4 Hidden Hazards Of Buying Foreclosed Properties

Auctioned properties are becoming the preferable choice nowadays since it is deemed to be reasonable. There are a few reasons on why certain properties are being auctioned and these include owner failing to pay their mortgage, property tax, as well as income tax; Abandon abodes and homes seized by the government due to illegal activities can also be auctioned.

Whilst buying an auctioned property can be advantageous due to its fairly affordable price tag – which is possibly lower than the market value or cheaper than buying directly from the developer, yet it is undeniably risky at the same time.

There are quite a number of dreadful stories involving auctioned properties and much more to come if buyers are not cautious enough. Here are the risks involved which should be avoided at any means possible:

Foreclosed properties in Malaysia are auctioned in two modes: Loan agreement cum assignment (LACA) and non-LACA.

The LACA auction is conducted by banks for properties without an individual or strata title, which requires a 5% deposit; and non-LACA auction is conducted by the High Court for properties with individual or strata title, which requires 10% deposit of the reserved price.

It is vital to prepare the funds prior to auction or as soon as possible after making a successful bid, as LACA auction requires winning bidders to settle the remaining balance within 90 days and non-LACA bid within 120 days.

Failure to do so will result in your deposit being forfeited.

One of the most common problem buyers’ face after purchasing auctioned properties are vacating the occupants if the unit is not in a vacant possession.

The process of legally evicting the occupants will take up to four weeks and cost approximately RM1,500 to RM2,000. You can apply to distress the occupants through a lawyer before you apply for a court order. This process can only be conducted after you’ve become the rightful owner.

The best way to settle such issue is by speaking to the occupants first. Tenants are easy to deal with compared to enraged owners. So the best way to avoid this is to survey – find out if it’s occupied and whether they are previous owners or tenants, prior to the auction.

Bear in mind, not all auctioned properties come with ready to move in condition. If no proper survey made prior to the auction, additional expenses might incur right after.

Inspect the condition of the unit before bidding on it to determine the repair works involved. In some instances, when the occupants are forcefully sent out they tend to damage the house in purpose; meanwhile some houses are poorly maintained.

Pay a visit to the unit even if you are unable to view the interior. The state of the exterior can give you a rough idea on the condition itself.

Also check the outstanding bills and if there’s any, it’s your responsibility to settle them all. Before you bid on the house, visit the relevant offices such as Syabas and TNB with a copy of the Proclamation of Sales (POS), and check the available outstanding bills.

By doing this, you can calculate the hidden cost involved in purchasing the house and decide whether it is a worthy acquisition.

Before making a successful bid, check for caveats as well as the status of the title.

Caveats are legal notice to stop or suspend the property sale. This situation might incur if the property is co-owned by two individuals, where one of the individual places caveat to avoid the other to sell the house; or if the house is used as a collateral for money lending.

In terms of the status of the title, certain properties are allocated to Bumiputras. The property cannot be transferred to your name if you are a non-Bumiputra, even after a successful bidding.

To avoid such complications and to reduce the risks involved, do research and inspect the property thoroughly right before making a successful bid.

If you’re interested in acquiring auctioned properties, undertaking adequate investigation will help to reduce the risks and provide a clear picture of the total sum involved. Pay attention to the above-mentioned details to ensure that you’re making a worthy and risk-free investment.

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