What happens at property auctions and are there truly good deals to be had? There has been an increase over the past couple of years in the number of properties put up for auction, with 516 properties listed for auction last year – a 45% increase from 2014.
Not all auction sales are from mortagee’s sales (i.e. when a bank puts up the property for auction when the owner defaults on his loan payments) though they do make up an increasing percentage of property auction listings. In 2015, about 30 per cent of auction sales are from mortgagee’s sales. And contrary to popular belief, the properties listed at auctions do not necessary come with absurdly low prices and not all property owners of these listings are in a hurry to sell. Only about 1 or 2 properties are sold during the auction, with most others finding buyers following post-auction negotiations. Some property agents and buyers are there to see what options there are in the market, and almost everyone comes prepared, with a clear idea of market values and trends. Some owners even attend such auctions as a form of research, to better understand what their property is worth by comparing similar units offered at such auctions.
While rock-bottom prices are not be expected, most listing vendors are more willing to budge on pricing by offering deeper discounts. As a guide, most properties valued at $3 million and below usually come with a 5 to 10 per cent discount while properties with price tags beyond $5 million may have even higher discounts. A recent auction sale of a $5.4 million unit at Turquoise in Cove Drive in Sentosa saw the bidder walking away with the unit at $2.92 million, $60,000 more than the opening bid of $2.86 million. Quite a steal, considering the $2.48 million difference. For property investors, auctions though not without risks, may be a good way to secure unique units which they can then profit from thereafter.