We rarely encourage people to buy an auction property, and there is a reason for that.
If a buyer has not been equipped with the right knowledge, an auction property can be tricky and complicated.
On the other hand, an auction property can also be lucrative and a hidden gem.
Well, there is no right or wrong about this.
Buying an Auction Property
Auction properties are sold on an “as is where is” basis. A buyer should inspect the property better to understand its state, condition, and surroundings and conduct a comparison of prices in the neighborhood.
Bidders must do their homework and understand their financial standing.
For instance, if there are any caveats on the properties, they will take a longer time to be removed, and banks may not release financing. So, buyers must be prepared to pay in cash.
Another thing to highlight is the existing or past bills incurred on the auction property. The bills can be from the utility bill, assessment tax, quit rent, maintenance fees, and other related fees.
As we know, a property will be auctioned when an owner unable to service the home loan repayment with the bank.
When the owner does not have money to pay for the home loan repayment, do you think they will have money to service the utility bills, taxes, maintenance fees, or other fees?
I doubt it.
So, what happened to the bills? Who is going to pay it?
Two parties will pay for it: one the auction bank, two the new owner. Or both will share to pay.
If the owner is lucky, they can request a waiver paying these bills from the utility companies, municipal office, management company, etc. But, the chances are slim.
There is also another way to avoid paying the fees.
Before choosing to buy the auction property, the potential buyer can select an auction property with its cost bear by the bank.
Naturally, how it works?
First and foremost, the auction bank will put in writing; they will bear the existing bills. And this typically will be sighted in the Proclamation Of Sale.
It’s essential to have this clause in the Proclamation of Sale. If no, the auction bank can deny it later.
It’s worth taking note, even though the bank agreed to cover the bills, the new owner still needs to pay it upfront and will be reimbursed by the auction bank later.
How long you asked?
The new owner requires to claim from the auction bank by providing all the proof of receipts. The turn around time can take weeks and some even months.
Some people might not be aware of this. But the practice has been in such a way for years.
So, it’s good to understand and get head-ups about the process before jump into buying an auction property.
Another reality check, the upfront cost of buying an auction property can be up to 20% – 30% of the property price. Massive funds require upfront. This is compared to buying from the sub-sale or under-construction property.
Before you go, do note either you are buying an auction property, sub-sale property, or construction property, each purchase requires a different set of techniques, skills, and knowledge.
It’s best to acquire some basic knowledge before dive in to buy the property, especially auction property.
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