How to purchase a low budget property
Some of us have low budgets for buying a property. Many reasons can lead to a low budget for property purchases. You still have options if you need to buy a property with a low budget.
1. A-flat may be booked in the pre-launch period or when a new project is beginning. These stages are generally lower in price.
2. Find Resale Property: Search for properties with low resale values.
3. Buy Property outside the City: If your budget is tight, you can purchase Property on the suburbs of the city. As the city grows, so will the value of your property.
4. Purchase a Property in a Bank Auction: This is not a very common practice. After taking possession, banks auction houses whose owners cannot repay loans. The banks will advertise the selling price often at 15-20% below the current market price in the area. This makes them appealing. But before you rush to buy one, think carefully about the options.
Bank Auction & SARFAESI Act
Banks will auction properties for which the owners cannot repay the loan amount, or for loans, he has mortgaged his home as collateral. The bank will issue a notice under the SARFAESI Act to the borrower asking him to deposit the amount owed within 60 days. Then it will advertise the Property in the newspapers if the borrower fails to make the required deposit within the time limit.
The bank is only keen on recovering its outstanding principal, some interest components, and any expenses incurred due to legal possession. This amount will be the reserve for the auction. This price is often lower than the actual market value of the Property. If the final auction price is more than the reserve price, the bank will pay the additional amount to the original owner.
Before participating in an auction, what should you be aware of?
Although a low reserve price might seem appealing, you should verify that the amount stated by the bank is the net price and if you will have to pay any additional fees.
These are the queries that you should clarify before you submit your bid.
Are there unpaid fees?
A bank will auction Property on an “as is where it is” basis. You should carefully read the bid document to see if any dues are unpaid. The bid document acts as a prospectus for an IPO. It contains all details about the legal title and the responsibility for pending fees.
Most of the time, the owner knows that the bank will seize the property if he cannot pay the dues financially. He doesn’t bother paying the fees such as the society maintenance fee or the lease money/property taxes. The minimum period from the moment he receives the notice until the Property is taken over is six months. This means that you will likely have to pay six months of outstanding fees if you purchase the house.
The utility bills may not have been paid as well.
Some utilities could have been cut off or disconnected, such as the water or electricity connection. You will need to settle the renewal fee and the late fee if applicable.
What is the cost of repairs?
Many banks don’t do much to maintain the Property after it is taken possession. To make the Property more habitable, you might need to do some renovations or maintenance. You should visit the Property to determine the extent of the work required and the cost. You will also be responsible for any damage that could have been caused to Property around it by water seepage. If water seepage occurs while the bank holds the house and damages adjoining properties or one below, the new owner will be responsible for the damage.
You might also find items left behind by the previous owner. The bank will need to confirm who will be responsible for the items. You will need to pay an additional fee for furniture, appliances or other items that the previous owner installed. The previous owner will collect these items, or you will have to dispose them off.
Who will get the proceeds from the sale?
The bank will usually decide after taking into account the outstanding amount. The bid document usually mentions the owner of the Property. It is advisable to clarify your rights to avoid unpleasant surprises in the future, should the former owner visit you to claim his items.
What amount will you pay right away after receiving the bid?
Banks will require a larger down payment to auction a house. This payment is typically 20-25% of the sale price and must be made immediately after placing a winning bid. Although banks do not have a set policy regarding where to source your home loan from, they may assist to help you negotiate for a lower down payment or a better interest rate by allowing you to take it from the same bank. Banks usually allow seven days to arrange the remainder amount, which is typically 75-80%. It would help if you investigate on the loan before bidding.
Advantages
After considering all costs, You have probably landed a great deal if the final price is lower than the market. Even if the final price is higher than the market price, it’s okay not to mind paying more. Because the bank will have thoroughly reviewed all documents, you can be certain that the Property is safe.
This is the best advantage. If you buy a property at auction, the bank will execute the sale deed on the full amount. You don’t have to worry about paying black money. In all likelihood, you will be able to get more loans. You will also likely get a house in a well-established residential area.
