Auction(Lelong) house might bring a high returns for buyer. However, we must understand the potential risk that we might face ! Take note on 「The Risks to be aware of when buying an auction property」！
(1) The former owner does not want to move
New buyer needs to negotiate with former owner which might an exhausted process.
(2) Outstanding management fee or others fees balance
Read carefully for the sales brochure of the auction house in detail. It will state the part that the bank will bear and the unstated fee will fall under responsibility of new buyer.
Example: Investors can inquire the management of the apartment about the arrears of management fees.
(3) Entanglement of creditors
Generally, when the property is auctioned, the former owners are mostly in debt. Thus, the creditors of the former owners might come to entangle new buyer.
(4) Rent to others
This is a rare situation. Generally, the properties that are auctioned are occupied by the owner. If you encounter this situation, you have to find a way to get the tenant away.
(5) Private caveat
Even if the relevant property is under private caveat, the bank will continue to auction. Before we face this problem, we must conduct “Land Search” or “Title Search” to understand the details of the caveat property.
(6) The housing loan is not approved
On the day of the auction, a bank draft with a 10% deposit must be prepared. Assuming that the final bank loan is not approved, you need to pay the remaining 90% yourself, otherwise the 10% deposit will be forfeit.
(7) Risk of overspending
If you do not do a complete research, you can’t get a thorough understanding of the house’s condition. You will risk exceeding the cost and result in a final overspend.
(8) Atmosphere impact
You must have your own pricing in your mind, and don’t be driven by the atmosphere of the scene, make the wrong decision when you are dizzy, and follow up the price hastily.
Take Note !
You must ensure that your bank loan application will not encounter obstacles before you bid for auction property. Once the auction is completed, the successful bidder must pay a 10% down payment. If the bank loan is not approved, 10% down payment won’t be refund to the successful bidder.