You should consider all these factors when buying house on auction

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Buying a house is everybody’s dream. People usually buy houses from the development authorities, builders or from the second-hand property market. But there is another way to buy flats and that is through auction. There are thousands of properties which are put up for sale by the banks when the loan on them is not paid.

When the money lent by banks, NBFCs or companies is not repaid by the borrower, the bank can auction the pledged property after giving sufficient notice to the borrower. When does a property go up for auction and how can such property be bought? Let’s find out!!!

Most banks conduct e-auctions of properties. The information can be found in newspapers, on bank websites, or on portals that keep records of auctions

If the borrower fails to pay three consecutive EMIs, the bank initiates the auction process.

The bank sends a notice to the borrower asking why their property should not be auctioned.

The borrower has 60 days to respond to the notice.

During this time, if the borrower makes the payment, the notice will be withdrawn.

If the borrower does not respond to the  notice, or, if the bank is not satisfied with the response, the auction process begins 30 days after the time limit mentioned in the notice has passed.

In auctions, properties are usually sold at 10 to 30 percent cheaper than the market price. This means that a property worth one crore rupees may be available for around Rs 70-90 lakh. This is because the bank’s focus is on recovering its capital. Most of the properties sold in auctions are located in posh areas. Many times, you can find a property at a good location in such auctions. These properties are mostly ready to move in. This means the buyer can shift immediately after the deal is completed.

People generally believe that buying a property in an auction is an indication of  clear title, i.e., a clear indication of ownership. However, this is not the case.

The bank’s auction notice states – ‘As is where is’ and ‘As is what is’ basis. This means that the property is being auctioned in the condition it is in, both physically and legally.

If a third party comes forward with a claim on the property later on, the bank will not be responsible.

Many times we get to hear that someone bought a property in an auction, but even after years, he did not get its possession. In many cases, the auction is held based on Symbolic Possession of the properties… In Symbolic Possession,  banks have the legal rights of the property on paper, but the actual possession of property remains with the previous owner or tenant. That person can go to court against the auction.

It is very important for the bank to have physical possession of the property. If there is no physical possession, then you can get stuck in legal troubles.

Before  bidding, check the title deed of the property. Check registry and chain deed. Make sure the property is not involved in any legal dispute. You can seek the help of a lawyer for this.

If the property belongs to a company, then inquire at the Registrar of Companies’ .

Check the condition of the property before buying it in the auction. This will give you an idea how much you will have to spend on repair work.

In addition to this, also find out about the property’s municipal tax, society charges, pending electricity and water bills, and other such things.

When buying a property at an auction, the responsibility of paying the dues will lie with the buyer. Therefore, keep in mind such costs while placing a bid. Otherwise, the actual cost may exceed your estimate.

If you are also thinking of investing in auctioned properties like Ashish, then keep these things in mind.

To participate in the bidding, a reserve price of 10% needs to be deposited as earnest money.

If your bid is unsuccessful, the deposited amount will be returned. Upon winning the bid, 25% of the amount needs to be deposited within the next few days. This includes earnest money as well.

The remaining amount needs to be paid within a month or during the specified time provided by the bank. The deposit will not be refunded if the payment is not made after winning the bid.