Property auctions in Malaysia can present excellent opportunities for buyers looking to purchase homes or investments at discounted prices. However, lelong mistakes abound and auction purchases are far from straightforward. They involve legal obligations, strict timelines, and financial risks that can easily turn a good deal into an expensive lesson. Success in buying auction properties is not just about winning a bid—it requires careful planning, legal understanding, and disciplined financial preparation. While auction properties often sell below market value, buyers must be aware of common pitfalls that could result in unexpected costs or losses. Below are 12 critical mistakes to avoid when purchasing auction properties in Malaysia, along with practical ways to protect yourself.
1. Overlooking Penalties for Late Settlement Lelong Mistakes
After winning an auction, buyers are required to settle the full purchase price within a fixed period—commonly 90 days. One lelong mistake is failure to meet this deadline which may result in penalty interest charges and, in serious cases, cancellation of the sale with forfeiture of the deposit. To avoid this, ensure funds or loan facilities are ready before bidding. Consult a lawyer to understand whether extensions are allowed and what penalties may apply. Delays can significantly reduce or even eliminate your investment returns.
2. Underestimating the Risk of Deposit Forfeiture Lelong Mistakes
Auction deposits—usually 10% of the purchase price—are generally non-refundable. If you fail to complete payment within the stipulated timeframe, the deposit is forfeited unless the seller breaches the auction terms. Many buyers mistakenly believe they can withdraw from the deal without consequences. Before bidding, evaluate your financial readiness, including legal fees, taxes, and renovation costs, to ensure you can complete the transaction.
3. Overlooking Tenant and Occupancy Issues Lelong Mistakes
Some auction properties are sold with existing tenants or occupants. Removing them can be time-consuming, costly, and legally complex. Before bidding, verify whether the property is occupied. If tenants are present, understand their legal rights and whether vacant possession can realistically be achieved.
4. Failing to Check for Caveats on the Property
Caveats are legal claims lodged against a property that can prevent ownership transfer until resolved. They may arise from disputes, unpaid debts, or ongoing court cases. Conducting a title search is essential. If a caveat exists, consult a lawyer to assess whether it can be removed and how long the process may take before proceeding. Failure to account for caveats is one of the critical lelong mistakes.
5. Underestimating Renovation and Repair Costs
Low auction prices can be misleading. Major repairs such as roof replacement, rewiring, plumbing upgrades, or structural strengthening can dramatically increase total costs. Obtain realistic renovation estimates before bidding. A cheap purchase price does not always translate into a good deal.
6. Assuming Loan Approval Will Be Easy
Financing auction properties is often more challenging than conventional purchases. Banks may reject applications due to title issues, property condition, or valuation shortfalls. Always obtain loan pre-approval and confirm the property is bankable. If alternative financing is needed, be mindful of higher interest rates and stricter repayment terms.
7. Failing to Verify Occupancy Status
Properties that are still occupied may require legal eviction, which involves court proceedings, legal fees, and enforcement costs. Confirm whether the property is vacant before bidding. If not, factor potential eviction expenses and delays into your investment decision.
8. Getting Swept Up in Auction Fever
Emotional bidding is another example of common lelong mistakes. In the excitement of competition, buyers may exceed their budget and overpay for the property. Set a maximum bid based on market value, repair costs, and financing limits—and stick to it. Discipline is key to auction success.
9. Underestimating the Property’s Physical Condition
Auction properties are sold strictly on an “as is” basis. Structural defects, plumbing failures, wiring issues, and pest infestations may not be visible at first glance. Whenever possible, engage a professional inspector or contractor to assess the property. Knowing the true condition helps you estimate repair costs accurately and avoid buying a money pit.
10. Failing to Review the POS and COS Properly
The Proclamation of Sale (POS) and Conditions of Sale (COS) govern every auction transaction. These documents outline:
- Reserve price and bidding rules
- Payment deadlines and penalties
- Buyer responsibilities and liabilities
Ignoring these terms can result in penalties, unexpected costs, or even loss of the property. Legal review before bidding is highly recommended.
11. Misunderstanding Direct vs Double Title Transfers
Auction properties may involve either a direct transfer or a double transfer of title:
- Direct transfer moves ownership directly from the previous owner to the buyer.
- Double transfer involves the title passing from the developer to the first owner first, then to the auction buyer, increasing legal complexity and costs.
Among common lelong mistakes are failing to clarify the transfer type beforehand. This helps avoid unexpected legal fees and delays. Always seek professional advice to understand the implications.
12. Ignoring Outstanding Utility Bills and Charges
Unpaid electricity, water, sewerage, assessment tax, quit rent, or maintenance fees are common with auction properties. Lelong mistake is not checking fully on these items. These liabilities often transfer to the buyer and must be settled before ownership registration. Before bidding, try to obtain statements from utility providers, local councils, or building management. Include these potential costs in your budget to avoid financial surprises later. Check if the auctioning bank covers part or all of these costs.
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