that may arise when buying an auction property is when you discover there is a private caveat on it. This means the property has been secured by other bidders but is still qualified to be auctioned.
If there is a private caveat, banks may not finance the property. However, the caveat can be removed by filing an application to the court. This will take about two to three months.
If you want to avoid the trouble, you should conduct a title search at the relevant land office.
 

5. Be prepared

Obtain a copy of the proclamation of sale (POS) and conditions of sale (COS) from the auctioneer or solicitor to understand all the details about the desired property, the deposit you have to prepare and the cost to be undertaken or excluded by the financial institutions.
On top of that, you are advised to check your eligibility for mortgage loan and seek legal advice on the COS prior to the auction.
 

6. Bidding

A. Normal auction

(i) Registration — register yourself with the auctioneer before the auction starts. An individual bidder needs to bring his or her identification card, a bank draft for the deposit and additional funds to top up the possible difference on the deposit between the reserve price and the successful bidding price. For company bidders, they need to bring the memorandum and articles of the company, certificate of incorporation (Form 9), return of allotment of share (Form 24), letter of authorisation, identification card, a bank draft for the deposit and the additional funds.

(ii) Set a limit — the excitement of bidding, the desire to get your property and the competitive atmosphere can make you overshoot your budget, so it is wise to know your limit. It will be helpful to outline a few bidding strategies and keep in mind that being calm, confident and strategic is the key to successful bidding.

(iii) Successful bid — the auction will be concluded once the highest bid is called out three times by the auctioneer. The successful bidder is required to sign the contract of sale, pay the deposit of the bidding price and settle the balance within 90 or 120 days.
For a LACA property, one will need to prepare a bank draft equivalent to 5% of the reserve price as deposit, with the balance of the purchase price to be settled within 90 days of the successful bid. On the other hand, the deposit for a non-LACA property is 10% and the period to settle the balance is 120 days.

(iv) Additional cash — bidders should also prepare additional cash on the auction day to top up the difference on the deposit sum between the successful bidding price and the reserve price. The sum must be paid immediately after the auction.
If you do not win the bid, you can get back your bank draft from the auctioneer after the auction.
 
B. Online auction (based on general practices)

(i) Sign up with the portal — sign up to create an online account at the e-auction portal.

(ii) Identify your target — once your account has been verified, you will be able to start browsing the auction property listings. You will get to view details including auction date and time, reserve price, location, property type, property tenure, built-up or land size, encumbrances and others. You are advised to read the POS and COS carefully.

(iii) Register as a bidder — once you have targeted a property for bidding, you will have to register for the auction by providing your details and submit the deposit to the auctioneer using online banking transfer, or in the form of a bank draft using Pos Laju or by hand within a certain number of working days before the auction. If you want to withdraw from the auction, you can inform the auctioneer no later than one day before the auction date.

(iv) Bid online — on the auction day, log in to the website at least 10 minutes before the auction starts and read the terms and conditions. Once the auction starts, the reserve price and the amount for each bid will be shown on the website as bidders place their bids. There will be a few minutes for bidders to place their bids and the system will notify you to place a new bid if you have been outbid. Once the time has lapsed, the final bidder will be declared the successful bidder. If no bid is made within a certain time frame, the auction will be terminated.

(v) Succesful bid — the auctioneer will generate the memorandum of sale and deliver it to the successful bidder and the deposit amount paid by the successful bidder will be delivered to the plaintiff’s solicitors via Pos Laju services. The successful bidder will have to sign the contract of sale and pay the differential up-bid deposit (if any) using online bank transfer, Pos Laju services or by hand by a certain working day. The successful bidder will have to settle the balance within 90 or 120 days. Failed bidders will have their deposits refunded via online banking transfer or Pos Laju.
 

Auction properties can be categorised into:

Loan Agreement Cum Assignment (LACA) properties — properties without an individual title or strata title; their auctions will be conducted by banks.

Non-LACA properties —properties with an individual or strata title; their auctions will be conducted by the court.