Auctions and losing face

  • Auctions
  • Monday, 24 Jun 2019

PETALING JAYA: Selling properties by private auction can sometimes offer better exposure, said the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (PEPS).

President Michael Kong said: “In the heat of the moment, prices may be bid up. It does not mean that the property is being foreclosed.”

He said there is a difference between private and public auction, which involves a foreclosure process, and the end point is the public auction. Buyers must do their homework for both, Kong said.

Buyers in a public auction cannot view the property but they are able to do so if it is a private auction, licensed auctioneer Leong Wye Hoong from Leong Auctioneer Sdn Bhd said.

A couple of institutes representing estate agents view private auctions as rather limited because of the stigma attached to auctions.

Until and unless the fear of “losing face” disappears or is diminished greatly from the local culture, sale of properties by private auction will not pick up, said the Malaysian Institute of Professional Estate Agents and Consultants (MIPEAC).

President Francis Loh said: “‘Losing face’ is a significant consideration in our Malaysian or Asian culture. Some years back, even putting up a signboard was something not permitted by owners.”

Loh was referring to owners who sell their properties by private auctions instead of via an agent as a result of a slow secondary market.

The property market is broadly divided into the primary market where buyers buy from developers, and the secondary sub-sale market where sellers buy directly from owners.

Loh said some owners fear a “For Sale” sign give the impression that they were facing financial difficulties, therefore, the potential sale would not attract a fair price.

So private auctions may be a passing fad due to the actions of “some very desperate and distressed owners”, Loh said, whereas sale by private auction is fairly common in Australia.

“In fact, most of the properties in the secondary market are sold by private auction. However, when the market is bad, the proportion of properties sold by auction goes down compared to private sale/negotiations.”

On agents using the reserve price of auctioned properties to pressure owners to lower prices, Loh said he was unaware of such practices.

The Malaysian Institute of Estate Agents (MIEA) concurred with Loh’s views that private auctions are limited.

“Most properties sold by the auctioneers are under foreclosure by the bank,” MIEA president Eric Lim said, although the negative perception may change in future.

On agents using auction prices instead of fair market prices when dealing with owners, Lim said unscrupulous agents may resort to such tactics.

Lim agreed that the sub-sale secondary market is slow due to external headwinds but sales are still moving.

Loh said the market is somewhat slower than in previous years but added that it is largely dependent on property type, price range and location.

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