Buying a Bank auctioned property in India? Here is everything you need to know
What is a bank auctioned property?
Properties are typically auctioned by banks in accordance with the provisions and procedures outlined in the SARFAESI Act and its associated rules. This occurs when a borrower, who has pledged their properties as collateral to the bank, is unable to repay the loan amount.
Why bank auction property?
Typically, a bank commences the auction process when a borrower defaults on three consecutive Home Loan EMI payments. The customer is then issued a notice, requiring a response within 60 days, explaining why the bank should not proceed with auctioning the property due to payment default. If the borrower rectifies the situation by making the overdue payments, the notice is retracted.
Alternatively, the borrower has the option to submit objections within sixty days, providing justifications for the non-payment of EMIs. If there is no response from the borrower or if the bank finds the response unsatisfactory, the bank may initiate the auction process. Following the expiration of the 60 day period, the bank can proceed with the auction after an additional 30 days.
How to find bank auction properties?
Numerous banks display lists of their auctioned properties on their official websites or in newspapers. Additionally, you have the option to directly reach out to the bank for information on currently auctioned properties. The IBAPI portal, managed by the Indian Banks Association (IBA), is another resource to review listings of bank auction properties.
For auction notices, it is advisable to visit the official websites of the relevant banks. Furthermore, you can bookmark the www.PunePropertyExpert.com website to conveniently search for bank auctioned properties in the Pune region.
Contact the bank
In the event that information about auctioned properties is not available on the bank’s website or other platforms, feel free to reach out to the bank directly. Contacting them and inquiring about upcoming auctions might yield the necessary information.
Check newspapers
Banks frequently promote their auctioned properties in prominent newspapers within the classifieds section.
Property title and ownership
Verify the ownership and title documents of the property to ensure that the seller possesses the legal authority to sell the property, and confirm the absence of any unresolved disputes or encumbrances.
Physical inspection of property
Conduct a physical inspection of the property to ascertain its overall condition, ensuring there are no structural or other issues that could entail significant repair costs.
Liabilities and dues
Examine whether the property carries any outstanding dues or liabilities, such as unpaid property taxes, utility bills, or pending loans. It is crucial to avoid unforeseen expenses after the property purchase.
Submit a tender form and pay Earnest Money Deposit
Ensure that you include the Earnest Money Deposit (EMD) along with the tender form, which can be obtained for submission. Typically, EMD is deposited using a demand draft or banker’s check. Prior to the deadline, carefully review all the details on the tender form before its submission.
The bank commonly levies a 10% charge of the property’s value as the Earnest Money Deposit (EMD) before the auction. This measure acts as a safeguard to deter inexperienced bids. Following a successful bid, the winning bidder is usually required to make an immediate payment of 15%, with the remaining 75% to be settled in accordance with the terms stipulated by the auction authority, which may vary from case to case.
Check for Pending dues
The buyer is obligated to settle any outstanding fees related to the bank’s auctioned property. These obligations encompass municipal taxes, society charges, statutory dues, electricity bills, and other associated costs.
How to ensure there are no pending dues?
When contemplating the purchase of a bank auction property, it is crucial to undertake thorough due diligence and understand the associated risks. Bidders should request all pertinent property documents, including the sale deed, title documents, property tax receipts, and utility bills such as electricity and water. Additionally, it is imperative to conduct a comprehensive title search through the relevant authority or registry before participating in the bidding process. In addition to due diligence, obtaining a No Objection Certificate (NoC) from the local authority has become a necessary step.
What documents should a bidder ask for?
- Verify the historical title deeds and cross-reference them with original documents held by the bank, such as loan agreements and/or mortgage deeds.
- Confirm the legal possession status of the property being auctioned by the bank.
- Investigate any ongoing legal disputes related to the property.
- Examine whether there are any outstanding dues owed to societies or government authorities, including property taxes.
- In the case of property ownership by a company, check with the Registrar of Companies (ROC) to determine if any other financial institution holds a charge or mortgage over the property.
- Conduct an inquiry at the office of the Sub-Registrar of Assurances to verify the absence of adverse title claims.
- Obtain a No Objection Certificate (NOC) from the society if the property is within a housing society. For land properties, review revenue records to ensure the accurate mutation of the owner’s name.
List of other relevant documents
Here is the list of relevant documents a bidder may ask before bidding in any property, presented with a different numbering style:
- Title Deed and Ownership Documents, including the sale or conveyance deed, and previous title documents to establish ownership history.
- Property Tax and Utility Bills.
- Encumbrance Certificate.
- Approved Building Plan and Layout Plan.
