Bought 100 Million Won Cheaper Than Market Price... Auction Attention for Real Buyers [Practical Financial Tech]

Seoul Sindorim and Donam-dong Auctioned Over 100 Million Won Below Market Price
March Auction Bidders Average 9.7, Up 1.2 from Previous Month
Seoul Apartment Auction Success Rate 90.6%... First Time Above 90% in 1 Year 8 Months
Increase in Auction Listings Expands Options, Disperses Bidders
Essential Rights Analysis... Verify Move-in Registration Date and Confirmation Date

# In February, an H apartment (exclusive area 80㎡) in Sindorim-dong, Guro-gu, Seoul was auctioned for 710 million KRW. This was about 75% of the appraised value (944 million KRW). It was approximately 100 million KRW cheaper than the actual transaction price of 815 million KRW for the same period.

# At the beginning of this year, a B apartment (exclusive area 85㎡) in Donam-dong, Seongbuk-gu, Seoul was auctioned for 750 million KRW, which is 87% of the appraised value (870 million KRW). Considering that the same size apartment later traded at 897 million KRW, it means the buyer acquired it nearly 150 million KRW cheaper through the auction.

Homebuyers who are trying to purchase their own homes are facing deep concerns. The timing of interest rate cuts is being delayed, and there is no sign of easing household loan regulations. In this situation, court auctions have emerged as one alternative to consider. With both housing prices and pre-sale prices rising, auctions are gaining attention as a way to purchase a home cheaper than the market price.

According to Gigi Auction, a specialized company for auction and public sale data, the average number of bidders for apartment auctions nationwide increased from 8.5 to 9.7 in March. The number of auction cases also rose by 10% to 2,663 compared to the previous month (2,422 cases). This is nearly a 20% increase compared to the end of last year (2,233 cases).

Auction Winning Bid Rate Also Rises

The winning bid rate (the ratio of the winning bid to the appraised value) is also on the rise. Generally, when there are many bidders in an auction, competition intensifies and winning bids increase. Last month, the winning bid rate for apartment auctions in Seoul recorded 90.6%, up 4.7 percentage points from the previous month (85.9%). This is the first time in 1 year and 8 months since August 2022 that the apartment auction winning bid rate has surpassed 90%.

Senior researcher Lee Joo-hyun of Gigi Auction explained, "The rise in winning bid prices means there is a high possibility of future house price increases," adding, "Real demand buyers who judge there is a safety margin are entering the auction market." The winning bid rate is one of the leading indicators of the real estate market. An increase in the winning bid rate means expectations for house price increases are also growing. However, experts explain that because acquisition tax and capital gains tax surcharges for multi-homeowners continue, auctions have low merit as an investment for short-term profits.

As auction properties accumulate, a bidder dispersion effect can also be expected. Due to prolonged high interest rates, cases where 'Yeongkkeuljok' (those who borrowed to the maximum) fail to repay interest to financial institutions and properties go into auction (voluntary auctions) are increasing. According to court auction statistics, the number of auctions filed nationwide in March was 10,093, exceeding 10,000 again since January this year (10,619). For March alone, this is the highest number in 11 years since March 2013 (10,281). Senior researcher Lee said, "When auction properties increase sharply, buyers have a wider range of choices," adding, "Bidders may be dispersed, which could result in a decrease in winning bid prices."

Experts recommend paying attention to the auction market in Seoul and the metropolitan area. Lee said, "In Seoul, there is high demand for apartments, but supply cannot dramatically increase in the future, so it is advantageous for securing a safety margin." He also added, "In Gyeonggi Province, it is good to target areas with the metropolitan wide-area rapid transit (GTX) benefit."

Rights Analysis Is Essential

However, if there are tenants in the house you want to win at auction, rights analysis must be conducted first. If tenants can exercise their oppositional rights against the winning bidder, the winning bidder may have to assume all or part of the tenant's deposit. Conversely, if tenants have a subordinate status, the winning bidder can receive the house without assuming the deposit. Therefore, it is necessary to check the tenant's resident registration date or certified date through the registry. If the resident registration date and certified date are earlier than other rights on the registry, it means the tenant maintains a senior status, so caution is required.

Careful comparison is also essential when determining the winning bid price. The appraised value is generally based on market prices from 1 to 2 years ago, so it is necessary to check whether the appraised value is not higher than the current market price. Also, some complexes have high asking prices but no transactions, so asking prices should not be used as the basis for determining the winning bid price. Additionally, if a loan is needed, it is necessary to check in advance the mortgage loan limit according to the debt service ratio (DSR) application.