Property auctions are the third, lesser-known option in Singapore to acquire property. Typically, most buy property from the open market or from a developer.
At any given time, an auction hosts about a hundred people or so. Not all are there to score a new property at a record price. Some prospectors attend the auction as a way to get a feel of the market while others are agents and bankers who use it to introduce the auctioned properties to their clients.
With property auctions seeing higher success rates in Q1 2021, it's useful to stay up-to-date and learn more about this alternative way of acquiring property.
Summary of What You Need to Know about Property Auctions
Questions on Property Auctions
What are property auctions?
A method of selling various types of properties by offering them up for bids.
How to find property auctions?
Head online to an auctioneer’s website to view details
Why are properties put on auction?
Common reasons include: if the property’s home loan was defaulted, as mortgage collateral, or because of having to split matrimonial assets during a divorce
How much must successful bidders pay as a deposit?
A deposit of 5% to 10% by cheque on the same day is required
Are prices lower at property auctions?
Should you sell your property via auction?
Auctions are a great way to gain more interested parties, but pair it with conventional buying or selling methods
What Are Property Auctions?
Property auctions are a method selling various types of properties by offering them up for bids. Before the auction occurs, the time, venue and date of the event will be posted on the auctioneer's website. In Singapore, you do not have to pre-register to indicate your interest; you can simply walk into the venue.
Knight Frank Singapore and ERA Singapore are two real estate firms that carry out property auctions. Alternatively, you can browse PropertyGuru auction listings.
When the property auction commences, would-be buyers submit bids and the individual who is the highest bidder wins the right to purchase the property. Head to the Singapore Legal Advice website to view eligibility criteria and more terms and conditions.
If you intend to attend a property auction, read our 5 hidden tips on property auctions and learn how you can be better prepared.
Why Are Properties Put on Auction?
Properties auctioned typically are of a mortgagee’s sale which means, it is put up by the bank that has come in possession of a home for a number of reasons. If the home loan was defaulted or if the once owner had taken up a second mortgage to support a business that ultimately failed, then the bank has the legal right to take the asset for their own.
Other reasons include selling your property due to divorce, either by the design of the separating couple or by decree of the court.
Property auctions can be discovered by joining banks and agency's mailing lists
Not all properties on auction are a result of these two factors, however. Some sellers may choose to place their property up on auction in an effort to diversify their sales channels. As successful bidders must pay a deposit of 5% to 10% (usually by cheque) on the day, some sellers may appreciate the extra cash and the certainty a higher deposit demand brings.
If the bidder is unable to commit to the completion of the sale, which usually takes 10 to 12 weeks, then the deposit is forfeited. Therefore, buyers are advised to acquire an in-principle approval from a bank or mortgage broker before they attend the auction to avoid such a situation.
Are Prices Lower at Auctions?
Statistically, only one or two properties are sold during the auction with the rest of the deals made in private after the auction, with further negotiations. It is certainly possible to score a property at a lower rate at an auction, however, this is subjective.
For example, the bank in charge of an asset cannot price it however they see fit. The final price will take into consideration the excess amount owed prior to repossession, not simply the bank’s interest.
Yet, there have been buyers who managed to secure properties at significantly less than the advertised price. There won’t be any purchases where the valuation is cut by half, but $100,000 or so is possible.
Property auctions are a good way to get a feel of the market
A good rule of thumb is to expect around five to 10% discount for units priced over $3,000,000 and slightly higher for units priced over $5,000,000.
Are Auctions Suitable for You?
Unless there is reason to quickly offload your property as in the case of a divorce, a property auction should be used in conjunction with the other common methods. Depending on the market, the auction may favour the seller or buyer and rarely does a bidding war occur. Most buyers prefer to wait in the wings until after the bidding is done, to approach the seller directly for fear of tipping their hand to other on the fence buyers.
So the auction is a great way to gain more interested parties, especially parties with the financial ability to commit to a sale but it bears more fruit when used together with conventional buying or selling via agents and PropertyGuru.
More FAQ on Property Auctions in Singapore
How Does Auction Work in Singapore?
At the property auction event, the highest bidder for the property wins the bid.
Are Property Auctions Worth It?
While you won’t find property prices that have been slashed in half, it is possible to buy a property that has $100,000 shaved off its asking price.
How Much Deposit Do I Need for Auction Property?
Usually, a 5 to 10% same-day deposit is required.
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