3 reasons why you should not overlook property auctions
By PropNex Research and editorial
Most people are familiar with the idea of a property auction, but not many have attended an actual session nor perhaps seriously consider it as an avenue to acquire a property. Usually, properties – including landed homes, condos, HDB flats, industrial and commercial units – are put on auction either as a mortgagee listing or owner’s sale.
In the case of mortgagee listings, also known as foreclosure or bank sales, these properties are made available for auction when the owner of the properties are unable to service the monthly loan repayment, resulting in the unit being offered for sale by the bank.
Meanwhile, property owners themselves could also opt for auction as a way to sell their property, as it is a relatively efficient manner of sale which enables the seller the opportunity to garner optimal pricing for the unit via open bidding.
Property auctions are held once a month by various consultancy firms and real estate agencies, including PropNex. Interested buyers can register with the firms in advance to attend these sessions. Typically, the auction list will be uploaded online a couple of weeks before the auction date and those who are keen on any properties could arrange for viewings before bidding for them at the auction.
Usually, home hunters tend to look at new launches or resale listings when they evaluate and shortlist interested properties. However, auctions should not be overlooked as they can potentially offer some interesting options at decent pricing.
A misconception is that auction properties are sold at rock-bottom, bargain prices. While this is not always the case, chances are buyers can still snag a good value-buy. Typically, the offering price for the property will be announced during the auction session before the auctioneer calls for bids from the participants. Once the final bid is accepted by the seller, the property is knocked down by the auctioneer, signaling a sale.
Do take note that the bid can also be rejected if it does not meet the seller’s reserve price. If there are no bids or no successful bids, the property will be withdrawn from the auction.
Depending on how attractive the property is and the demand for the unit, the bidding process can be quite competitive. For instance, it is not unusual to see active bidding for luxury properties in places like Sentosa or in the prime Districts 9 and 10.
Another advantage of an auction is that it provides a transparent, efficient, and straightforward platform for the selling and buying of properties. As a buyer, the auction enables one to know about competing offers on the spot and decide whether to submit a higher bid. In contrast, when buying a resale property, the buyers are usually unaware of offers from other interested parties and may not always get the chance to counter offer. For the seller, an auction is a quick and efficient way to sell the property as well as provides a chance to optimise selling price, especially when many bidders try to outbid one another for the unit, thereby driving prices higher.
Properties that are not sold via auction are not off the table. Interested buyers could still enquire about them and negotiate to purchase them via private treaty.
Attending auctions also helps to improve understanding of the prevailing market conditions, offering a good gauge of buying interest for any given locale as well as buyers’ pricing threshold. That said, it is always advisable to do the homework and keep abreast of property news and trends ahead of attending auctions.
Those who are interested in any of the auction properties should arrange for a viewing of the unit and thoroughly assess its location and condition, recent transactions, and decide how much one is willing to pay for it. Do consider things such as renovation cost and how many times the property has been re-listed for auction when evaluating how much one should bid for the unit. For example, if a property has been put on auction for a period of time without success, the seller may be more willing to adjust the price expectations.
Before attending a property auction and bidding for choice units, do check on the following: are you eligible to buy the property (e.g. foreigners are not allowed to buy landed homes on mainland Singapore); have you secured the necessary financing arrangement; and are there any changes to the conditions of sale for the property.
Do remain in the auction room once the session begins, watch out for the property when it is being called out and raise your hands to indicate an interest to place a bid. Should the bid be successful, the buyer will have to pay a deposit of 5%-10% on the bid price and enter into a sales and purchase agreement immediately. Hence, it may be a good idea to bring the cheque book along.
It is easy to get caught up in the auction process, the important thing to remember is to do your sums and ensure that the property meets your financial budget and housing needs or investment objectives. Do not rush into making a purchase, speak to PropNex’s auction team first to evaluate your options.
August 31, 2021