Skip to main content

Buying Auctioned Homes

Best SIP Funds Online 

Repossessed properties sold by banks can appear to be a steal for bargain hunters, but they come with their own set of risks. 

Buyers should remember that a bank's claim on a property put up for auction is restricted to the outstanding loans against it. Thus, the base price is determined by the outstanding amount. 

This explains why auctioned properties usually go at a discount to the prevailing market price, and this discount can be as high as 30% in some cases. 

However, retail investors find it difficult to bid for such properties as high networth real estate investors usually corner them with the help of bank managers, agents, etc. Though the introduction of online auction platforms has made the process more transparent now, the risks involved with these properties remain. The properties are auctioned on an "as is, where is" basis. This means the bank in question will not take any responsibility should any issues arise with the property in future. 

This is the opposite of a normal house purchase deed, where the buyer can put a clause asking the seller to indemnify the buyer from any encumbrance on the property prior to the date of registration. "Since these auctioned properties are coming with an 'as is, where is' clause, the banks don't take any responsibility. Prospective buyers need to make sure that the risk is commensurate with the discount they are getting 

This is the opposite of a normal house purchase deed, where the buyer can put a clause asking the seller to indemnify the buyer from any encumbrance on the property prior to the date of registration. "Since these auctioned properties are coming with an 'as is, where is' clause, the banks don't take any responsibility. Prospective buyers need to make sure that the risk is commensurate with the discount they are getting 

1. Loans from other lenders 
The bank that auctions the property will cover all its dues, but there is no guarantee that the same property is not mortgaged with other lenders. This problem is more acute on land parcels than constructed residential flats or on commercial properties. 

This is because most lenders insist on original sale agreement, share certificates and no objection certificates from the housing societies, etc and therefore, you get a fair idea by getting details from there. However, you have to independently verify, in addition to the documents given to you by the bank, with other agencies like municipalities, tax authorities, etc for land being sold. "Since India doesn't have a unique property id, it will be difficult to locate all mortgages linked to that  

Also make sure that if it is a joint property, all owners are also co-borrowers for the loan and thus bound by the auction process by the bank. Else, other owners can create trouble later. 

2. Other outstanding dues 
Though a bank will recover its dues fully from the bid amount, the bid winner has to bear all the related liabilities on that property like pending society dues, electricity bills, property tax, etc. Sometimes, these dues can be substantial, warns Kapoor of Liases Foras. This is because people default on housing loan EMIs last. There is high probability that the borrower might have defaulted on other expenses before that. 

Meeting the society members and asking them about pending dues is one way of going about it. However, you have to verify other dues like electricity bills, gas bills, etc yourself. Pending stamp duty claims, if the previous owner has shown less value at the time of registration and the department has raised any claim on that, can be another issue. This can be verified by comparing the value shown with the prevailing rates in that area. For under-construction properties, some dues may be pending

3. Property titles 
Generally, it is assumed that the property titles are clear because banks have already lent against it. However, this may not be true. With competition picking up, there are several instances of banks lending against properties with not so clear titles. For instance, for buildings that don't even have occupation certificates. Even if the banks might have taken full precaution at the time of giving loans, illegality might have happened later. 

4. Tenants in the house 
The chance of earlier owners staying in the house is less because banks usually ask them to vacate before auctioning the property. However, if it is already let out, the tenants may be still staying in the house and it becomes your responsibility to evict them. Freeing a house of its tenant is difficult in India, especially if the tenant has been staying there for long. The best strategy is to avoid a house which is already occupied 

5. Physical condition 
The existing owners will stop paying towards the upkeep of a property once they realise they are going to lose it. Even before the property is auctioned, the existing owners might stop maintening it due to financial stress. While this is not a very big issue, you do need to visit the house and also the locality to assess the situation. 

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com


Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now