Banks usually draw sizable interest whenever they decide to auction properties since buyers believe that they can purchase these units at comparatively lower prices. Another benefit is believed to be finding properties at prime or good locations where new supply may be hard to come by. The major advantage of purchasing any distressed property through a bank auction is the chance to land a good asset at a potentially lower rate than market rates for real estate in a good location as per experts. However, it is advisable to be mindful of the risks involved in purchasing distressed properties at bank auctions without getting carried away with attractive offers.
There is no database of these properties for consultation purposes while it is almost impossible to accurately forecast the highest bid for any given property on offer. There is thus no guarantee on getting a property at a price which is comfortable. The Co-Founder and COO at Square Yards, Kanika Gupta Shori, stated that while purchasing property at a bank auction, there is a lower burden of due diligence in most scenarios since the bank will have already established the legal credentials of the same. Yet, there are certain aspects that remain challenging according to him. Banks are usually not responsible for physical issues that may arise from the property or related encumbrances attached to the same. Post auctioning, the buyer will have the responsibility to tackle these issues if they exist.
Shori has stated that the bank will have possession only symbolically for the property that has been auctioned and once sold, the buyer may have to tackle possession related issues, particularly if the house has been rented out and tenants have not vacated the same yet. Not being able to forecast accurate prices may result in problems in arranging funds. Buyers have to be fully familiar with the procedure of buying distressed properties. Buyers of such properties are taken as investors and hence relief in consumer courts is hard to come by for cases where there is any property construction linked issue.
Shori has also stated that for purchasing auctioned properties, buyers will not qualify legally as consumers since there is no sale that is conducted. Hence, they will find it tough to file legal cases against the developer for poor quality of construction and get compensation from the courts. Hence, while auctioned property is attractive and comes at a fair discount in most cases, it is not free from risks according to her.
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Published Date: 22 Dec 2020