What is your experience in buying a property in a bank auction in India?

We all have heard that properties are sold at a cheaper price in a bank auction. But before thinking about purchasing a property in a bank auction it is better to know the problems in buying bank auction property.  

Is it safe to buy bank auction property?

I have seen my friend bidding to purchase a property through bank auctions. So I think I can say why is it not a good idea to purchase a property in a bank auction. I will share some pointers below so that you can understand better.

• If you want to buy property in a bank auction you need to pay some reserve price. Usually, the banks charge 10% of the reserve price and you won't get your money back if you lose the auction.

• The bank does not reveal all the important details that you need to know. Terms such as "as is where is" and "whatever there is " are used by banks for property auctions. That means, if you face any legal disputes after purchasing the property, the bank will not be responsible. You will need to solve the problem on your own.

• If there are some dues the property had prior to purchasing, you only have to pay if you are thinking about buying property in a bank auction. The bank gives a significant amount of time to pay any dues. If you fail to pay you will forfeit the deposit.

• You will also need to pay for maintenance charges if you are purchasing a property in a bank auction. 

So wherever you are thinking of purchasing property in a bank auction you should check if there is any due diligence and you must hire a lawyer before buying property in a bank auction.

Now that I have discussed purchasing a property in a bank auction I also want to tell you briefly about "can I get home loan for bank auction property?"

Well, at times banks will help you out and they will provide you a loan on bank auction property. But if a bank is offering a home loan for a property that you want to purchase in an auction, there is very little chance that other institutions will give you a home loan.

I hope you like my answer on problems in buying bank auction property.

How To Buy Property In Bank Auction

 

If you ask me, the process of bank auction is an attractive opportunity to buy your dream house at a cheaper rate. A house is put for auction when the borrower misses more than 3 EMI payments for the home loan taken for the house and when notices sent for the same by the bank go unanswered. But if you are wondering

is it safe to buy bank auction property, there are pros and cons for the same. You need to be aware of the complexities involved and then make a decision.

Is bank auction property worth buying?

• In most cases, the sale price exceeds the guideline/market value. While accepting the loan, the borrower would have hoped for a higher value for his property. As a result, registration fees are greater

• The entire amount paid to the bank must be accounted for

• Until the 2014–2015 timeframe, Auction properties were appraised at 20–30% below market value. Recently, properties have been evaluated at market value

• We must carefully examine the bank requirements and payment timeframes to the bank, as any delay could result in the auction being cancelled

• Because most recent auctions are only available online, learn about EMD and apply for a digital signature

• If the property includes a structure, please verify that the structure is in actual possession (Note: Not only Symbolic possession). The bank would have sealed the property and placed security upon physical possession

• If you are successful in purchasing a “property with a building,” there must be an arrangement for a field visit from the Sub Registrar’s office during the registration procedure

• When trying to auction educational institutions or agricultural estates, a buyer must be extra cautious because the government is attempting to assist the borrowers

• The properties are sold “as is, where is” by the banks. The title to an auctioned property may or may not be apparent. As with any purchase, we must double-check the titles

• Please keep in mind that banks rarely provide loan for auction property

Last but not least, potential purchasers should guarantee that they view the property being auctioned if the bank permits them. A prospective buyer should also obtain as much more information about the home and its surroundings as possible. I have shared my experience of buying from auction. I hope this helps you understand is it safe to buy auction property or not.

Buy a property on NoBroker without paying brokerage fees, here. Read More: How to Buy Bank Auction Properties in Chennai? Where to Find Auction Properties? How to buy property in bank auction? 

You must be aware that when a borrower defaults, lenders like banks and financial institutions are permitted to recoup mortgaged properties without the need for court action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act). The bank then sells the properties that were so successfully recovered at auction to recoup its debts. If there are any surplus sales revenues, these are given to the defaulter (original property owner). But if you are someone who is willing to invest in an auctioned property then you must first understand is it safe to buy bank auction property in India. Don’t worry, I will help you out.

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Is it good to buy bank auction property?

If you want to know how to buy bank auction property in India and the risks associated with it, I must tell you that one of the main benefits of purchasing a property at a bank auction is the potential to do so at a significant discount from the current market value. This is owing to the banks' desire to sell the property as soon as possible and their main concern for recovering their debts, which are typically less than the value of the property. On paper, this could seem appealing, but in practice, it might not be. This is due to the possibility of numerous bidders competing at the auction (especially in the case of e-auctions), even though the reserve price may be low, and the highest bid could be close to the market price.

Second, following the payment of any outstanding bank debt, the original owner of the property (the defaulter) is entitled to receive the surplus from the sales profits. Therefore, it is in his best interest for the property to sell for more money. A disappointed defaulter has the right to appeal the bank's decision to the Debt Tribunal.

Another misconception about real estate sold at bank auctions is that since the buyer is dealing directly with the bank, the title will be fully clean. It should be emphasised that the properties are offered for sale at public auction "as is, where is," and "as is, what is." As a result, these properties are identical to the other properties the bank is financing, and the buyer will receive the same title as the original owner (defaulter).

Another thing to keep in mind is that, frequently, the property may not have been adequately maintained by the defaulter due to financial limitations. As a result, the buyer might have to shell out a considerable sum for repairs and restoration of such property.

Why such auctions are not very popular with property buyers?

Home purchasers don't typically participate in such auctions for a number of additional reasons.

• The majority of retail home buyers are not very knowledgeable.

