Identifying the pros and cons of an auction property
As the global pandemic rages on, more and more Indians are delving into auction property as a means to seek out more affordable properties. Auction properties are rather attractive to home buyers owing to their ridiculously-low prices . Some properties come with certain risks and speculative infrastructure conditions. They largely appeal to the masses who fall for the prices of these unsaleable properties. This is a small learning of auction property and its benefits and drawbacks.
We understand that auction properties are sold at far below market value, making it a real big incentive for prospective home buyers who seek affordable alternatives. Given the prevalent economic condition, more properties are expected to populate auction houses in the immediate future. Online auctions are gradually becoming a trend, and are expected to dominate property markets everywhere and therefore anticipate better margins as the supply increases.
As you decide to purchase any piece of property, it is very essential to know what you are buying the property for… whether it is for your own stay, rental yield or commercial purpose.
A simple research and homework will help!
Always do your homework well in advance and do an extensive research on your financial status. Bidders are always advised to inspect the property and ascertain its current condition as well as underlying cost for repairs and renovation if necessary. Bidder should conduct a price comparison of properties within the neighbourhood to understand & determine their market value before bidding.
Beware of the danger signs
If you are a newbie in the auction market, there are some danger signs to watch out for as there are common pitfalls in auction property you need to avoid. They are typically stubborn tenants, Politically Exposed Occupants,Invisible Encumbrances as well as dilapidated properties. When the price of an auction property seems too good to be true, it is usually saddled or burdened with encumbrances. Hidden costs and accumulated charges are truly a pain for prospective bidders. To discover the real value of a property under auction, visit your local Registrar office to check any encumbrances or outstanding fees and unpaid bills.
Since auction properties can only be viewed from the exterior, any defects would only be known after the sale has been finalized unlike properties in the primary and secondary market. Further, most auction properties which have been left vacant for long time would require substantial expenditure in refurbishment.
A word of Caution !
Ensure that you do the due diligence before participating in the bidding. Banks issue notification of e-auctions well in advance with details of the properties.
Some Banks (very few), has given the addresses and sizes of the properties, names and addresses of previous owners, and other details on its website. It has also allowed interested customers to inspect the properties by seeking an appointment with bank officials, whose contact details have been given.
But don’t make the mistake of relying only on the information provided by the institution. In case someone claims to be the owner of the property after the purchase, it is unlikely that the bank or institution will come to your rescue.
So make independent enquiries regarding the encumbrances, the title of the property, and the claims and the rights of the previous owner or any other entity. While the ownership rights conveyed to the bidders are absolute and enforceable, issues about title, possession and other encumbrances could still arise.