In this article, we will highlight the main differences between sub-sale and auction of properties to our readers. It is highly advisable to equip yourself with the necessary knowledge before deciding to purchase a property whether through a sub-sale market or auction.
| Sub-sale | Auction
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| Sub-sale would be a buy and sell transaction between the vendor/seller and the purchaser. | It is not a direct purchaser from the Vendor/Seller. In fact, it would be through auctioneer. During the auction process, the vendor/seller is not involved.
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The purchaser can negotiate and discuss with the vendor/seller in respect to the purchase price of the property as well as the condition of the property, such as the purchaser may request the vendor/seller to repair certain part of the property.
| The vendor/seller will have no involvement in the auction of the property because the property is auctioned by auction bank. The successful bidder cannot request the vendor/seller or the auction bank to repair any damage in the property. The successful bidder will have to take the property on an as is where is basis.
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The vendor/seller will have to pay the property’s outgoings (quit rent, assessment, management fee, sinking fund, TNB, water bill, Indah water bill) up until the date of the delivery of the key to the purchaser.
| The successful bidder is requested to pay for all the outstanding outgoings immediately after the auction date. Only certain outgoings are claimable from the auction bank and these are only claimable after the payment of the full payment of purchase price. Therefore, it means that other than the purchase price of the property, the successful bidder needs to prepare extra own money for the settlement of the outstanding outgoings.
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The contract for the sale of the property is called Sale and Purchase Agreement (SPA). The terms in the SPA will be agreed between the vendor/seller and the purchaser.
| The contract for the auction of the property is called Memorandum of Contract (MOC) and the terms for the auction are contained in a Proclamation of Sale (POS). Note that the MOC and POS are standard contracts which the successful bidder has no rights to vary, amend or change the terms.
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The completion of the SPA is 3 months either from the date of the SPA or from the date the condition precedent in the SPA has been fully complied by the vendor/seller.
Therefore, it is sometime common to see that in certain complex situations, the purchaser can only get the property after 6 months or even 9 months, yet the purchaser will not get penalised for late payment penalty. It is because the vendor/seller takes longer time to comply with the condition precedent in the SPA, such as the obtaining of the low-cost consent etc.
| The completion of the auction is either 90 days or 120 days, depending on the terms stated in the POS. Note that this completion period will not be affected or prolonged, even if the auction requires:-
a. The issuance of the low-cost consent or consent from the local authorities; or b. the execution of the memorandum of transfer by the developer; or c. other action by any other third party.
Therefore, it is very common that the successful bidder needs to be prepared to pay for the late payment penalty.
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| Upon full payment of the purchase price of the property, the vendor/seller will have to deliver the keys and the access card (if any) of the property to the purchaser in accordance to the SPA, failing which the vendor/seller will have to pay the late penalty of 8% to the purchaser. | Upon full payment of the purchase price of the property, the successful bidder will have to find his or her own way to gain access to the property because generally the auction bank has no obligation under the POS to deliver the vacant possession of the property to the successful bidder.
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