• Additionally, banks are unable to reach a wider target audience using the present methods of notice in the newspaper (and increasingly on the internet).

• In general, it appears that more commercial, industrial, and land holdings are up for auction.

• Numerous banks are hesitant to offer loans for the acquisition of such auctioned properties due to the legal and other complications involved.

• A generally safe and cost-effective way to buy a home is through bank auctions. To make a well-informed conclusion, one must, however, put up the work necessary to carefully study and investigate the many aspects covered above.

The home loan on auction property

We can receive a loan for a house that we buy at an auction. But we need to make sure we are familiar with the details of financing auction property before making that winning bid and relying on our preapproval to secure financing.

Before buying a property, buyers should be aware of the auction's terms and conditions. These are typically found on the auctioneer's website and can be read before a live auction begins. Generic terms and conditions might appear as follows:

• No upgrades or repairs will be undertaken by the seller on any of the property that is being sold; it is being sold as-is.

• 10% or a predetermined deposit is due on the day of the sale, and the remaining payment is due in 30 to 45 days.

• Real estate is sold without conditions.

The majority of auction properties are sold without any conditions. Inspections are often permitted prior to the property being sold, but neither post-auction inspections nor the buyer's ability to acquire financing is required for the sale.

Now you know is it safe to buy bank auction property in India or not.

Read More: How to buy property in a bank auction?

Hi Buddy,

I recently got a job. I was also under pressure to purchase a flat for myself. To be honest, I did not have a huge budget for the same. Hence, I decided to purchase a property from a bank or buy from auction that is done by banks. 

Calculate your EMI on home loan with the help of the NoBroker EMI calculator.

As it is a known fact that bank auctions give buyers access to properties (often in good locations) for 20 to 30% less than the going market pricing. As a result, owning a house through a bank auction has a realistic price point, and the underlying property is usually ready to occupy, which attracts more potential purchasers.

I was a little skeptical about whether

can we buy bank auction property or not? However, one of my friends, Piyush, who is a bank employee encouraged me and explained to me the entire procedure.

He informed me that when an account becomes a non-performing asset (NPA), the bank takes control of the property and issues a possession notice in the newspaper under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act). In addition, if the borrower fails to pay his or her debts, the bank will publish an auction notice in the newspaper for the sale of the property.

I enquired Piyush about whether I can avail myself of a

home loan for auction property. He told me that on mortgaged or auctioned assets, banks do not provide loans, and asked me to contact some private money lenders for assistance. Being a newbie in property investment, I was a little scared when I got to know the risks that are involved.

The top five risks associated with purchasing property at an auction are 

• risks related to the property title

• risks related to existing occupants on the property (eviction of the encroachment is the responsibility of the potential buyer)

• risks related to property maintenance

• risks related to statutory charges payable

• the hazards of not having enough money to pay for the property when the winning bidder is declared

• Furthermore, there is a risk of missing out on essential auction terms and conditions, which may come as a surprise to the potential bidder/buyer later

Piyush informed me that buyers can reduce their risks by becoming more alert and prepared, with a thorough awareness of the facts available and the ramifications in the event of a missing link.

Finally, after gathering courage I embarked on this journey. Now I am a proud owner of an apartment which is auctioned by the bank.

I hope this helps:)

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Read More:

Where To Find Auction Properties?

If you're looking to buy a new home, you're probably wondering how much money you'll need to put down. The answer depends on a number of factors, including the type of mortgage you get and the terms of your loan.Generally speaking, you'll need to put down at least 5% of the purchase price in order to get a mortgage. However, there are some programs that allow you to put down as little as 3% or even 0%.If you're getting a conventional loan, the amount you can borrow will be limited by your debt-to-income ratio. This is the amount of your monthly debts (including your mortgage payment) divided by your monthly income. Lenders typically like to see a debt-to-income ratio of 36% or less

Hello,   Thank you for the brief details. Recently I have bidded for a property, I have paid 10% EMD and bidded successfully on 16-11-2021. The bank didn't share the account details till noon 18-11-2021(I asked several times) then they sent an automated email. The email got in my spam folder and I couldn't make the payment by 20-11-2021. Now bank cancelled the auction.   Is there any procedure to stop the cancellation of bidding in my name or get the latest 10% of EMD amount?

The bank auction process is a quite lucrative opportunity for people to buy a house at a cheaper cost. It is usually done when a borrower misses three or more EMI and when the notice which is sent to the borrower goes unanswered. All the opportunity there are certain pros and cons to this process. One needs to be aware of the complexities of this process to avoid the issues. First and foremost the person who is willing to buy a flat through an auction process must do a background check of the property as what kind of balance is remaining whether the property is in the position of the bank or no. Banks usually do not disclose many details about the property that is being auctioned so it is better to hire a lawyer or a legal expert while going for this proceeding. The notice for the auction of the property is given by the bank in the newspapers and on their website as well. However, this process is not streamlined or organised so it is difficult to find the auction details. There are certain websites which provide the details about the properties that are being auctioned by the bank however these are paid websites and charge for the details to be disclosed. Best way to go about this process is to note down the branch and the bank and physically visit or get in touch with someone in that branch and get the details about the property. Next to that whenever you are going to buy a property from the auction make sure that you make all payments as per this schedule as missing the payment will result in confiscation of the booking amount. It is always better to have a property which is already in the position of the bank as the position for the property can take months or sometimes even years if it is not already in the position of the bank. Post auction, the banks will become co-operative sometimes which might delay the entire process.