Sale by Private Contract & Sale by Auction

◆ Sale by Private Contract

Sale by private contract means selling a property upon an agreement with the bank who’s financing when loan repayments cannot be made by the property owner.

Usually price of a property for sale by private contract is thought to be, “higher than auctioned property but lower than properties in the market”.

 

Main differences from normal transactions are:

・A creditor involved

・No warranty against defects

etc

 

Properties for sale by private contract could be very beneficial in many cases although there are some factors to consider such as price negotiation between buyer and seller, negotiation between debtor and creditor, and buyers’ bank loan.

 

 

◆  Sale by Auction

Sale by Auction is literally auction that a new owner gets decided based on an price offer.

There are merits and demerits to sale by auction.

 

Merits

Purchase price is relatively cheaper

Sale by Auction has been popular lately and purchase price at auction is coming close to the market price. However it is still cheaper in many cases and could be a big advantage.

 

Easy to register a property

For auctioned properties, as a buyer you deal with the court so they can take care of all the ownership registration of the building.

 

 

 

Demerits

Unable to see inside the property

Before the purchase, normally you cannot see inside the building and unable to check how it looks.

No warranty against defects

Sale by Auction does NOT come with any warranty against defects that is usually available for normal real estate purchase transactions. Despite of any kinds of damages, bad conditions, or breakdowns, they all fall into your own responsibility.

Possible to have some trouble with troubling tenants

Some may resist moving out of the building although you as the new owner can legally insist that you own the property now. Others may even try to ask for eviction fees.

 

Low chance to get a loan

Usually banks do not give a loan for auctioned properties. Cash transaction may be the only choice.

Sale by Auction can be tricky in terms of relations of rights and take some time. it is not recommended to beginner investors. For those who have knowledge and experience in real estate investment, this could be one of the options.

 


Sale by Private Contract & Sale by Auction
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