With recent market turmoil putting pressure on mortgage holders, the property market has seen a seven- year high in the number of repossessed properties put up for auction.
The Straits Times also reported that the value of property sold under auction has hit a five-year high of $102.27 million, with residential units dominating the listings.
But bad news for overstretched property investors could mean good news for serious house hunters who could possibly pick up some choice units going on the block. Here is a quick guide on the process.
VIEW THE PROPERTY BEFORE THE AUCTION
Property research house DTZ said arrangements to view the property can be made before the auction. Typically, ads are placed in the classifieds two to three weeks before an auction. You can contact the agents to set up a viewing appointment.
GET LEGAL ADVICE AND CHECK YOUR ELIGIBILITY BEFORE THE AUCTION
Prospective buyers should seek legal advice and check their eligibility to buy properties before making the purchase.
"Buying at an auction is a firm commitment and carries the same legal implications as a signed contract in a private treaty sale. In most cases, copies of relevant legal documents are available before an auction so that you and your solicitor can review them," DTZ told The Straits Times.
In addition, buyers who require loan financing should consult their bankers on their eligibility requirements. But there is no need for the buyer to bring an in-principle agreement on their loans to the auction.
Under the Residential Property Act, an interested buyer who is a foreigner or a foreign firm must seek prior approval from the Land Dealings (Approval) Unit for any landed residential property purchase.
CHECK FOR LATE AMENDMENTS
An inquiry desk is set up at the auction for potential buyers to check for any changes to the particulars and conditions of sale.
THE BIDDING PROCESS
Stay in the auction room once bidding starts as some properties sell quickly. Indicate each bid to the auctioneer by raising your hand.
Once a bid is successful, the buyer should inform his bank so the loan application can be processed, and contact his lawyer, who will get in touch with the seller's solicitor.
SETTLEMENT AFTER A SUCCESSFUL BID
After-sales settlement of the property is prompt. Once the hammer comes down on an accepted bid, a contract is drawn up.
DTZ said the successful bidder has to furnish the auction staff with his identity card or passport, company stamp and/or Power of Attorney and a cheque (two cheques required if GST is payable). The successful bidder will pay a "10 per cent deposit of the successful bid price and immediately sign the contract".
For commercial and industrial properties, where the goods and services tax is payable, the successful bidder has to pay the GST amount together with the 10 per cent deposit.
The date of completion of sale is usually between 10 and 12 weeks.
DTZ said the buyer does not have to pay any commission, which will be paid by the vendor.
LEAVE YOUR CONTACT DETAILS
Should the deal not go through because the bids do not meet the reserve price, DTZ said interested buyers should leave their contact details. "It may be possible that the vendor may decide to sell later," it said.
The reserve price is set by the seller and is not publicly disclosed.
GO WITH REALISTIC EXPECTATIONS
DTZ said the prices of properties sold at auctions tend to be slightly lower than prevailing market rates.
This article was first published on February 27, 2016.
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