[Ryu Taemin's Real Estate A to Z] Discounted 'Boryuji Sale' Appears... Is It Worth Bidding?

Complex with lowered minimum bid price after multiple failed auctions
No subscription savings account required, lowering entry barriers
Short payment period may cause difficulties in funding

Apartment complex in the Seoul area. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Ryu Tae-min] As the housing market slows down, 'reserved lot bidding' is also being overlooked. Although it has been popular due to the advantage of potential capital gains, recently, after several failed auctions, many complexes are lowering their initial bidding prices to clear remaining units.

On the 17th of last month, the redevelopment association of Eungam 2nd District in Seoul announced a sale by lowering the price of the reserved lots at ‘Nokbeon Station e-Pyeonhansesang Castle’. For the 59㎡ (exclusive area), the minimum bid price was 1.03 billion KRW in the sale announcement issued in April, but this time the price was set 100 million KRW lower at 930 million KRW. As the overall housing market slowed and sales failed after four attempts, the price was lowered to handle the inventory.

At ‘Taereung Harrington Place’ in Gongneung-dong, Nowon-gu, Seoul, after seven attempts failed to complete the sale of 12 reserved units, the bidding prices were lowered. For the 84㎡ units, the price dropped from the previous 1.3 billion KRW to 1.26 billion KRW recently. The 74㎡ units decreased from 1.1 billion KRW to 1.06 billion KRW, and the 59㎡ units from 930 million KRW to 900 million KRW.

Purchase New Buildings Without Subscription Savings Account... Choose Desired Building and Unit Number

Reserved lots are units that the reconstruction or redevelopment association, as the project implementer, withholds without selling to prepare for unforeseen circumstances such as omission or errors in the allocation of buyers or lawsuits. The association can reserve up to 1% of the total number of units as reserved lots, but in practice, only a very small amount less than 1% is usually kept as reserved lots.

Reserved lots are sold to the public through a bidding process at the discretion of the association a few months before completion. The highest bidder who offers the highest amount based on the minimum bid price set by the association wins the bid. Since it is close to the move-in date, the price is set based on market value rather than the original sale price. Reserved lot bidding has a low entry barrier as anyone over 19 years old can participate without a subscription savings account.

The biggest feature of reserved lot bidding is that you can know the building and unit number in advance. Unlike member or general sales, there is no lottery; you can specify the preferred size, building, and unit number when bidding. Especially, since reserved lots are taken from the member units, they often include apartments with good floors and orientations. Additionally, services applied only to member units, such as free balcony expansion or premium finishing materials, are also available, and there is relatively more freedom regarding resale restrictions, which is considered an advantage.

Short Payment Period Makes Financing Difficult... Loans May Not Be Available Depending on Registration Status

However, caution is needed as financing can be difficult. Generally, a deposit of about 50 million to 100 million KRW, equivalent to 10% of the winning bid amount, must be paid at the time of bidding, and the contract deposit must be paid at the time of contract. Since the move-in date is near, the full balance is often required to be paid within one or two months. If the contract is canceled due to non-payment of the balance, the bidding deposit will be forfeited to the apartment association, risking a loss of money.

The problem is that reserved lot bidding may not allow obtaining the desired loans, which can cause difficulties if financial capacity is insufficient. For reserved lots without preservation registration, mid-term loans or mortgage loans are difficult to obtain. Therefore, it is advisable to consider reserved lot bidding only if you have sufficient cash or can arrange funds in a short period.

Song Seung-hyun, CEO of City and Economy, advised, “Even if the price is low, caution is needed when bidding because the balance must be paid in cash within a short period,” and added, “Reserved lots are also affected by the overall housing market trends, so premature investment should be avoided.”

This content was produced with the assistance of AI translation services.