What’s a Fire Sale Property and Where to Look for a Good Deal

what is a fire sale property and where you can look for fire sale properties for sale

Who doesn’t love a good deal? This is especially true when it comes to big-ticket items like property where buying at an attractive price could result in thousands in savings. Well, if you are looking for a bargain, the first thing that should come to your mind is a fire sale property.

 

What is a fire sale property?

In the past, a fire sale is where someone tries to sell the surviving furniture at steep discounts after a fire.

In today’s modern-day context however, a fire sale is a term that refers to any sort of urgent sale that is accompanied by a steep discount.

In the case of property, a fire sale property means that the property developer or seller is looking to let go of the property at a heavily discounted price, usually below the property’s existing valuation.

 

Why do fire sale property sales happen? Here are 5 common reasons

#1. The seller is unable to pay off remaining the home loan repayments, and is willing to let it go 

The seller might end up in a bad financial situation where he/she is no longer able to afford to service the mortgage. In such a situation, the seller is forced to let the bank repossess the property so that he/she can be relieved from the financial obligation. 

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#2. The seller is going to be declared bankrupt and is willing to sell it the property at a huge discount

If the seller is on the verge of being declared a bankrupt, the last resort would be to sell the property for cash to pay the debt. For instance, a businessman might be facing a cashflow problem with his/her business and is looking to sell his/her property to cover the cash flow problem. While properties are a good store of value, they can't liquidate. Because of that, the seller has to sell it at a steep discount to get buyers quickly. 

#3. The seller wants to encash property to split assets for a divorce

A divorce requires the matrimonial assets to be split into two (usually). If the seller is going through a divorce, that’s when a fire sale can happen. The seller might be looking to liquidate their home quickly so that they can settle the distribution of matrimonial assets to both parties and speed up the divorce process.

#4. Seller wants to cut losses early ahead of a downturn

In an economic downturn, the demand for rental and sale of properties can plummet. If the property owner foresees such a situation, he/she might be tempted to cut losses early ahead of the downturn rather than get stuck with the properties for years without a chance to sell the property.

Plus, with the rental demand falling, the property owner might not be able to rent out the unit and will be obligated to service the mortgage out of his/her own pocket.

#5. Developers that want to avoid paying ABSD

Although a fire sale property is more likely to happen among sellers, you might also find a fire sale property among developers who are close to their ABSD deadlines. 

For the uninitiated, the Additional Buyers Stamp Duty (ABSD) rule imposes that developers have to complete the development and sell everything within five years of acquiring the land. Otherwise, they have to pay 30% of the land price as ABSD. 

To avoid these hefty levies, developers would rather give attractive discounts to buyers. 

 

Where can I find fire sale property for sale?

There are a few ways to scout for fire sale properties: 

#1. Property auctions

When banks repossess properties from those who are unable to meet their financial obligation, the properties are then auctioned off at property auctioneers to allow the bank to encash the properties.

If you want to look for fire sale property for sale, auctions from Colliers International, Edmund Tie, JLL and Knight Frank are where you should be looking at. In addition, you can also find all the properties that are put on auction by banks on PropertyGuru’s bank auction page.

#2. On PropertyGuru's fire sales page

Where to search for fire sale properties on PropertyGuru

Yes, there's a dedicated fire sale property listings page on PropertyGuru as well. Here, you look for properties listed by sellers who are willing to offer their properties below market value. You can also refine your search based on the property type, location, price and more.

 

But don't assume that every fire sale property is a steal 

Are fire sales as good as they seem? After all, if a property is sold at a 'bargain' price, surely it would seem logical to snap it up?

Just like any other good deals, you should take a step back to look at the bigger picture, especially when you'll be paying lots of money. 

For example, the property might be neglected for a good period of time and requires major repair to make it livable again (hence the lower price). The discount you get from the fire sale might not be enough to cover the repair costs.

That being said, if you have already done your due diligence to make sure that the property is one that is worth buying, then buying a fire sale property is a great deal, according to Tan Tee Khoon, Country Manager for PropertyGuru Singapore. 

However, he cautions that the most important aspect to consider before you buy is the location of the property (i.e: whether if it's near to schools, MRT stations, or future developments based on the URA Master Plan)

"While a fire sale situation presupposes a very motivated seller who is prepared to give a steep discount to relinquish his or her property and is a good bargain for the buyer, that said the key mantra of location, location and location still applies", he said. 

 

Whether you want to compare the best home loans, or get personalised advice for your home loans, PropertyGuru Finance helps you for free. 

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