What You Need to Know Before Buying an Auctioned Property in Malaysia

What You Need to Know Before Buying an Auctioned Property in Malaysia

In Malaysia, it may appear that the auctioned properties are relatively or a lot cheaper than the market prices, making it appear to be an attractive purchase but buyers need to understand the various hidden costs that could indirectly hike up the price. Therefore, it is always advisable to perform the necessary due diligence to spot all possible red flags before proceeding to purchase an auctioned property.

Here are few possible hidden costs and/or issues that could happen in an auctioned property:

Additional Cost in Relation to The Developer

In most of auction situations, the original owners have not done the perfection of the strata title from the developer to themselves and therefore, the subsequent bidder may have to bear the additional costs for the direct transfer fee payable to the developer and some other miscellaneous charges (in the event that the developer is agreeable to directly transfer to the bidder) or costs for the double transfer where this will prolong the completion process. It is advised to always check on the status of the strata title of the property with the developer before auction purchase.

Penalty

The risk of buying an auctioned property is relatively higher than the normal sub-sale cases. Therefore, if the bidder and/or his bank is unable to pay the full balance purchase price within the required 90 or 120 days from the auction day, there will be a penalty imposed on the bidder.

Outstanding Utility fees and other charges

It is very common that the original owners will stop paying the outgoings and maintenance charges long before the default of the housing loan repayment. Therefore, it is always advised to check for the latest outstanding amounts for the electricity, water, Indah Water bill, management maintenance fees, sinking fund, quit rent, assessment tax, insurance premium, and the late charges (if any). Also, not to forget to check the Proclamation of Sale on who will have to bear these charges whether it is the original owners’ bank or the successful bidder.

Repairs and Renovation Costs

Auctioned properties may require additional costs for repairs or home renovations if the properties are not taken care of properly and if it involves the structural damage (such as damage to the ceiling or roof), the bidders may need to spend more on repairs.

Unwelcomed Person / Tenant in the Property

After paying the full balance price, the original owners’ bank generally will issue a clearance letter in confirming on the full payment of the purchase price even before the auctioned property is duly registered under the name of the bidder. With such letter, the bidder can enter into the auctioned property.

It is always stated in the Proclamation of Sale that it is the duty of the bidder to get the vacant possession of the auctioned property and this is very different from a normal sub-sale sale and purchase agreement where the owner will give the full set of keys and access card to the purchaser upon the completion of the sale.

So, if there are tenants or other people at the auctioned property, it is the bidder’s responsibility to get rid of them. It is advised to discuss with the tenant either to come up with a new tenancy agreement or give them a notice to vacate the property within a reasonable timeframe. If they fail to do so, the bidder will need to appoint a lawyer to start a legal proceeding against them to forcibly regain the vacant possession through a court order. These legal proceedings could take months.

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