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Auctioned Property - The Real Pros & Cons of Acquiring One!
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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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Auction simply means a public sale in which the product or item in question is sold to the person who offers to pay the most money. Auctioning a property is commonly done by banks and financial institutions to recover their debts from borrowers. When their loan is not repaid, they take hold of the borrower’s property and auction it to recover the home loan amount.
When Is a Property Auctioned?
The money that the lender lends has to be returned within in a stipulated period of time. When the borrower fails to do so, the lender sends a reminder notice. After the borrower does not act suitably to the recovery notices, the property is put for auction as per the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act), 2002. The information of the auction is publicly announced so that any person in any part of the country can place a bid to buy the property. The person bidding the highest amount gets the property.
But you might wonder if it is safe to buy such properties? Should you acquire an auctioned property? Here are the pros and cons of buying an auctioned property that can help you decide if it's a wise step to take. Keep reading to know more.
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Pros of Acquiring an Auctioned Property
In a property auction, there are high chances of you getting heavy discounts on the property cost. Experts believe that you can get a discount of 20-30% on the auctioned house. Moreover, in an auction, you can buy properties located in prime locations.
Usually, such properties are ready to move, equipped with all the amenities. You can move in immediately after the auction without facing any project delays. Moreover, the property has been usually checked for encumbrance by the bank, which makes it risk-free and safe to be bought.
Cons
There could be chances that the property does not have a clear title. While the bank does give a disclaimer that to their best of knowledge there is no encumbrance in the property, they do not take any responsibility for unknown existing or fraudulent encumbrances on the property. The bank sells the property based on its current physical and legal conditions.
While you could get the property at a lower cost, there could be additional costs that you need to pay. If the previous owner has not paid statutory and non-statutory dues, charges, fees, etc., you might have to pay them after winning the bid. You might also need to spend a considerable amount on the repairs and maintenance of the property.
Before you bid for a property in an auction, you must do your due diligence, visit the property and check if there are any additional costs you would need to incur. The banks usually inform about the auction much earlier to give bidders time to attend it and do their research. You must verify the property to avoid any surprise element after acquisition.
So, if you are planning to go for an auction, you can buy the property with a home loan. But ensure to check your affordability with a home loan EMI calculator. Take the benefit of the lowest home loan interest rate offered by Kotak Mahindra Bank and fulfil your dreams.
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