Property auctions: How low do prices really go?

· Thinking of Selling

Why are properties put up for auction?

The Reasons

Most properties being sold at auctions are there because the owner of the property is unable to fulfil his or her obligation in financing the property.

Often, properties are put up for auction to fetch the best price possible for the property at the shortest possible timeframe. Apart from an auction, banks may also go into private treaty to offload the property.

However, not all properties that are put up on auction are distressed sales or mortgagee sales. Some owners may be putting up their properties at an auction as an added avenue to market their property – these are known as owner’s sales.


Are auction properties really much cheaper?

A common perception is that prices of properties put up for auction tend to be significantly lower than market price, but this isn’t always the case.

For a start, not all properties that are placed in an auction are up for a “fire sale”. They also come with a reserve price, to ensure that the banks can cover as much monetary loss as possible.

As such, prices of auction properties typically do not go significantly lower than market prices. There are cases where property prices can come up to about 5% to 10% lower than market price at an auction. However, many of these properties are actually priced quite closely to market value.


Finding opportunities at property auctions

Potential buyers may have better luck scoring “better deals” with owner's sales compared to mortgagee sales, as some owners may be more motivated to sell their properties. For instance, some couples may be looking to sell off their property quickly in order to qualify for ABSD (Additional Buyer’s Stamp Duty) remission.

According to IRAS, ABSD remission may be applicable to a married couple who purchases a second residential property jointly, provided that they meet remission conditions that include selling the first residential property (co-owned or separately owned) within six months after the date of purchase of the second property for completed property, or the issue date of the Temporary Occupation Permit (TOP) / Certificate of Statutory Completion (CSC), whichever is earlier, if the property was uncompleted at the time of purchase.

Meanwhile, some owners may be siblings who are no longer on good terms, or couples who are going through a divorce, and wish to sell off their property quickly.

In such cases, owner’s listings could present attractive opportunities for potential buyers.


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Should you be thinking of selling, or would simply like an update of where your property sits in today's market, book a non-obligatory discussion with one of our TemasekClass consultants.