What happens at property auctions
Property auction sales in Singapore increased in the 4th quarter of 2016. A Jones Lang Lasalle report stated that transaction volume reached approximately SGD$44.02 million even before the end of October 2016. The high volume was boosted by the sale of three vacant plots of land in Swiss Club Estate for SGD$15.22 million. There were 14 bids submitted. JLL reported that they are seeing renewed interest in the auction market, especially for landed properties in good locations.
Property auctions have been going on for some time. Property buyers often dream about purchasing a property from an auction. Yet not many do actually attend auctions much less know what to do and what happens at auctions. It is a myth that there is someone with a hammer and everyone is yelling out prices. Auction events are much more dignified and organised than what many would imagine. So let us take a look at what to expect at auctions.
1) Why are these properties put up for sale at auctions?
Most of the properties being sold at auctions are placed there because the owners decided to sell it through an auction. There will be a decent amount of properties that are put on sale by banks as well. These properties are usually repossessed by the bank and the bank has to sell them off to recover the debt. For the owners who place the properties on auction, usually they are keen to transact quickly and selling through an auction allows them to secure an optimal price within a short period of time. For some properties on auction, the owners may be going through a divorce and there may be a court order to sell it at an auction.
Not all properties sold at auctions are because of distressed owners. Some home sellers may just be open to putting their properties up for sale at an auction to add an avenue for them to market their property.
2) Can I buy a property at these auctions at ridiculous prices?
If you are thinking of getting a property valued at $2 million for $1 million then no. Even though a property is repossessed by the bank, the bank cannot sell the property for any price that it wishes to. The property has to be resold to repay the debt but that does not mean that the property will be sold at an amount that takes into consideration the banks interest alone. For example, if a $2 million property is repossessed by the bank and there is an outstanding loan of $1 million dollars owing to the bank, the bank cannot sell the property for $1 million. The bank has to sell the property at the highest possible price in the expected time frame. If the highest possible price in 3 months is $1.8 million, then the bank has to sell it at $1.8 million and return the excess to the original homeowner. So yes, you may be able to get bargain deals at auctions but if you are expecting to purchase prices at half their valuation, most probably that is not going to happen. That being said, if you are looking for a property, it would be good to keep informed about the latest auctions and properties on sale.
3) Who attends these auctions?
At most of such events, there may be about a hundred people at an auction. However, not everyone at the auction may be a buyer. A lot of people are there to take a look at these events to get a feel for the property market. There are also a lot of property agents and bankers at these events. The property agents are there to offer assistance to any potential buyer that may be keen in the properties that they are representing.
4) How is the bidding process?
There is an opening price and a reserve price for each property. The opening price is the price which the auctioneer will throw out to get interest in the property. The reserve price is the lowest price which the property can be sold for. For those who are keen in the property, they will be invited to submit bids on the property. These bids may be higher or lower than the opening price. Very seldom does a bidding war occur. However, when a very good property is put up for auction, the bidding activity can be pretty exciting. Some properties are actually sold after the auction through private negotiation. Interested buyers may speak privately with the agents representing the property after the auction and offer on the property privately. One of the main reasons for this is because buyers may not want to show interest in public for fear of another buyer bidding the price up. Psychologically a bid may draw other interested buyers who were on the fence to start bidding as well.
5) How do I prepare for an auction?
You should get an in-principle approval from a bank or a mortgage broker before you make an offer at an auction. You can also request for the list of properties that will be presented at the various auctions. You can view some of these properties before the auction. This will allow you to access whether you may want to put in a bid for the upcoming auction and if so what is the price you are willing to pay for that particular property. You may sign up for details about the latest auction and properties on offer here.
6) Are many properties transacted at these auctions?
There are actually very few properties which are transacted at these auctions. The truth is that you are unable to find properties are bargain bottom prices. However, you are likely to find some properties with very motivated sellers and thus more open to negotiation. At times we do see some really good buys at these auctions. The key is to stay informed about the latest auctions and the properties on offer. From there you should get a general feel of what to expect at these auctions and after a while, you may be able to spot some good buys. Our team have compiled a list of auctions which may interest you. You may sign up to our auction mailing list at by clicking here. Most auctions are held at function rooms in hotels. Some are held by property agencies at various locations.
Happy property hunting!
The Lovelyhomes Team
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Article contributed by Daryl Lum