I've been to many property auctions, to a point I'm beginning to learn it is hardly worthwhile to buy anything with good value here. Whenever there is a hot property in auction, you find literally hundreds of bidders. In the end, the auction price turned out to be higher than market value. For example, a leasehold 20'x70' double storey link house in Sunway PJS7 auction recently fetched RM800k. Market value is around RM700k. A condo in Kelana Parkview went up to RM650k.... Market value is around RM600k.
Then never believe what the auction agent tells you. Do your own search before you go for an auction. It's troublesome, but imagine the hassle and the pain when you bought a property with a caveat. I recently found out the hard way. After going through so many auctions, I began to have less hope of ever winning one. So I didn't bother with a search and instead listened to the agent tell me the property has no issues. The laws of caveat emptor is an age old one. It means when you buy a property from an auction, you've bought all the joys and pains that comes with it - whoever sells it to you does not need to tell you anything.
At the auction I was given a copy of an old land search showing no caveats on the property. Confidently I went for it and won. When my lawyer initially told me they found a registrar caveat in a subsequent search, I didn't think it was very serious. I was so wrong.
There are 2 types of caveats. Private caveat and Registrar caveat. The latter is less common. Private caveats on the other hand is rather common in auction properties. It's usually the reason why the property ended up being auctioned in the 1st place. Or it could be lodged by the owner of the property attempting to prevent or discourage the auction. Unless there is a good reason for the private caveat, it is easy to remove it. The way to do it is to go to court. You need to spend anything between RM10,000 to hundreds of thousands depending on how determined the person who lodged the caveat is. If he is not so determined (or don't have much money...), he might not contest the court action.
So, you just get a court order and the caveat is removed, the property then gets transferred to your name. If your luck is not so good, he contests it... he might lose and appeal... you have to wait years.
Under such a scenario, you will never be able to get a bank loan to pay for the auction property. And if you don't have cash to pay, the bank forfeits your deposit after the 120 days lapse. So buying an auction property can be extremely risky. Sometimes the caveat may be lodged after you win the auction and while you are processing the transfer and loan.
So what happens when you can't remove the caveat on time? By the 120 days dateline, you must pay the balance of the auction. You have to pay cash since you can't get a loan. The bank then transfers the problem of the caveat to you. If you don't pay, the bank forfeits the deposit and then they can try to auction the property to the next sucker.
As I found out, it may cost up to a few hundred thousand to remove a caveat if unlucky, it's normally not worthwhile to even consider it unless the property is worth millions. In fact, I know of people who purposely bid for caveated properties because they can get it cheaper and use the savings to fight the caveator instead.
A Registrar Caveat is however not so simple.... Normally a Registrar Caveat is lodged by the Land Office at the instructions of a Judiciary body, a court or tribunal due to a fraud case. You have to wait for this case to be settled before the caveat gets removed. But what if the court or tribunal rules in favour of the caveator? You will effectively lose the property and everything you've paid for it.
One lawyer I spoke to seems to disagree. He says that if the court rules in favour of the caveator, it means the bank fails to deliver a property to you which you bought through their auction. The bank then have to refund you the money as well as all your costs. But you may need to go to court to get this and it will be a lengthy process and obviously you need to fork out a lot of money to the lawyers. But this is however untested... Anybody wish to try?