If you are a real estate investor or planning to become one, you should know how lucrative below-market-value (BMV) properties are. But tracing one is not easy as it sounds. Finding a BMV property is highly challenging, unless the property is being auctioned, as reported in PropertyGuru.com.my.

Most people pretend to sell properties below market value, which are usually typically not below the market value at all. It depends on the buyer to inspect the price of the property to make sure it is a worthy deal.

You have obtained a decent deal if you manage to purchase a property which is 25% below the market price. Meanwhile, anything below that would be considered a very profitable deal.

So in what situation can one usually find a BMV property?

Houses are usually sold below market value when a person is transferred out of town or the country within short notice. The longer they are unable to sell the property, the cheaper it will become to attract buyers.

Aside from that, properties that are inherited to a person or a group can also be bought below market value. Sometimes, in fear of others staking more claim on an inherited property, it is quickly sold off before the news gets too widespread. A group of inheritors will usually want to dispose of the asset and divide the gains among themselves as soon as possible.

Properties are also sold below market value when the owner is having trouble financially, or when the house is haunted. These types of properties are hard to find and people will instantly grab such properties which are in the market. The best BMV properties are auctioned properties, which are easily found.

A property is usually auctioned off when the owner is unable to serve the mortgage loan. Hence, the bank takes possession over the property and auctions it to the highest bidder. Auction properties are easily located through advertisements in newspapers two weeks prior to the auction date. Check the classified ads in the newspaper on a daily basis to get the best deals and also sift through the available property portals online to get info on such deals. Auction properties are becoming the preferred choice nowadays as they are deemed to be more reasonably priced. There are a few reasons on why auction properties are being auctioned, and these include the owner failing to pay their mortgage, property tax, as well as income tax. Abandoned abodes and homes seized by the government due to illegal activities can also be auctioned.

Steps to Purchase Foreclosures Purchasing foreclosures is not easy as it sounds. There are certain skills that should be mastered to avoid making the wrong move or buying the wrong house. Interested auction property buyers will need to study and gain adequate knowledge before joining the game.

Attending auctions beforehand and observing the way people bid can also come in handy during your bid. Reach out to others if you have doubts or if you need help. You can reach out to your family members, friends, relatives, real estate agents, or property experts - given that they have the experience or knowledge on foreclosed properties.

So what should one do before, during and after the auction?

Before the auction The very first step would be locating a property for auction, which can be done by going through newspapers and online portals daily. Make sure the chosen property fits your criteria, in terms of its type, location and price.

Once your preferred property is located, conduct the necessary inspection. Visit the neighbourhood yourself and check out the said property. Inspect the property and ensure that the house is not tenanted nor occupied by a squatter.

Also, check out the interior and exterior of the property, and roughly estimate the cost of repairs necessary. Ensure the property doesn't require a hefty refurbishing, but only a minor make-over which is within your budget.

Following that, conduct a survey on the current market value and the latest transaction in that area. By doing this, you can set the limit (maximum price for your bid), to make sure your purchasing price remains below market value and not over the market price.

Next, check the property for limitations. Check on the status of the title, caveats, pending bills and payments, whether it is a Bumiputra or non-Bumiputra unit, and if it is located on Malay reserved land.

Please note that, a non-Bumiputra will not be permitted to purchase a Bumiputra registered property or a property located on Malay Reserved Land. The bank will not inform of the limitations and if such properties are purchased by non-Bumiputras, problems will arise during the property transfer.

Once you have fixed your mind to bid for the property, contact the agent and see if the vendor is interested in selling the property prior to the auction.

Given you can't purchase the property beforehand, prepare the relevant documents and get a copy of the Proclamation of Sale (POS) and Condition of Sale (COS). Read and understand all the terms. You can get your solicitor to inspect the POS and COS, and do not hesitate to ask if you have any questions.

Lastly, find out if it's a Loan Agreement Cum Assignment (LACA) or non-LACA auction. A LACA auction needs a 5% deposit, while a non-LACA auction requires a 10% deposit. Prepare a bank draft or cashier's order for the deposit.

During the auction On the auction day, your appearance is important. A rich and confident look will help to convince other buyers that you will acquire the property at any cost.

Arrive at least 30 minutes earlier. Register and deposit your bank draft or cashier's order at the counter. Present your identification card (NRIC) at the counter and fill up the Bidder's Registration Form.

A small briefing will be held by the auctioneer. Listen carefully for the important clauses in the COS and property details in the POS. Ensure the presented COS is the exact copy as yours and no amendments were made to it.

Once the auction commences, raise your bidding card to bid. Bid clearly, confidently and avoid unusual sign languages. Stand in clear sight of the auctioneer and avoid being drawn into bidding wars with other attendees.

The bid is completed when the highest price is announced by the auctioneer and the property is sold at the fall of the hammer. Always ensure that your purchase price doesn't exceed the limit you fixed earlier.

If the bid is successful, sign the Contract of Sale and pay the remaining balance of the deposit, given that the purchase price of the property has increased after the bid; and if the bid is unsuccessful, redeem your bank draft or cashier's order at the counter.

Don't be upset if you lose the bid, as there are plenty of foreclosed properties out there.

After the auction If you are the successful bidder, settle the balance of the purchase price within 90 days for an LACA auction and within 120 days for a non-LACA auction.

Whilst buying an auctioned property can be advantageous due to its fairly affordable price tag - which is possibly lower than market value or cheaper than buying directly from the developer - it is undeniably risky at the same time.

There are quite a number of dreadful stories involving auctioned properties if buyers are not properly prepared or cautious enough. Always perform adequate investigations before purchasing auction properties.

As for the risks involved, read 4 Hidden Hazards of Buying Foreclosed Properties.