25 JUNE, 2021

Whether it is a new or an auctioned property, acquiring a home of your own is a dream come true. Though there are quite a few risks associated with an auctioned property, you could end up with a good deal by paying attention to the nuances.

Here’s a guide on how to purchase a property under auction. But before that, it is important to get the basics right.

What is an auctioned property?
If you buy a property on a home loan, the bank reserves the right to sell the property to recover their dues in case you do not repay the loan on time. In such a situation, after reminders and due process, the lender puts the property in question up for auction. The lender fixes a base price and then people participating in the auction are allowed to place bids that are higher than the base price. The person bidding the highest gets the property.

If you are exploring such a property, follow the guidelines below:

  • Check the Legal Due Diligence
    When you have selected the property of your choice, checking the legal titles of the property is of utmost importance. The bank does not take the legal responsibilities of the auctioned property. Thus, it is highly recommended that you get the property papers probed by a lawyer. This will prevent you from facing any legal trouble in the future.
  • Arrange Your Finances
    Make sure that you have ample money for buying a property under auction. A minimum amount of liquid fund (25% of the bid amount) has to be deposited within 24 hours of the day of auction. In such a case, if you are short of money, you can opt for a home loan for auction.
  • Inspect the Physical Condition of the Property
    To inspect the property’s physical condition, you should talk to the bank and get a date fixed to visit the property. When doing that, you must ascertain that there are no bank notices pasted on the doors of the property or the society noticeboard anymore regarding the property you are considering. Check the condition of the house thoroughly before purchasing it.
  • Submit the Tender Form
    Once you are contented with the physical condition of the property, you must submit the tender form with an Earnest Money Deposit (EMD). Essentially, EMD is a form of security deposit paid to the bank to prove that you are a serious buyer.
  • Submit the Bidding Form
    The bidding form is the document wherein you are supposed to mention the price at which you wish to purchase the property. You can submit the form physically or online in case of e-auction.
  • Auction Date
    The bank will announce the successful bidder post the auction. If you are the successful bidder, you will have to deposit a certain percentage of your bidding amount within 24 hours. If you are unable to pay the said amount within the stipulated time you will lose the property along with the EMD amount paid to the bank earlier. Thus, to arrange the required funds, you can avail a home loan for the auction property.
  • Get the Sale Certificate
    Your next step is to acquire the sale certificate from the lender. This is done by paying off the entire amount of the property. Then, the lender will provide you the sale certificate, which will act as proof of the payment between the buyer and the seller of the property.
  • Register the Property
    You will have to register the property at the registrar’s office. Registering the property in your name will make sure that it is legally yours. The sale certificate provided by the seller has to be signed by the bank and registered simultaneously.
    Once that’s done, the property is yours to keep! By following these aforementioned steps, you will be able to purchase a property under auction successfully, and sometimes at a cheaper price as well. Therefore, now you can go ahead and have a plan in place in case you decide to purchase a property under auction.

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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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.