Disadvantages If The House Is Auctioned

Honestly, the monthly installment of the house can be a huge amount. Some people have to pay for this because they bought the wrong house. There are also those who buy a house, then cannot afford to pay due to changes in lifestyle. The house is then up for auction with the bank. Even if your house is in Pandan Indah, there is no good if your house is auctioned. 


Before I tell you about how to save a house from auction, let’s first explain the disadvantages of having a house auctioned.

1) Unable To Control The Price

When a house is auctioned, the seller will lose control of the price.

Then, we do not know what method the bank uses to determine the auction price or what we call the reserved price. Maybe they use the forced sale value that the appraiser determines. Or maybe the balance of the loan (plus auction and sale costs) or they determine in some other way.

After that, banks do not want to make a profit when they auction. They just want to get back the balance of the loan that the seller has not paid. That’s their main motivation.

So most likely the reserved price is far below the market price.

2) Don’t Expect The Bid To Be Very High

When a house is auctioned, the auctioneer will open the price for bidding. The bank will sell the house to the highest bidder.

Moreover, the only ones who buy this auction house are mostly real estate investors. They already have the price they want to bid so that the return is worth it. So they also have no motivation to buy at a high price.

Even worse if the house only has one bidder. They won with a low reserved price.

Sometimes there can also be conspiracies between bidders. They pay other bidders so as not to fight the price. Namely, the bidder who pays then wins with the reserve price. Homeowners will lose. This is the risk when our house is up for auction.

3) The Incidental Costs For The Auction Can Be Staggering

When the bank auctions the house, the owner will have to pay incidental costs. Then, this cost can be the cost of lawyers, auctioneers and various other costs.

Undoubtedly, all these costs can be huge. Even if the bidder price is high, you will lose when you have to pay these incidental costs. 

4) House Prices Go Down A Lot If The Auction Doesn’t Sell

If the house has no one bidding, the house will go into the next auction.

Definitely, house prices will go down to attract bidders. Not sold, enter the auction again. Prices go down. This process will be repeated until someone buys the house.

And when there are buyers, of course their price is too far from the current market price.

5) The Owner Can Go Bankrupt

Generally speaking, if the bank sells the house at a low price, the price may not be enough to cover the owner’s debt.

In the same way, suppose the debt is RM100,000 and the bank only manages to sell at RM70,000. The remaining RM30,000 the owner still has to pay to them. If you do not pay and the amount is more than RM30,000, the bank can take action for a bankruptcy suit. 

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