What to Look For when Buying a Second-hand Property

With property prices skyrocketing, the common man today is finding it really difficult to own even a 1 BHK property. This is where homebuyers can seek other alternatives. A property seeker is always hesitant when it comes to buying second hand homes.

While the choice between a new property and an old one is mostly subjective, resale properties have their own advantages. For instance, you don’t have to incur the service tax or VAT (Value Added Tax). So, if you are one of those who are facing this dilemma, below are some pointers you need to consider before purchasing a second hand property.

Location

Instead of moving to a new project in the suburbs that pushes you further away from your workspace, purchase a second hand property that is right in the middle of the Central Business District. Investing in a resale property in an established locality is a much better choice than a premium property in a “developing” neighbourhood. Your home buying decision should be based on factors such the area’s connectivity, its proximity to educational institutions and other recreational spots.

Document verification

As part of your checklist, ensure you evaluate and check the sale deed, encumbrance certificate, NOC (No Objection Certificate), possession certificate, latest property tax receipt and occupancy certificate. It is essential to ask for a marketable property title too while purchasing a resale property. The title will not only tell you how old the property is but it will also let you if the property had a chain of previous owners.

Property valuation

Do some background research and check the market price of the property. Go through the current price trends and get an estimate or seek a professional to help you evaluate the second hand property. Trail the property’s ROI (Return on Interest) and check if the property can still reap benefits in the future. Avoid dealing with intermediaries like agents or brokers and try getting in touch with the owner directly.

Property inspection

Since builders may promise you one thing today, and you might end up getting something else altogether, it is always better to opt for something that you see right in front of your eyes. While purchasing a resale property, you see the house in its original shape, so check for its foundation and find out how old the property is. If the property has several structural problems, you might end up paying more, so draw up an estimate of what needs to be remodeled and then make a decision.

Bargain

Sometimes, the owner of the resale property might be under pressure to sell the property at the earliest, so do not forget to bargain. Identify all the defects and press to get additional discounts. If there are a lot of renovations to be done, cite these reasons to get a good deal. While second-hand homes in Mumbai are priced 5% lesser than new projects, properties in Bangalore, Gurgaon and Chennai are marked down by 10-18% when compared to new properties.

Hire experts

Get a lawyer to complete the home buying process faster by drafting a S&P (Sale and Purchase agreement). If you feel that you are not equipped to deal with the negotiation process, then opt for a property inspector or a broker to help you examine the property and help you negotiate the deal with the owner. These experts could advise and legally guide you to invest in a property that promises higher returns in a shorter span of time.

Lower property prices

Due to the scarce real estate inventory within city limits, many new projects are banished to the suburbs, but due to all the modern day amenities, capital values of new homes might be priced higher. In competitive realty markets, owners could offer discounted prices for older properties. Flexibility in payments terms too is attracting several homebuyers to invest in second-hand properties. Capital values of resale properties in Mumbai are cited to cost an average of INR 8,200 per square feet. Cities like Gurgaon and Pune both offer resale homes anywhere between INR 5,400 and INR 5,700 per square feet, while upcoming realty corridors in Hyderabad offer resale properties at INR 2,700 per square feet.

Low maintenance

When compared to the new projects, old properties are low maintenance assets due to their limited amenities and facilities. Not all projects charge for using common facilities, however, older structure do come with their disadvantages of regular structural repairs, need for water proofing etc.

Financial help

Even before you consider getting a loan to buy such a property, check if the property papers have been mortgaged against some loan amount. Banks will only be able to sanction loan once the mortgage has been cleared and there are no debts against the property. Once the papers have been released, you could be eligible for a loan. But, most banks today do not approve loans for homes that are older than a decade. Seeking a home loan for older properties is a challenge due to its depreciating property value. So budget accordingly.

Limit deposit amount

Limit your deposit amount as much as you can as agents and brokers could end up defrauding you. So deposit about 3% of the amount or have a lawyer to handle the entire payment. If you want to make the payment directly, stick to using a cheque or a bank draft rather than using cash. Do not forget to take a payment receipt as proof.

Direct benefits

You not only get to stay in a ready-to-move-in apartment but you also get to save a considerable amount which you would otherwise end up paying as rent or EMI against an under construction project. The immediate possession also lets you enjoy tax benefits from the first EMI. Under 80C, the deduction of INR 1.5 lakhs on the principal EMI and a tax exemption of not more than INR 2 lakhs against home loan interest under Section 24B makes investments in resale properties worth the time and the effort.

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