Amidst the soft residential property market, more houses were foreclosed by financial institutions and sold via auctions in the first quarter of this year, reported Free Malaysia Today.
In May, AuctionGuru.com revealed that about 6,225 homes were disposed through this method in Q1 2017, up from the 5,442 units recorded in the same period in the previous year.
Its executive director Gary Chia thinks that the supply glut of houses and the prevailing low rents are among the factors why foreclosures are trending upwards. After buying homes several years ago when the prices were high, he reckons some people are now struggling to repay their housing loans.
But instead of getting foreclosed by lenders, a number of websites are offering to purchase houses from distressed home owners. These portals pledge not only to sell the properties within one to three months, but also provides “attractive” terms like shouldering related expenses, including legal fees.
According to Henry Butcher Malaysia Director Lim Eng Chong, these websites seems to be operated by investors seeking to buy houses at a significant discount.
“They offer a chance for the owners to make a quick sale in order to settle their outstanding loans. These groups will buy properties at below market prices and make the difference when they sell at full market value.”
The offer by these websites might seem enticing to home owners struggling to repay their mortgages, but distressed sellers are advised to determine first the market price of their houses to know if the prices offered are fair.
Sellers are also urged to scrutinise the documents before signing and make sure all terms are fulfilled by the buyer. They should also ensure that they are dealing with unlicensed real estate agents, said Lim.
“Whatever it is, owners should avoid dealing with unlicensed agents as they are not trained in the proper manner and may not follow proper procedures.” There are many cases already of buyers and sellers getting cheated by unlicensed agents.
But banks typically want to avert foreclosures by restructuring the loans of borrowers. They may even suggest property agents to help them sell their property.
“I would get in touch with the owners and try to help them sell off their houses at prices that are higher than the value of their loans,” said an agent who is often called by banks about a property they might foreclose.
Lim explained that there’s a good chance that a real estate agent can get a better price for a house than through an auction.
“Properties are typically put up for auction at full market value during the first auction and the reserve price will be reduced by 10 percent at each subsequent auction. Quite often, properties get sold after the third auction.”
Nevertheless, the number of properties being put up for auction nowadays are much fewer than those between 2006 and 2010, when lenders were facing many Non-Performing Loans (NPL).
“The NPL situation is currently under control but could deteriorate if the country’s economic growth slows further and companies close down and staff retrenchments increase. That will result in more properties being foreclosed and being put up for auction,” added Lim.
Image sourced from FMT
Radin Ghazali, Content Writer at PropertyGuru, edited this story. To contact her about this or other stories email radin@propertyguru.com.my
For more information on new top homes, check out PropertyGuru’s New Property Launches and Project Reviews
