reserve price of the property. Along with the application, the earnest money deposit (EMD) amount needs to be deposited, which is usually fixed at 10 per cent of the reserve price.
The auction is usually held 30 days after the issuance of the public notice. During this period, it is possible for the defaulting loan borrower to repay the loan amount to the bank. In case, the borrower clears the dues, the auction will be cancelled and the bank will return the EMD to the bidders.
If the auction goes through, the winning bidder needs to deposit approximately 25 per cent of the bid amount on the same day. The balance needs to be paid within a stipulated time frame, which is usually the next 15 days or an extended date mutually agreed to by the buyer and the bank.
If a person does not pay the remaining amount within the specified period, they would lose the sum paid earlier. Some banks do offer loans for buying auctioned properties; however, as there are stringent time limits, one needs to ensure that they have the necessary funds available before participating in a property auction.
Points to Consider: Though beneficial in terms of property value, buying a property in an auction is not feasible for everyone.
In case of aggressive bidding, the price could go much higher, eliminating the cost advantage. Therefore, a careful assessment of the property is critical along with wise bidding.
Check the property documents thoroughly through a lawyer, if necessary.
A bank auctions a property ‘as-is-where-is’ which makes the buyer liable for any renovation cost or unpaid taxes on the property. Hence, a proper inspection is critical to assess the property’s true value.
Buying a property at an auction is a relatively new concept in India and while it might seem to be a lucrative option, it requires the buyer to have really deep pockets to acquire one. Moreover, there are certain safeguards one needs to practice to enjoy the advantages that an auctioned property offers.
— The author is CEO, BankBazaar.com