Kudos if you are a first time buyer attempting to buy a property in auction, especially from a bank auction like the well-known SBI property auction. You are in for some homework but a very satisfying result in the long run. Our guide below will help Indians across all states to buy their dream home or get that lucrative investment in the form of a property bought during auction.
Properties become eligible for auction when banks sell them off to recover loan dues from borrowers who fail to repay. While auctioning, the bank that has the said property, sets a reserve price that takes into account the price at which the property was bought along with the loan dues.
Public notification of such an auction is then displayed on bank websites and newspapers. Nowadays online auctions like SBI e auctions are quite popular too. This public notification details the property’s reserve price (minimum price to start bidding), Earnest Money Deposit (EMD), date of inspection, time and place of auction, time and place for collecting the ‘tender form’ and last date to submit it.
If buying a property that is attached to a bank is what interests you, then first identify the property through the many lists these banks put up, submit your tender along with 10% of EMD. If you are the highest bidder on the day of the auction, the property gets allotted to you. After the allotment, you must deposit 25% of the property price while the rest of the price must be deposited within 15 to 30 days. After all these steps, you can get the property registered in your name.
But first, there is homework to be done as we have already mentioned. The advantages of buying property in auction in India are many but most individual or first time buyers think that bidding against property investors and real estate experts in an auction is an uphill task. But as with most things that are hard to achieve, an auctioned property comes with a discount of as high as 30% so put in that work as we tell you how.
Do in-depth research – It may seem daunting, but go through as much reading material as you can. Ask the right questions, find articles that give you an in-depth knowledge and gather huge amounts of information on buying property in auction. Read up on bank auctions like the SBI property auction and go through lists of auction houses in the area of your liking. Sign up to get weekly updates on mailing lists of auction houses and browse dedicatedly through auctioneers’ web sites like SBI e auction properties list 2019 or JVD.
After researching on the internet, talk to a person who has bought a house in auction as it is immensely beneficial. They can advise you on the process and may throw in a pearl of wisdom here or there.
As most of us know, a lot of property investors and real estate experts are seasoned at buying properties in auction, so acclimatize yourself for the process. Visit an auction or two before going for the one you actually want to take part in. This gives you a clear idea of how the whole process goes down.
Buying with a mortgage – Most first time buyers come from humble beginnings. It isn’t uncommon for them to need a mortgage or loan to buy a property in auction, so just be prepared well in advance financially. Getting a mortgage agreed ‘in principle’ even before you find the desired property will help you set your budget and go through only those lists of auction properties that you can afford.
It will also be critical to have your lender complete the mortgage deal in 20 days as the auction process goes really fast – you have to put down 10% deposit for your property on the day of bidding itself, so you need to have the confident and the funds to back what you’re bidding on as you will need immediate access to the cash in the case you win.
So most importantly, you must stick to your budget. Do not feel pressured to bid more than the 10% you have already done the homework for. If you do so, it will only topple the rest of the preparation you have made going ahead. The budget, more importantly the mortgage deal you have made, is there for a reason – do not play with it.
Hire a surveyor – If you have zeroed down on which property you want to buy in auction, say from SBI auction properties, visit that property and the neighborhood at different times in a day. As you are a first time buyer, chances are you plan to live in that property, so a thorough recce of the property is advised. Hire a Chartered Surveyor, who is an expert at looking out for structural issues in houses and buildings. This expert can help evaluate the property for you, an important thing to know while making a winning bid.
Big or small fixes to be made – The Chartered Surveyor will tell you which small fixes can wait and which reparations will be absolutely necessary in a property that you have decided to bid for at an auction. As most properties that are bought in auction are sold ‘as is’, it is advisable to understand from your Chartered Surveyor what is the maximum price you might get from the renovated property. Figure out the balance between saving money by buying property at auction and spending money at making the property habitable.
Hire a property lawyer – There is another expert you need to hire as a first time buyer; a reliable property lawyer who will examine the legal issues and confirm if the auctioned property is unmarketable or not. He will also inform you of potential secrets that you as a buyer are unaware of.
Take assistance of your city’s law firms that specialise in speedy transactions when it comes to buying property in auction. This is a crucial step in overcoming the gap between you, a first time buyer, and a seasoned property investor who is used to buying at auctions.
One may call all this hard work but an intelligent first time buyer will recognize these efforts as smart work towards building a solid future for himself and his dear ones. In the long run, these steps of buying property in auction will not look laborious but a game well won and deserved.