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As a property market matures, the number of ways buyers and sellers can find each other proliferates. In developed countries such as the US and the UK, properties are advertised on dedicated television channels, auction portals such as eBay.com and free online classifieds such as craigslist.com. In Malaysia, a few channels have emerged to serve the vibrant secondary property market.
Appointing a real estate agent is the most popular channel and many of them advertise their available properties and services on online property portals such as theedgeproperty.com and iproperty.com. A less common channel for secondary properties are private deals, whereby a buyer and seller connect either through classified advertisements placed online or in the newspapers, or though word-of-mouth. The third channel is property auctions, which are usually organised by banks that want to sell off foreclosed properties. Auctions dealing with property that have not been foreclosed, known as exclusive property auctions, have also entered the market. Each channel has its own unique advantages and drawbacks.
Choosing convenience
The advantages of using an agent are clear. Besides acting as an intermediary between the buyer and seller, he assists the latter in doing the preliminary legwork, such as marketing and advertising the property, approaching and screening interested buyers and showing the property.
Tang Chee Meng, chief operating officer of Henry Butcher Marketing Sdn Bhd, says the traits of a good agent includes being knowledgeable about the property and the neighbourhood it is in. “He must be very familiar with the area, know how much the properties there have been selling for, and be able to tell you who is moving in and out. He should also be able to tell you whether you are getting a good deal for your property.
“If you’re a seller, the agent must be able to highlight the strengths of your property. He must be able also suggest minor touch-ups to prop up the price. He should have contacts ranging from contractors and interior design specialists to a person who disposes of unwanted furniture. He should also be able to introduce a lawyer to attend to the transaction, if needed, and even help the buyer to source for financing.”
A good agent is also fair to both parties during negotiations. Gerard Kho, senior vice-president of Reapfield Properties Sdn Bhd, says when emotions prevent the reaching of an agreement, the agent should act as an intermediary. “If there is an issue with the price, he should advise the parties on what is acceptable.”
The drawback to hiring an agent is the cost. The agent can charge up to 3% of the property’s value, which means that if your property is valued at RM400,000, he can receive a maximum fee of RM12,000. Says Tang, Henry Butcher’s agents usually charge a commission of at least RM1,000 per property, which includes the service tax of 6%.
“In Malaysia, the seller usually pays the fee, although sometimes, it is the buyer who pays, depending on how the transaction is brokered. Nevertheless, the agent is not legally allowed to collect fees from both parties,” says Tang.
Some agents have collected fees from both parties before absconding, says Kho. “Thus, it is always best to engage the services of a licensed agent, whose licence carries a serial number with an ‘E’ in front.”
This channel provides a quick option for those who urgently want to buy or sell a property, provided the agent is experienced and keen on transacting the deal. It is possible for the sale to go through within a day. “Expect the agent to leverage his or her network and to give you an update as soon as possible, even if it is after office hours,” says Tang.
Dealing privately
An advantage with private deals is that the owner would know more about the property, especially if he has been living in it. He will be on hand to provide more details, such as the build-up and the interior finishing. In talking to him, the buyer will be able to gauge the type of owner he is and how well he has taken care of the property.
A disadvantage is the possibility of manipulation. For example, a seller may be coerced by a shrewd buyer. “If so, the seller may end up selling below the market rate or back out of the deal,” says Tan, adding that the buyer may also take advantage of the seller if he knows that the latter is desperate to sell. “If the buyer knows that the owners of the property do not get along and want to dispose of it quickly, he will use this as an opportunity to negotiate for a lower price.”
The speed in completing such a transaction depends on the professionalism of both sides and not allowing emotions to get in the way.
Bargains at bank auctions
Auctioned foreclosed properties are attractive because of the bargain prices. “In a bank auction, the reserve price for the property is usually a bargain. Yet, there is the possibility that prices may be pushed above the market rate, especially if there is a bidding frenzy,” says Tang. To attend, look at the notices found in newspapers under the “Proclamation of Sale” category, or enquire at banks’ collection or legal departments.
This channel is only popular with seasoned property buyers as a lot of homework is involved, including checking on the viability of the property (foreclosed properties are generally not open for viewing), conducting an official land search and getting acquainted with the auction process.
There are a few clear rules that interested parties have to bear in mind: there is no guarantee that the property will be vacant, the property is bought on an “as is, where is” basis, and all utility bills received after the property has been foreclosed will be borne by the successful bidder. This means that the new owner might have to deal with evicting tenants, or worse, evicting the previous owner.
Property investor Winston Tan (not his real name) checks out the premises to ensure that it is vacant and does not have a nasty history. He knows people who have had bad experiences with auctioned properties. “I had a friend who bought a property at his first auction. After obtaining ownership, he went to check on the property with his young children in tow, only to find that the previous owner was still living there. She wielded a knife and refused to be evicted.”
It is not unusual to see syndicates working on behalf of “clients” to prevent interested buyers from bidding at foreclosed property auctions held at the High Courts or the land offices. It is difficult for organisers to prevent such happenings.
Speed with exclusivity
Exclusive property auctions are relatively new in Malaysia and they differ from bank auctions in that it is the owner who approaches an exclusive auction organiser to sell his properties. They will then agree upon the reserve price.
Josephine Chew, managing director of Marco Management Sdn Bhd, says exclusive auctions are more transparent than bank auctions. “The process is laid out in black and white. Before the auction date, we ask the seller whether he would be willing to open his house for viewing for a day. This is similar to auctions conducted overseas, like in Australia, whereby prospective buyers can inspect the condition of the property. The owner can be present or leave us to manage the viewing.”
The seller must give the auctioneer the exclusive right to sell the property for a period of time. “The reserve price that the owner agrees upon can be below, on par with or above the market rate, depending on the property’s location and condition. Our lawyers do a search on the property to authenticate its ownership. If there are no problems with the documentation, the verification process takes two to three weeks,” says Chew.
After that, various methods are used to market the property, including advertisements in newspapers and flyers and sounding out real estate agents. This process takes two to three weeks. During the auction, the owner has to accept the highest bid, provided it meets or exceeds the reserve price. If there are no bidders, a second auction date is offered, which is two weeks to a month after the first.
The successful bidder has to place a 10% down payment immediately after the auction and sign a memorandum of sale and a sale and purchase agreement within 14 days. A fee comparative to real estate agents’ commission of 3% is chargeable.
This artice was first published in the July 2011 issue of Personal Money
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 878, Oct 3-9, 2011