- No Objection Certificate (NOC) from Local Authorities.
- Completion and Occupation Certificate of the Property.
- Auction Catalog provided by the auctioning authority, outlining terms, conditions, and any obligations of the buyer.
- Auction Invitation or Notice.
- Property Inspection Report.
- Property Photographs.
What if there are structural changes to property that haven’t been approved?
In the event that there are structural changes to a property that haven’t received approval from the relevant local authority, potential legal and regulatory issues may arise. Nevertheless, it is essential for the bidder to evaluate the nature and extent of these unapproved structural changes. Understanding the scope and impact of such alterations is crucial for assessing the associated risks and making informed decisions during the bidding process.
Start Bidding
There are various methods for submitting your bid. One option is to utilize the bid form to present your offer, and it’s worth noting that tender forms and bid forms are often interchangeable. Essentially, you can submit a bid by using the tender form. If you intend to make multiple bids in increments, you’ll need to submit distinct tender forms or bid forms for each. Occasionally, a physical tender form is submitted, and a separate online bid form is utilized for submitting the bid.
E-Auctions
In light of recent technological advancements, banks have adopted the practice of e-auctions conducted on their online platforms. Property e-auctions provide a convenient option for bidders, enabling participation from anywhere in the world. This method mirrors traditional auctions but incorporates real-time bidding and a structured timeline for the bidding process.
Register Sale Certificate in Sub-Registrar office
Register the Sale Certificate at the Sub-Registrar’s office, and it is advisable to emphasize the inclusion of the defaulter as a confirming party, as detailed in my previous post on Bank Auctions. The Sale Certificate must be endorsed by the authorized bank executive during the property registration process.
Here is process to register property in Pune
Finance for Buying Property at Bank Auction
A potential real estate buyer can secure financing for properties sold at bank auctions through the following steps:
- Initiate the process by making a pre-bidding deposit, typically ranging from 10% to 15% of the total property value.
- Within the stipulated timeframe, make an additional payment of 15%. Note that this timeframe may vary depending on the bank’s policies.
- Complete the transaction by paying the remaining balance within approximately a month, in accordance with the timeline set by the bank.
Financing a Bank Auction Property
Securing financing is a pivotal aspect of acquiring a bank auction property. Despite the potential for attractive deals and opportunities in purchasing through bank auctions, a comprehensive understanding of the available financing options is essential.
Key considerations related to the bank property auction process
- Bank auctions are typically scheduled thirty days from the date of the auction notice. If the defaulter settles the outstanding amount with the bank during this period, the auction process is cancelled.
- Winning the bank auction comes with a requirement to pay the balance amount within a specified period. Failure to do so may result in the forfeiture of the entire amount paid.
- Properties auctioned by Public Sector Undertaking (PSU) banks are generally more affordable compared to those auctioned by private banks.
- Exercise caution against aggressive bids during the bidding process. It is advisable to have a fair understanding of the current market prices of similar properties to make informed decisions.
Frequently Asked Questions (FAQs) on Bank Auction Property
What defines a bank auction property?
A bank auction property is a property seized by a bank due to the borrower’s failure to repay a loan. The bank auctions off the property to recover the outstanding amount.
How do I participate in a bank auction?
Participation in a bank auction typically involves registering with the bank, obtaining the auction notice, and submitting the necessary documents. Bidding can be done either in person or through online platforms.
Which documents are necessary for participating in a bank auction?
Required documents may include proof of identity, address, income, and a pre-bidding deposit.
Is property inspection allowed before bidding?
Yes, it is recommended to inspect the property before bidding. Many banks permit potential buyers to visit and assess the condition of the property.
How is the auction price determined?
The auction price is often based on factors like the outstanding loan amount, interest, and additional charges. Bidders compete by offering higher bids.
What happens after winning the auction?
Upon winning the auction, you typically need to pay a percentage of the property value as an initial deposit. The remaining balance must be settled within a specified period.
Can the auction process be cancelled?
Yes, if the borrower settles the outstanding amount with the bank before the scheduled auction date, the auction process can be cancelled.
What risks are associated with purchasing a bank auction property?
Risks include properties being sold “as-is,” potential legal issues, and the need for thorough due diligence. It is crucial to research and assess these risks before participating.
Do properties auctioned by different banks have different prices?
Yes, properties auctioned by different banks may have varying starting prices. Public sector banks, for example, might offer properties at different rates compared to private banks.
Can I secure financing for the purchase of a bank auction property?
Yes, financing options, such as home loans, are available for bank auction properties. Buyers can explore these options to fund the purchase.
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