How to Buy Property from Bank in E-auction?

Is it safe to buy a property at E-Auction?

The answer is both ‘YES’ and ‘NO’.

Like any other real estate deal, buying a property in a Bank auction needs proper due diligence in order to reap the benefit of purchasing it at a discounted price as compared to the market price. Bank Auctioned properties are a lucrative way to acquire property at a lower than market price.   

Risk Associated with the Transaction:

  1. Risk associated with the property title.
  2. Risk associated with existing occupants of property as the eviction of encroachment is the responsibility of the potential buyer.
  3. Risk associated with the maintenance of the property.
  4. Risk associated with statutory charges payable.
  5. Risk associated with the availability of funds to pay for the property after the winning bidder is announced.
  6. Risk of missing out on important terms and conditions associated with the auction which may come as a surprise to potential bidder/buyer.

Buyers can mitigate these risks by doing proper due diligence and being more aware of the whole process and repercussions in case anything goes wrong.

Our Firm suggests the following points be kept in mind in order to mitigate the risks:

  1. Location: It makes sense if the bidding is done for a property that is situated at a location with which the potential buyer is familiar.
  2. The Physical inspection of the property is an absolute must to know the condition of the building/flat both externally and internally.  It will also give an idea to the potential buyer as to how much amount he will have to spend to make it habitable.
  3. Never blindly rely on any bank’s advertisements or its officers or any property dealer/agent’s promise but always do your own due diligence in order to know encumbrances, if any, on the property, statutory dues, property tax, society dues, etc.  It is important to have a full chain of original documents (i.e. title deeds of earlier transactions) and it is advisable to have a title clearance report from an independent lawyer/advocate.
  4. Verify whether the bank has followed all due process under law to take possession of the property and sale thereof through auction to avoid any litigation later on.
  5. If the owner of the property is a Company or an LLP, then a ROC (Registrar of Company) search should be done to ascertain the charges on the property.
  6. Also conduct a search in the sub-Registrar of Assurances to ascertain whether the property has a clear title or not.
  7. If the property is in a society, the NOC of the society needs to be taken for the transfer of the share certificate in the record of the society
  8. If the property is a Bungalow or land then revenue records should be seen to ascertain whether the name of the owner is mutated therein as owner and whether any adverse entries are there.
  9. In case the physical possession of the property is still with the builder, check whether any outstanding dues need to be paid to the builder in order to get his ‘NOC’ for the transfer of the property in the name of the new buyer.
  10. The stamp duty and registration need to be borne by the buyer.
  11. Tax implications including GST and TDS should be properly factored in wherever applicable.