Through auctions, there are increased possibilities that you can get your ultimate property deal you have been waiting at about 15-20% less than the prevailing market rate. Although the initial selling price of the property is determined by factors such as location, type of construction, neighbourhood etc, you still an secure your bid, rather than opting for high rates on a home loan.
Here is an example of Mr.Sooraj, who managed to get his property by placing a bid of Rs13 Lakh in a locality of New Delhi, where the properties were being sold for Rs 18 Lakh. Another example, a bidder in Bengaluru managed to capture the property that was being auctioned merely at 70% of the market price. Most banks organize an auction so as to sell the house because of the default of its original owner. And you as a bidder can take advantage of the auction and try to clinch the deal by securing a safe bid.
Procedure :
Mostly, banks and financial institutions who want to auction the property, issue a public notice, providing information of such a sale, which is not a rule for all financial institutions to follow. If you are a prospective buyer, you could call up the financial instituitons’ call centre and enquire about any such deals. Sometimes such deals are not made to public due to the high sale amount, inappropriate location etc. But once issued for public notice, the prospective buyer should submit a form showing the interest to bid and specify the date as to when he/she can visit the property. And upon depositing an earnest fee as the deposit fee, the bid submission process is carried out.
Advantages :
Only in case, where the auction involves corporates, there is a possibility of having multiple partners, making the handover process to the prospective buyer a quite lengthy and time consuming. However, apart from that, if it involves a single buyer, the procedure is quite transparent since the banks take care of the title documentation. Also, buyers dealing in cash are kept out since these kind of transactions involve court proceedings.
Scrutinize the actual value of the property :
Sometimes, the bid that you have just finalized at may not be the net amount of the property you intend to buy. There are chances where apart from settling the bank’s claims due to loan default, there can be outstanding dues as in dues to be paid to the builder or the co-operative housing society. Ask for a letter from such parties, stating there are no such outstanding dues. After assuming all such dues then decide upon your bid amount.