Contributed by Dr Alan Poon

Perhaps for good reason, auctioned properties get a bad rap, but there are advantages to be had if due diligence is exercised

“Auction” and “property” are two words that make for an oxymoron when combined. Where the latter is the dream of many in their quest to have a roof above their heads, or simply as a form of stable asset to include in one’s investment portfolio, the former is rife with caveat emptors (buyer beware) and the shattered dreams of aspiring homeowners.

Unlike broken dreams, properties bought on auction require some investment of time, money, and effort to restore. Photo by Valentin Salja on Unsplash.

So how do auctioned properties fare as a form of property investment, as they do not belong to either the primary or the secondary market? An auctioned property is real estate placed under the auctioneer’s hammer due to unforeseen circumstances, usually relating to the non-payment of monthly instalments to financial institutions – but there are also cases where properties are auctioned off to facilitate a speedy liquidation for immediate cashout by the owner.

Sometimes, due to dire financial circumstances. Photo by Alice Pasqual on Unsplash.

Enough has been said about the do’s and don’ts when it comes to buying properties on auction. Those with a legal background, especially, would list the countless traps one should be wary of and the reasons why one should avoid auctioned properties at all costs. Property gurus who are experts in their own right will have differing views regarding the choice of buying auctioned properties versus the many attractive properties directly from developers or the sub-sale market.

These two started debating the pros and cons of buying properties on auction in the morning – and they’ll still be at it by nightfall. Photo by Jonathan Sharp on Unsplash.

If auctioned properties are to be avoided, where does this leave us? Are we to be convinced only by the auctioneers, who are probably the only party interested in discussing this? My answer is a straight “no” – as the auctioneer is obligated to only highlight the benefits in order to compel the investing public to buy from their catalogue of listings, which could number in the region of hundreds.

“I can’t promise to be impartial, but I can promise that I’ll try – after you bid on all these listings.” Photo by JJ Ying on Unsplash.

So what if you really want to buy an auctioned property and you need proper guidance? Where does one look for this information? While we can search online or acquire tips from books, nothing beats asking those who have been there and done that before.

Experience matters

After having gone through the necessary but painful lessons in property investing, I would say auctions are definitely an avenue to hunt for hidden gems in real estate when it is done right. While the advantages far overweigh the fear of the unknown, the question will always be: What if?

What if I didn’t go for it? What if I can’t secure a loan? What if I bid at the wrong price? The ‘what ifs’ are endless and the uncertainty only fades when sufficient knowledge is acquired. I acquired mine when I went into the unknown, learned practically every single step, and summoned the courage to weather all the uncertainty that came with it.

Or if you prefer, “If ‘if’s and ‘but’s were candies and nuts…” Photo by Anthony Garand on Unsplash.

It would be an injustice to many if I condense the guides that one can find on the internet or the books written on the subject of buying auctioned properties. However, I will leave you with some useful pointers for when you dive into the most misunderstood segment of the real estate industry.

Check the property

First and foremost, there is much-needed legwork to be done: to check the premises and the necessary documents such as the land title and outstanding utilities. Don’t just rely on the lip service extended to you by auctioneers or agents. Remember, nobody is responsible for properties bought on auction once they have been acquired by you – it only makes sense to research the property long before you ever lay hands on them.

“Hey man, caveat emptor!” Image by Ashish_Choudhary from Pixabay.

The premises could be empty and locked, or it could be unexpectantly occupied, which could present a challenge in accurately gauging the internal conditions of the property – but a visit is still absolutely necessary to know whether a soft-yet-direct approach is needed to handle any unexpected occupants.

As that old saying commonly attributed to Sun Tzu’s Art of War goes: if you know your enemy, you have won half the battle. Isn’t this apt when it comes to knowing who are you dealing with before making the move to purchase a property on auction?

Another important move in buying a property at an auction is to check on surrounding properties that are similar in terms of type, size, and furnishing. If the property being auctioned is inaccessible, the surrounding properties will also help to give you an idea of what you’re getting.

Keep calm and do the math

The buying process in an auction is very straightforward – and it must be done without any emotions when bidding on the property of your choice. Ensure that you’re able to get adequate financing and do all the calculations that are required for the property that you are aiming for. Keeping a maximum bid in mind will ensure that one does not fall prey to over-bidding – which could be detrimental to your returns on investment.

Buying auction property requires one to be tactful with their gut feelings and to temper their emotions with experience. An investor or buyer could heed the advice given here but until and unless one gets their hands dirty and truly embraces the challenge of making your first purchase at an auction, nothing can supplement learning by way of books or online resources such as this.

I wish meaningful success for those who are about to embark on this journey. Best of luck in your endeavours and have a profitable investment journey!

About the Contributor

Dr Alan Poon

This article was contributed by Dr Alan Poon, founder and CEO of SuperiorWealth Resources Sdn Bhd, an award-winning company specializing in real estate education and investment advisory ranging from speaking engagements to events, content marketing services and book publications

This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation.

Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.

Read “To invest or not to invest in Auction Properties?” by Vicky How, “Hide and seek of auction property” by Eunice Tan, “10 Steps to buy an auction property”, and “Property Auction: The good and the bad”.

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