Auctioned homes which are sold by banks can appear to be very lucrative and attractive, however, they have their own set of risks. It should be remembered that the outstanding amount of the property determines the base price. That is the reason why the auctioned properties are found to be given at a discount than the prevailing market price and the discount can be as high as 30%.
People who are investing in auctioned properties should be more careful. The investors should understand the prices are cheap due to the associated risks. We take an opportunity to look at the possible risks and the tips to get rid of them.
- Loans From Other Lenders: It generally happens that the bank that auctions the property covers the dues associated with it, however, the same property might be mortgaged to other lenders too. This problem aggravates for land parcels than the commercial or residential flats. Lenders generally want original sale agreement or share certificates and no objection certificate from the housing societies. You will get a good idea by getting details from there. In addition to the documents given by the bank, you should verify with other organisations like tax authorities, municipalities for the land being sold. In case, if the property is a joint property, you should verify whether all owners are co-borrowers of the loan. You might fall in trouble from other owners.
- Outstanding Dues, If Any: Generally, a bank recovers its dues completely from the bid amount. All the related liabilities like electricity bills, society dues, property tax have to be borne by the bid winner. There remains a high possibility that the borrower might have defaulted on other expenses. You can meet the society members and find out if there are any outstanding dues. By comparing the value shown with the prevailing rates in the area, the same can be verified. Get in touch with the builder directly and check if there are any pending dues for under construction buildings.
- The Condition Of The House: It is a common practice that the existing owners will not pay towards the maintenance of the property once they know they are going to lose it. Due to the financial crisis, the existing owners might stop the maintenance of the property. You should assess the situation of the house and the locality too. You should get in touch with a civil engineer and to understand what has to be done in the flat and the building too.