Done deal on hammer’s fall

Going once… going twice… Quite a few properties in Malta fall under the hammer every year. Simonne Pace finds out how easy it is to buy or sell property at auction.

Anyone with a keen interest in property can opt to buy or sell at an auction – with the difference that an auction is a lively place with a crowd of bidders bargaining and bidding to the final strike of the hammer, which means a property has been sold.

Any property that is listed at true market value will sell

Property auction expert Pierre Faure, who has a 32-year background in the real estate industry, says property auctions are ex-tremely popular in the US and the UK.

“The auction process has always interested me – mainly because it is so different to the normal way of selling or buying real estate and property anywhere in the world,” he explains.

Malta Property Auctioneers (maltapropertyauctioneers.com), set up by Faure five years ago, is the only company in Malta specialising in property auctions.

“The auction is such an exciting medium because it’s the purchaser not the vendor who ultimately faces a deadline.”

Normally, the buyer looks at a property and has plenty of time to decide whether to buy it or not. At a property auction, once a bid is made and taken, the buyer cannot develop cold feet at the eleventh hour.

“If bidders do not act fast, a property can easily be snatched away from right under their noses,” Faure explains.

Three or four property auctions are held every year, each featuring about 30 properties, ranging from bungalows, villas, penthouses and apartments to townhouses, guest houses, plots of land, commercial properties and houses of character.

Properties are listed in lots and featured on a catalogue about three weeks prior to the auction. Buyers can also view the properties before the auction date.

Guide prices usually range from €450,000 to €700,000, but “we have also had properties at auction listed for €1,100,000 or even €1,250,000, depending on the property”.

The average value of properties for sale at one auction usually totals between €12 million and €23 million. In 2010 the total value of property on auction was of around €51 million.

Learning the basics of how a property auction is conducted could be interesting and a novice should just turn up on the day to observe what goes on until he learns a few tricks of the trade and masters all the ropes.

The reserve price is the lowest price agreed on by both auctioneer and vendor for a particular property.

The property auctioneer also creates a guide price bracket – this is listed clearly adjacent to the property on the catalogue, say €700,000–€750,000. The property could sell for €700,000 or even for a million, depending on bids and bidders.

Bidding always starts at guide price. The auctioneer can reduce the guide price if no bids are made.

Most importantly, if the guide price is lowered and the bid taken and if the reserve price is higher than what has been bid, the property is said to be ‘bought in’ – which means that the property did not reach its reserve price.

If, on the other hand, the reduced guide price is higher than the reserve price, and the bid is taken, the auctioneer bangs his hammer and says the property has been sold.

Once the property is sold, the auctioneer makes 3.5 to 4.5 per cent commission. Buyers wanting to bid at an auction need to place a 10 per cent deposit prior to registration as a guarantee.

It is important to know that once a bidder makes a bid and wins that bid, he is bound to buy.

When a property is sold, a contract of sale is signed at the auction and a deal is closed. The vendor and auctioneer are both present.

Asked why so many new properties remain vacant, Faure admits the real estate market has been affected by the recession: “However, real estate in Malta is still being sold. The values are still there. A good 70 per cent of property in Malta is overpriced or not marketed properly. Any property that is listed at true market value will sell.”

The next auction – which will feature 28 properties worth €12.5 million – will take place at the Westin Dragonara Resort, St Julian’s on Saturday at 10 a.m.