Hybrid Bidding is a Safer Option for Real Estate Auctions – Mr Tham Kuen Wei

There are recent debates on the online auction that is to be implemented by the High Court of Malaya to replace the manual public auction process. I agree with the High Court of Malaya that the auction process should evolve and I embrace the new concept of bidding for property at auctions online. Online auctions can reduce transport costs for bidders, save time, increase transparency and ease the process for auctioneers.

However, there are certain concerns that it would crucial for the public to note.

a) There is a huge difference between a service provider and user when it comes to online businesses. If the company that implements the auction is not a licensed auctioneer, this will contradict the local acts governed by the states (for example Auction Sales Enactment FMS, Auction Sales Enactment of Perlis, and Auctioneers Enactment Kedah No. 8). The National Land Code 1965 empowers the high court to carry out an auction but this does not empower any private third party without a licence to carry out such auctions despite being appointed by the High Court of Malaya.

b) There is a need to hold auctioneers responsible, which is why there are laws in place to protect the people when it comes to auction of public properties. Such local acts were established as early as 1929 (Auction Sales Enactment 1929). Auctioneers are responsible for the information and details they disseminate to the public. Thus, due diligence such as checking the validity of bidders, site inspection, title searches and taking of photographs should be conducted by a licensed auctioneer. The Internet is just a tool and so the online auction has to be managed by a person who is familiar with the process.

c) There is high risk of monopoly of online public auctions by a private IT company appointed by the high court, and this is a threat to the foreclosure system as there are many risks associated with the auctioneering of immovable properties. If a technical error arises, the entire system could fall and it would also be susceptible to IT hackers. However, auctioneers who conduct auctions on a “case-by-case” basis would help to mitigate this risk, and there are over 2,000 licensed auctioneers in Malaysia.

d) According to the World Bank, only 61% of Malaysians have access to the Internet. So, the best practice is to have a hybrid model where auctioneers would use the e-Bidding System but public face-to-face auctions would still be carried out.

e) There is a good reason why auctioneers should be given full access to such cases and incorporate the online system as a service provider to conduct their auctions. The face-to-face auctions can increase the value of a property as the auctioneer can hype up the crowd through his charisma and experience, which is something the Internet will never be able to do.

As for the auctioneers’ role in the e-bidding system:

a) A hybrid bidding system should be implemented. The auctioneer should still provide a face-to-face auction system for greater transparency and to protect the public’s interests. Many developed nations including the United States, Singapore and Hong Kong use face-to-face bidding.

b) The auctioneer should be responsible for conducting all due diligence including inspection, eligibility of bidders, taking of photographs, searching for titles and answering queries from potential bidders. This would safeguard the public interest as well, especially when there are matters and restrictions relating to the auction. Upon successful conclusion of the bidding, the auctioneer can be tasked with the preparation and overseeing of the signing of the sales agreement at their office.
c) Auctioneers can enhance the marketability of the property, especially through their niche marketing campaign by distributing flyers, getting referrals and calling up investors to purchase the properties. This is crucial and has successfully served the foreclosure system in Malaysia since 1929 for hundreds of thousands of successful auctions.

In conclusion, the e-Bidding System is a service provider and tool that should be embraced by auctioneers but only on condition that all foreclosure cases must be given to auctioneers for their execution. This will put it on par with the local enactments and other developed nations, help to mitigate threats to the entire foreclosure industry, protect public interest and improve the system. Auctioneers have been in existence since 1929. Their experience and services should be valued and utilised to reach greater heights.

This article is contributed by Mr Tham Kuen Wei, a licensed auctioneer and foreclosure consultant in Malaysia. He had experiences in foreclosure consulting, valuations, real estate auctions, research and consultancy. He can be reached at tham8888@yahoo.com