News & Articles Buying auction properties? Here’s a checklist before you bid !
Buying auction properties? Here’s a checklist before you bid !
25 Mar 2018
While there are various benefits of buying property at auction, with the most obvious being the lower prices, purchasing an auctioned property can come with some risks too.
Buying a house in itself is more often a once-in-a-lifetime financial decision, therefore here are four prudent items you need to cross off your checklist when purchasing an auctioned property.
1. Check the property from the outside
When it comes to auctioned properties, one of the major disadvantages is that you won’t get a chance to view the interior of the property. Thus, as a bidder, you won’t know the condition of the house when making your bid.
Even if you don’t have access to the interior of the property, there are other factors to look at. While the picture of the auctioned property may look acceptable, you can’t tell if it is located at a busy T-junction or next to a sewage plant. It is always important to do as much research as possible on the property. Find out the address or exact location of the property, visit the area, check the surroundings for security, traffic and amenities.
2. Check if there is a caveat
A caveat is a Latin word which means “let him or her beware”. A caveat is a temporary measure to protect the rights of the land.
Auction properties have a risk of having a private caveat. If an auctioned property does have a private caveat, even if you win the bid and pay the full amount, you will still have to challenge the third party (who submitted the caveat) for the property. This is because a private caveat may only be removed:
a) by the caveator (a person who files or enters a caveat)
b) by the Registrar
c) by order of the court
Application for the removal by court order could be made by any person aggrieved by the existence of the private caveat. In this case, the person who won the bid on the auctioned house which had a private caveat.
3. Research the developer
It is important for those who plan to purchase an auctioned house to do a background check on the developer of the property. If the property’s title is still under the developer’s name, a bidder should first check if the developer is still an existing company. If the developer is bankrupt and the company has been liquidated, then transferring the title to you after you have won the bid will be a hassle.
4. Check the tenure
Do some homework to find out the type of tenure for the auctioned property, whether it is leasehold or freehold. If it is leasehold, you will need to check with a bank to make sure you can get a loan. If the number of years remaining on the lease for the leasehold property is less than 50 years, some banks may not give you a loan. Or if a bank does approve a loan, instead of a 30-year mortgage, you might get a 25-year loan.
First time purchasing a property? Read this article on financial tips for first-time homebuyers so you can make a better-informed decision before taking that big financial leap.
Buying a house in itself is more often a once-in-a-lifetime financial decision, therefore here are four prudent items you need to cross off your checklist when purchasing an auctioned property.
1. Check the property from the outside
When it comes to auctioned properties, one of the major disadvantages is that you won’t get a chance to view the interior of the property. Thus, as a bidder, you won’t know the condition of the house when making your bid.
Even if you don’t have access to the interior of the property, there are other factors to look at. While the picture of the auctioned property may look acceptable, you can’t tell if it is located at a busy T-junction or next to a sewage plant. It is always important to do as much research as possible on the property. Find out the address or exact location of the property, visit the area, check the surroundings for security, traffic and amenities.
2. Check if there is a caveat
A caveat is a Latin word which means “let him or her beware”. A caveat is a temporary measure to protect the rights of the land.
Auction properties have a risk of having a private caveat. If an auctioned property does have a private caveat, even if you win the bid and pay the full amount, you will still have to challenge the third party (who submitted the caveat) for the property. This is because a private caveat may only be removed:
a) by the caveator (a person who files or enters a caveat)
b) by the Registrar
c) by order of the court
Application for the removal by court order could be made by any person aggrieved by the existence of the private caveat. In this case, the person who won the bid on the auctioned house which had a private caveat.
3. Research the developer
It is important for those who plan to purchase an auctioned house to do a background check on the developer of the property. If the property’s title is still under the developer’s name, a bidder should first check if the developer is still an existing company. If the developer is bankrupt and the company has been liquidated, then transferring the title to you after you have won the bid will be a hassle.
4. Check the tenure
Do some homework to find out the type of tenure for the auctioned property, whether it is leasehold or freehold. If it is leasehold, you will need to check with a bank to make sure you can get a loan. If the number of years remaining on the lease for the leasehold property is less than 50 years, some banks may not give you a loan. Or if a bank does approve a loan, instead of a 30-year mortgage, you might get a 25-year loan.
First time purchasing a property? Read this article on financial tips for first-time homebuyers so you can make a better-informed decision before taking that big financial leap.
Source: The Star