Real estate investment Q&A #3

Question #15 – How to find auctioned properties?
How can i know about properties that under bank auctions? I think there is an auction house doing it in City Plaza, are they appointed by the banks or…?

How many are there (places i can know abt auction houses) and usually how fast do they update their list. Also for good bargain do they “keep” the info to regular gangs of property agents instead of releasing it out to the public?

Answer #15:
You can contact auctioneers to get a latest auctioned properties list from them. Their contacts are available at auction advertisements on papers, notice board at the ground floor of JB High Court and Internet.

Besides City Plaza, some LACA auctions are held by auctioneers in their auction houses in TJB tower.

Most auctioneers are appointed by banks. Banks also appoint certain property agencies to find bidders for their auction properties. These agents collaborate with auctioneers to provide services in facilitating their clients to successfully bid the property they wanted in auction.

We have discussed some of our experience and details in acquiring auctioned properties in “What must you know before buying an auctioned property?” with recommended links and agents.

Question #16 – Inspection of auctioned properties
I admit that I never really consider to buy an auctioned property just because of the tedious due diligence works.

One particular thing is that the potential bidder can’t inspect the property. How do you go around this?

Answer #16:
It is necessary to conduct on site inspection of an auctioned property and its surrounding neighborhood to ascertain the physical conditions of the property. You may not be able to inspect the interior condition of a house. But you can ask around the neighborhood who may have visited the house. From the exterior condition also you can have a rough idea how much cost is needed to refurbish the house.

The stage of maintenance has a significant effect on property’s value. Don’t go for the deal unless you are confident that you understand the value of the property and the possible costs required.

Question #17 – Property agent’s conflict of interest
How would u know if the agent you’re hiring won’t be trying to sell for his clients? Wouldn’t there still be conflict of interest as agents would likely already have a pool of clients they’re already serving and earning commission from?

Answer #17
In today’s market where sellers are more than buyers, agents start to know they have to serve buyers better in order to close any deal. However, we always encourage home buyers and investors to do their ground work like learning how to estimate the property value, how to identify a property worth investing and borrowing before negotiating any price with the seller through agent. (You can learn these from our previous articles “How to estimate the value of a property?”, “How to know if a property investment is worth investing?“, “Why you want to take up a loan for your real estate investment?“)

No doubt most of the agents today still tend to sell for their clients and the conflict of interest is there. It’s our own responsibility to protect our own interest. And the best way to do so is to equip ourselves with the right investing and market knowledge.

Question #18 – Questions for prospective property agent
Maybe you can come out with a set of questions we should ask our prospective real estate agents, before engaging any.
In Penang, I’ve met many agents who don’t really know about the market. Only a handful of them are professional and knowledgeable.

Answer #18:
Some questions that we normally ask our real estate agents:

How old is the property? Fully-furnished or unfurnished? Lease hold or free hold? How big is the built-up area? How much is the monthly maintenance cost, if any?

Any other expenses for the property? Has the individual title issued? Why does the owner want to sell?

What is the lowest offering price? Is the price reasonable in the market? Any room for negotiation?

How much is the highest and lowest rent I can get from the property? How long will you need to find a tenant for the property?

Once you have asked the same questions to several agents, you will be able to identify who can serve you better.

Question #19 – Commission rate of property agent
May I know what’s the standard fee like for hiring/paying an agent in KL or PJ area? Is it 1% of the property purchase price like in JB?

Answer #19:
Yes, you are right. But for certain higher value transactions you may negotiate with the agent to have some discount on the commission. For example, for a transaction above RM250k we normally expect to get 20%-30% discount from property agent, i.e. 0.7%-0.8% of the purchase price instead of 1% for agent’s commission.