Property Auction #3: Is auction property always "cheap"?

Before auction, the bank will always engage a registered valuer to value the property as at Open Market Value (OMV) and also Forced Sale Value. As a rule of thumb and a rough guide, a Forced Sale value is normally 10% to 15% lower than OMV.

The first auction will normally start using the OMV as the reserve price, in other words, the auctioneer will first attempt to sell the property using open market value, if unsold, then only the price will start going down. In the case of Laca cases (i.e. properties without individual titles ), the reserve price is going down almost every month by approximately 5% to 10% from previous auction.

Low pricing is normally the major attract for auction properties, however, other issues such as condition of the property, previous owings and vacant possession should also be taken into consideration whenever you want to bid at the auction. Please also refer to my previous articles on Property Auction.