Your dream home may be just a bid away, and it could come 20% cheaper if you tread carefully and smartly,

Under the hammer, over the moon

WHEN BANKS AUCTION MORTgAGED PROPERTIES

Your dream home may be just a bid away, and it could come 20% cheaper if you tread carefully and smartly,

Prohibitive prices may keep you from the property market; numerous online destinations for realty deals may leave you confused; visits to builders’ offices could build high hopes and a big pile of glossy brochures; but an auction of distressed assets by a bank might be where you will find your dream home finally. And the best part is you can probably buy it 20% cheaper, too. Typically, if the owner defaults on loan repayments, banks are empowered by law to auction off mortgaged properties and recover costs. At such auctions, opportunities for good deals abound. However, prospective buyers need to take certain precautions and do their homework before bidding. Types of auction The bank generally advertises auctions in local dailies about a month or two in advance. Listings are also made on websites such as www.tenders.gov.in, www.indiabankauction.com, www.foreclosureindia.com and www.npasource.com. These sites will also give you an idea about the reserve price. It is the minimum price at which the bidding process starts, and may include the loan amount plus the interest accumulated. The process of bidding can be either closed or open. In closed bids, you need to mail your bid amount to the address mentioned in the advertisement. In open bids, you need to submit the demand draft for the amount you are willing to pay at the venue itself, should your bid be successful. Doing due diligence The asset sale will be on an as-is basis. This means, you may stand to gain on fittings and furniture. On the other hand, be careful about the dues that are part of the deal. For example, all the pending electricity and maintenance charges need to be borne by the buyer. You have an option of surveying the property before the auction starts. Make sure that on your visit, you are accompanied by a property dealer. S/he will have a better idea of the market rate for the property and can help you decide the right bid. “In certain cases, people buy under-construction properties where the flooring or the kitchen is not complete. Make sure you calculate the cost of the construction and repair work before finalising your bid,” says Pranay Vakil, a real estate expert. A lawyer should also be part of your due diligence team, so that you don’t end up bidding for a property that is under litigation. Check the title deed, the registry records, tax and municipal data and so on. You don’t want a legal notice served on you when you are serving refreshments to guests at your house warming party. Part-payment upfront You need to have deep pockets if you choose the auction route to a home deal. For, if your bid is successful, you need to pay up to 20% of the amount upfront, the same day or the next. If you fail to pay, the house will be given to the second-highest bidder. Once the deal is closed, property registration comes next. Ensure the property is registered in your name soon after taking its possession. A real estate consultant says that such deals may be worth only if you are able to make a profit of at least 10% or more. “The difference between the amount that you pay and the market price will be your profit. But before calculating this, remember to take into account the arrears, repair cost, registration cost and so on.”