FORECLOSURE VIA AUCTION: ALTERNATIVE SOLUTION FOR NON-PERFORMING CORPORATE LOAN

YOUR Corporate loan is in default or close to being in default and when this happens, generally our country’s financial institution will appoint Receivers and Managers (R&Ms) or liquidators to obtain the repayment of the lenders and at the same time to reduce the burden of the borrowers. 

Upon the appointments of R&Ms and liquidators, they usually secure the asset charged to the financial institutions (properties) and dispose by the process of tender and expression of interest if you are unable to repay the loan.

Sometimes the R&Ms and liquidators may encounter difficulties in selling the distressed assets via the method mentioned above or the appointment of agencies. Furthermore the delay in selling the distress assets can cause high carrying costs for the lenders and also for the borrowers such as interest payment, utility bills, maintenance charges, and other unnecessary inconveniences such as unscheduled viewing to unqualified prospects.

Gary Chia of AuctionGuru.Com.My, said that an alternative solution for non-performing loan is via auction. “It is important for the borrower who is falling behind in repaying their loan to take a more proactive approach in finding a solution. 

“Contrary to popular belief, your lender does not want your property what they want is to get back what was lost. Worst if they have to enter foreclosure, this can cost them as much as 20% of the remaining principal balance.

Chia explains that many people are starting to turn to selling their property via auction as a way to tackle non-performing loans. The auction format has many advantages both for lenders and borrowers. “Nowadays you can see that many real estate deals are clinched through auctions. It is an effective and excellent way to convert personal property into cash quickly in a fair and equitable way. “Auction is usually conducted by property auction specialist who will take the task for appraising, advertising of the properties and providing a venue for the auction to be held.”

Chia elaborates that from the simple process above it accelerates the entire marketing process therefore properties are sold in a shorter time frame compare to properties that are sold through estate agents. “The properties that are going under the hammer will have the advantage that it will be advertised well before time to many potential genuine buyers furthermore on auction day itself, because of the buzz and the process of competitive bidding of a property amongst interested buyers it automatically speeds up the entire marketing process.

“Another great advantages, is that the sellers have the right to dictate the minimum price of sale and the final selling price will be determined by the highest bidder, which there is no cap on the final ceiling price.”

Chia added that during an auction, if the seller is lucky enough or the property is really good, the auction price can exceed the market value. “Generally people are always interested in a potential deal and the chance to buy a property at a great discount will always get people in the door. Furthermore the auction creates the illusion of lost opportunity. Buyers are more likely to make a decision on buying a house when they are faced with the thought of the prize being pulled away from them.

“A few example, in a recent auction, one landed property in Desa Parkcity were sold for RM1.35 million with a reserve price of RM1.2 million. A condominium unit at K Residence sold for RM2.52 million with reserve price of RM2.1 million. Another one was a piece of land located near KLCC area with land size of approximately 2 acres plus was sold at RM84 million with a reserve price of RM59 million.

“To compare with the traditional real estate sales, sellers run the risk of overpricing the property and seeing very little interest, as well as underpricing the property and selling it for less than its actual value.” said Chia. Auction can be an alternative solution for non-performing loan to overcoming it, emphasise Chia, it is even an effective selling option for the lenders, R&Ms and liquidators.

To learn more about property auction you can log on to www.auctionguru.com.my. Through the website you can get extensive information on foreclosure properties as it keeps track of all public real estate auctions advertised in all the local media. It is a useful reference that can benefit bankers, valuers, investors, and the general public. It also keep readers updated with the latest property auction news nationwide.

For more information, you can call AuctionGuru.Com.My on 03- 6205 3325 or log on to www.auctionguru.com.my.

by Gary Chia

    AuctionGuru.Com.My