|
An alternative, and somewhat less conventional approach to purchasing a property, is by participating in auctions conducted by banks and financial institutions. You may have noticed such properties advertised in newspapers or on websites. What makes these properties appealing is their initial price, known as the reserve price. However, it's important to understand that the final closing price remains uncertain until the entire auction process is completed, as other bidders can drive up the prices.
Typically, these properties are sold at a discount of around 15% to 20% compared to the market rate, which is a significant draw for potential buyers. Nevertheless, as an individual buyer, it's crucial to familiarise yourself with the entire sale and auctioning process employed by banks and financial institutions when considering such a purchase. Failing to read the fine print in the offer documents can lead to costly consequences, so engaging a legal advisor well-versed in these matters is highly advisable.
It's important to note that banks and financial institutions that auction these properties do not assume responsibility for any other encumbrances associated with the property. These properties are typically sold on an "as-is-where-is" basis. Bidders should also be aware that borrowers have certain rights in a property being auctioned, especially in cases where the auction is a result of loan default or mortgage foreclosure.
How did these assets end up getting auctioned? When a borrower takes out a home loan, the bank retains the right to sell the property to recover their outstanding dues if the borrower defaults on repayments. In such situations, after following the necessary legal procedures, the lender places the property up for auction, establishes a base price, and allows participants to bid higher than the base price. The highest bidder ultimately acquires the property.
Before bidding, it's essential to inspect the physical condition of the property. You should coordinate with the bank to arrange a visit to the property and ensure there are no bank notices on the doors or society notice boards regarding the property you're interested in. Thoroughly assess the condition of the house before participating in the auction.
Participating in an auction: Participating in an auction typically involves some financial commitments. Banks or financial institutions usually require a 10% Earnest Money Deposit (EMD) based on the property's value before the auction. This deposit serves as a safeguard against frivolous bids. If you win the bid, you are then expected to pay a certain portion of the total amount on the same day as your victory. The remaining 75% must be paid according to the terms set by the auction authority, which may vary from case to case.
Failure to meet the specified payment deadlines will result in the loss of the property and forfeiture of the EMD paid to the bank earlier. Therefore, it's essential to be well-prepared and informed before venturing into property auctions conducted by banks and financial institutions.
|
