Hammering home
Capture potential opportunities at property auctions before they’re going, going, gone, says Matt Wang
Hong Kongers are no strangers to real-estate agencies, but purchasing property at auction is becoming an increasingly popular option for many. By taking this previously less-travelled route, home buyers have been really cashing in over the past few months – and why not, when you can often take home a home for well below market price.
If you’re willing to learn how it all works (and the auction process is not as complex as you might think), there is proven potential for great deals. A property that has been liquidated can be auctioned at highly competitive rates compared with its market value, and cash-rich buyers will also be attracted by the straightforward and even-handed bidding system.
“An acquisition is confirmed after the fall of the hammer,” says Thomas Tang, senior director, Valuation & Advisory Services at CB Richard Ellis Hong Kong. “There’s no need to undergo the acquisition negotiation, which may be time consuming and troublesome. The sale procedure is transparent, and it is a fair deal.”
Potential buyers need to be ready to act fast as information about an auction may not reach realtors (and the press) until ten days before the sale. How well an auction is promoted is one of the most important influences on selling price, and it is at the poorly advertised “quickie” sales that you really stand to cash in.
“If a property is sold under a forced sale situation, the final sale price may be below the market price levels, in particular when the potential buyers are not well informed about the auction,” says Tang. “However, when the market has been well informed about the auction, competing purchasers will be concentrated, thus forcing up the selling price.”
Prospective buyers should of course bring some method of payment (cheque, cashier order or cash) with them on the day of the auction.
Something that first-time auction buyers should also note is the difference between a property’s asking price and minimum price. The asking price, which is provided by the auctioneer based on estimated market value, is the price given before the auction and at the start of bidding. The minimum price is the amount that must be reached for the property to be sold – this is set by a government official, and based on price estimates from at least three surveyors.
The auctioneer will often be unaware of the minimum price until the day before the auction, and sometimes only minutes before the auction commences.
Once the final bidding reaches or exceeds the pre-determined minimum, the auctioneer declares the property sold. After the sale, the buyer then pays a deposit percentage before paying the balance at the solicitor’s office by the determined completion date.
All pretty straight forward assuming you have the funds upfront, though Tang points out that the procedure allows for little wriggle room. “Sales terms are dictated by the auctioneer, and such terms cannot be tailor-made to the special circumstances of the buyer. For example, arranging a longer completion timing.”
Discerning buyers should also pay close attention to any special conditions of the sale document, and notes pertaining to other legal issues. To keep yourself covered, it is a good idea to consult your solicitor – better still bring him along. |
