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How to Conduct Yourself in Property Auctions

How to Conduct Yourself in Property Auctions

auction house hammer

 

Have you been wondering what goes on before, during and after a property auction?

How to behave and what to look out for?

Let’s have a look and run it through.

In recent years, there are an increase of mortgagee sale on the back of a global economic slowdown and the tight leasing market challenges. There were 243 units (68% residential) of them in 2016, putting them at a five-year record high and it could be the year of mortgagee sale in 2017 as more listings were being projected.

So what is a mortgagee sale? It occurs when the owner(s) of the said property is no longer able to service their mortgage. Therefore, the “creditor” which is the bank that provides the loan to the home owner(s) will step in to repossess the said property. They will then put it up for auction, hoping to “recoup” as much as possible after a valuation.

Types of property going under the hammer

There are a few auction houses in Singapore such as Knight Frank, Jones Lang LaSalle and Colliers International. They do auction off all types of assets, including residence, commercial/industrial as well as development sites. However, there will always be certain assets which is highly favoured by potential investors and they are (non-exhaustive):

  • Rare properties/buildings under conservation
  • Properties/in area with future development potential
  • Prime real estate/land in excellent locale

And now you’ve made up your mind and ready to sit in for an auction, loan approved and cheque on hand. Nice! but before you raised your hand in bidding, please exercise due-diligence to avoid any potential pitfalls. Some may appear to be too good to be true and it probably is.

What are the signs to look out for?

Viewing of your Targeted Properties

Make time for viewing of your preferred properties, usually 1 to 2 weeks before the big day. Sellers would want to make a big and nice impression of it to attract potential bidders. If viewing is not available or on a short notice, it sets off the alarm. Would you want to take the risk blindly?

What is the Master Plan?

If you’re not familiar with the area, check it out and see the future for yourself! It is always a good practice to look into it.

General Discounts from Valuation

As a rule of thumb, there will most likely be a 5% to 10% price difference from the valuation in general for assets priced up to $3 million and a bigger % for higher priced assets. Keep calculating during bidding before you’re paying more than you should.

If You’re In The Know

Only for the seasoned old birds! or else please refrain from bidding for abandoned landed assets. Most often than not, purchasers are not keen on the property but the land itself. They have the knowledge, know-hows and higher accuracy of the cost estimation for reconstruction. Never underestimate the cost if you’re not experienced in this.

Your Preferred Property Pulled Off From Auction

And you’re feeling upset. Well, if you leave when the auction ends, it most probably ends there leaving you high and dry. But the bidding goes on aggressively behind when other bidders engages the seller privately as the reserve price were not met earlier on. You may keep trying to negotiate for a win-win transaction and this is what most of them are doing.

Who Else Are Selling Indirectly?

When you’re there, look around and network with the attendees. They are people like yourself or maybe real estate salesperson and they might just have the perfect property for you instead.

Best Advice

Keep your options open and do not be afraid to walk away.

Any buyer’s remorse may last many years down the road and I’m sure you wouldn’t like it…

How Does Real Estate Company Work?

Establishing a Real Estate Company:

The basic requirements and criteria for setting up a real estate company may vary according to the state. There must be a broker in all cases. Whether the company is a corporation or single ownership, the owner must be licensed real estate dealer. Some states require every branch office to have a full-time broker to manage it. In some states, the broker of the head office can also be the broker of the branch office. Each state has separate laws that regulate advertising, escrow deposits, and telemarketing. Especially escrow deposits are closely monitored and regulated.

When real estate agents are hired, they are signed up with a deal of commission split. Commission split means when a commission is paid to a real estate company, and the commission is split between the brokerage and the agent. Some usual splits are 50/50, 60/40, 70/30. The split may vary according to the brokerage or the agent.

https://hbr.org/2012/08/take-ownership-of-your-actions

Listing Agent:

Listing agent is the individual who meets with a mortgage holder who is interested in selling their home. This individual works for a real estate brokerage. This individual is then employed by the sellers to sell the home. The sellers marked an agreement which clarified the measure of cash they would pay this listing agent’s business to offer their home. This agreement is known as a listing agreement.

Listing financier – All real estate agents work for a brokerage. Each brokerage has an authorized land representative who is accountable for the real estate agents working at that company. Each land specialist you meet will work for a business like one of those mentioned. The financier that utilizes the listing specialist is the listing business.

Buyer’s agent:

This agent deals with a person who is in need to buy a home. These agents show a potential home based on the needs of the buyers. The houses that the agent shows to the buyer are listed for sale either by listing agents or by the owners themselves.

Managing the Real Estate Business:

There is a wide range of managing tasks that are the core of a successful real estate business. A list of those tasks are mentioned below,

  • Real Estate Company should keep up with regional and local market happenings and industry news.
  • Research and update on active, sold, and pending listings.
  • Appointment arrangements and planning meetings, and showings
  • Manages paperwork, agreements, and records with proper state agencies

Common Investment Mistakes that most People Make

People tend to make one or the other mistake as far as investing decisions are concerned. The break rules and principles that might lead to disastrous results that the investor might not expect. Errors are common, but there are always means to avoid them. So here are some of the common mistakes that people make as far as investing decisions are concerned. Have a look at it and never commit these mistakes when you are investing.

Common Investment Mistakes

The wrong strategy used in pooling funds:

The crux in investing activity lies in how well you can manage your manage your funds and reap benefits. So it is imperative that you knock the right door for pooling funds. When you are pooling funds, you have to have an eye on factors like interest, the period of loan, repayment factors, your repayment capacity and so on. Never make an investment before analyzing all these factors.

Method of analyzing the returns:

Different people follow different strategies in analyzing their returns. You cannot expect to become rich or earn a lot of returns from the investments that you have made at the earliest. There is always a sleeping period for every investment, and it is the period during which the investment multiplies. Expecting to earn a lot of profits right from the minute you invest is not the right way of looking at an investment.

Acquiring a property manager:

As far as acquiring a property manager is concerned, there are two types of mistakes that people commonly make here. They either do not hire a professional when it requires, or fail to hire a professional when it is mandatory. In both cases, the person is making a mistake. If a property manager’s role is essential then look out for a professional’s help or in case if you cannot afford it, it is better that you avoid it.

Wrong Property:

This is the worst of all mistakes that you are making. You cannot buy a property before making a proper analysis. There are a lot of factors that help you decide what your type of investment is. Consider all those factors before buying a house. If you are investing in the wrong property, you are making an irreversible mistake as you will not only face loses when you invest but also when you sell them.

You can invest at any age:

There is always one common misconception as far as investment activities are concerned. Most people believe that investments can be made, only when you are financially sound and have good sources that you can utilize to invest. This is the reason why people with a lot of potential in real estate trade begin their career very late or at times give up on the idea of making investments. Of course, money is important, but what is more important is the way in which you are handling it. So if you are good at financial management, age is never a restriction.

 

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