Bank Auctions: An Affordable Avenue to Your Dream Home
The contemporary economic climate feels much like an erratic roller coaster ride - highs are scarce, and the lows seem to keep dipping. If you, like many, are grappling with the strain of EMI burdens, stagnant salaries, or even the looming threat of unemployment, know that you're not alone. However, every cloud has a silver lining, and in this context, that silver lining is bank auctions.
What's The Buzz About Bank Auctions?
During these financially uncertain times, many homeowners, particularly those from the salaried class, struggle to meet their Home Loan EMIs. These EMIs, a significant portion of an individual’s monthly earnings, are committed based on expectations - expected salary increments, job security, and the hope of no unforeseen expenses. Sadly, when these expectations aren't met, it's the EMI that suffers the most. And when banks don't receive their dues, they resort to auctioning the properties.
Now, here’s the golden ticket for potential buyers: properties under bank auctions can be procured at prices up to 70% less than the current market rate! These steep discounts are primarily because the auction prices align with the Bank's Realizable value of the property, which is often 20% lower than the inflated market rates. Additionally, bank auctions generally witness fewer bidders, mostly investors or individuals with readily available funds. It’s also noteworthy that banks are increasingly offering loans for such properties.
A Deep Dive into Auction Jargons:
- Reserve Price: This is essentially the opening bid or the floor price. It's the least amount at which the bank agrees to sell the property.
- Earnest Money Deposit (EMD): Think of this as a commitment token. It's a sum potential bidders deposit before the auction to showcase their genuine interest. The good news for unsuccessful bidders? This amount is fully refundable.
For instance, let’s paint a real-world scenario: A bank lists a property 'X' for auction at a reserve price of ₹50 Lakhs. Consequently, the EMD will be ₹5 Lakhs. If Mr. A secures the property for ₹60 Lakhs during the auction, he must immediately pay ₹15 Lakhs (25% of the sale price). Since he’s already paid ₹5 Lakhs as EMD, only the balance ₹10 Lakhs will be required on the auction day. The remaining ₹45 Lakhs (or 75% of the sale price) must be settled within 15 days of the auction.
And speaking from experience, I can vouch for the lucrative nature of bank auctions. I recently acquired a property at a whopping 25% discount off its market price!
Where to Find Bank Auction Listings:
Typically, bank auction notices aren't splashed across headline newspapers. Instead, they often find a spot in lesser-known publications. However, for the convenience of our community, we'll share comprehensive data on properties listed for bank auctions. You can also stay updated with NPA properties through our dedicated WhatsApp groups.
Financing Your Auctioned Property:
There are two avenues to explore here:
- Loan Against Property: Here, one initially sources funds from personal means or short-term loans from institutions or acquaintances. After purchasing the auctioned property, they can avail a Loan Against Property to settle the borrowed sum. Do note, however, that the interest rate may be slightly steeper than typical home loans, and unfortunately, salaried individuals won't enjoy any tax benefits.
- Home Loans: This traditional route comes with its perks, like relatively lower interest rates.
A Word of Caution:
Properties under bank auctions are sold "As is Where is & What is There is Basis." In simpler terms, the bank isn’t responsible for any potential title disputes or encumbrances on the property. Unlike regular property sales where buyers can safeguard themselves from prior property encumbrances, auctioned properties come with their share of risks.
Therefore, a crucial step is to ensure the original property owner (whose property is being auctioned) is a “Confirming Party” in your sale deed. This minimizes the risk of any future legal entanglements.
Finally, it’s paramount to engage a seasoned local property lawyer before venturing into bank auctions. Not only can they demystify the auction process, but they can also verify property titles and spot any existing encumbrances.
For comprehensive NPA property reports, check out our network of legal professionals via the Bhume app.
To sum it up, while bank auctions present an enticing opportunity to buy properties at significantly reduced rates, it's essential to proceed with caution, proper guidance, and a good understanding of the process. After all, a dream home should bring joy, not troubles!
