Contacted a friend who happened to be a real estate agent and asked him if he has any properties that is within my budget. He asked if I am willing to look at an auction unit. I have never trusted auction, mainly because I think the properties are already in “trouble”, they are risky. I have heard a lot of rumours about houses which are badly damage, clogged plumbing and basically down-rotten. Furthermore, I have never heard of a landed property being on auction in Penang island.

But we decided to have a look anyway. It is within my budged, near where I want to stay and a nice neighbourhood. Already, this sounds fishy. But after discussing with the wife, we went ahead anyway.

My friend asked me to read and understand the Terms of Sale in the Proclamation of Sale. Those are very important and they are different between banks. The terms were in “lawyer” language but if you have read an S&P before, it should be familiar language. Basically, the bank does not guarantee vacant possession; you have to chase the tenant away yourself. The bank won’t cover defaulted utility bills but they will cover assessment and maintenance fees.

We prepared the bank draft for my friend who will be acting on our behalf. We also told him that we will take some time off to see how an auction was done, but will let him handle our auction so we don’t do anything stupid. On the day of the auction, my friend arrived first to register for the bidding. He called me while I was driving and told me that he had withdrawn our bid. Apparently the property has some messy issue and I better not be involved in it.

When I arrived, he said the auctioneer told him.. the property has 4 different S&P, 4 bank loans and 2 court case. Apparently someone sold the same unit to 4 different people.

Devastated, I was not. It was too good to be true anyway. But I did learn something while I was there.

1. Auctions are held in a few places but different auction houses. Some of them are held in hotels, where you can literally crash for free breakfast.

2. Auctions are a great place for people to earn money without bidding for property. In some hot property, some people will make a bank draft and goes around asking people if they are also bidding for the property. He will then ask you to pay some money to him so that he won’t compete to bid for the property.

3. You don’t have to pay your agent, they are paid 2% of the sale of the property by the bank.

4. Which means you better trust your agent. During the auction, I have seen how 2 agents try to jack up the price of a property. When one agent gets a good price, he will share his commission with the agent who helped to raise the price of the property. We bumped into one of the agent in the elevator down and he was boasting to a friend how he ripped the customer off.

My friend was telling me a lot of people buy cheap properties, clean it up and resell it again at a higher price. But these properties needs to be in better location.