Why To Invest In Bank Auctioned Property?

The opportunities in the real estate market are shrinking with the entry of a large number of investors. The traditional way of investing in real estate has many flaws and therefore it is difficult for many investors to participate in such asset class. Let’s check the problems in a property investment through a traditional route:

-  Risk of Litigation and Legal disputes: Properties have various legal aspects to check before it is selected for investment. Now a day’s property agents are deeply involved in most of the deals and they are unafraid to offer properties which are tangled in a legal problem. It is very difficult to find out the clear property in the current market.

-  Finance Risk: It is difficult for a normal buyer to purchase the property of completely own fund, so financial assistance from the bank or other institution is required. The property may not be considered by the bank for loan assistance depending on its policy; in that case buyer can face a difficult situation of arranging the fund.

-  Late Possession: The new flats and apartments offered by the builders are prone to possession risk. The builders take money in advance and delay the handover of the property on the due date. Such problems are very common and it is difficult to rule out such risk.

The above mentioned risks are very common and furthermore, the problem of transfer of title, hidden encumbrances, etc. deters the home buyers to take the traditional way of buying the property. The builders also charge a premium according to the location and choice demands of the property buyers, so the cost of property increases significantly along with the expectation. 

The solution to the difficulties in the traditional way of buying property lies in buying properties at auction.  A normal investor avoids the property through auction due to following reasons:

-         Lack of understanding.

-         Lack of information about auctions.

-         Due to problem with fund arrangement for auction.

-         Communication gap between stakeholders in auction.

Why to Buy an Auction Property

-         Chances of getting the property at a very reasonable and low price.

-         Auction properties are cheaper and the prices are 15 to 25% lower than the market value. The auctioning bank has an interest in recovering the loaned amount, so the price of such property is kept at a discount.

-         It is very safe and secure

-         The property is verified by banks for the legal aspects, documents, valuation and location of actual property, so there are minimal chances of fraud or any legal problem.

-         It is quite safe to rely on the credibility of the seller (Banks and Financial Institution).

-         The possession of Auctioned property is provided in less than three months time. The ownership is assigned within one month of completing the financial requirements.

-         The whole process of auction is very transparent and reliable, it is free from hidden terms and conditions

How to participate and purchase Auction Property

Step A - Read the paper notification for an Auction. Gather information required like Property address, size, Reserve price, Earnest Money Deposit (EMD), Date of inspection (DOI), Auction date, place and time, a collection point for tender form.

Step B – Collect the Tender form from the place mentioned in Auction notification

Step C – Prepare an EMD DD.

Step D- Deposit the DD along with complete tender document at designated places along with ID/Address proof (PAN, Voter ID, Bank Pass Book copy etc.).

Step E - The bidding process will commence

Step F - Participate with desired monetary bid if seems required

Step G – In case of winning bid; deposit 25% of the bid amount (including EMD) at the bank on the same day or else wait for the EMD DD to be returned.

Step H - After depositing 25% of bid money, arrange the balance amount in demand period and deposit it within time. Some bank offers loans facility for buying property at auction.

Step I – Auction Winner can now register the property in own name.

Conclusion

The idea of participating in an auction for buying a home may seem weird for many investors, but it is true that one can gain more in auction than the traditional way of buying the property. There are lots of auction consultants available in the market which helps the buyer to participate in the bidding process at nominal charges. It can further promote the buyer's interest in the auction property in the future.