Auctioned Property - Not everyone's cup of Tea, even cheap

Real estate prices are soaring up and everyone's urge to buy a house is still as a dream. For those who dream of buying a property for the first time, this option may not sound good, because some people consider auctioned property unlucky, and have belief that buying the property which the owner does not willingly sell, another attractive factor in this auctioned property is the price fixed by the banks which is 25-30% less than market price. Also, since they are auctioned by banks, the title to these properties would likely be clear.

AUCTION PROCESS

Banks issue a public notice in newspapers about the proposed auction and invite bids. The notice includes the details of the property, date, time and venue of the auction, reserve price, and earnest money deposit.

Bidders must submit their applications to the bank quoting their bid amount which should not be less than the reserve price. Along with this, they must pay earnest money deposit which may be around 10% of the reserve price. The auction usually takes place after 30 days from the date of the public notice

• If the borrower settles the dues within 30 days, the auction will not happen and your earnest money deposit will be returned. 
• If the auction takes place and you do not win the bid, your earnest money deposit is returned. 
• If you win the bid, you will have to pay around 25 per cent of the bid price on the day of the auction. You need to pay the balance amount within the next 15 days or an extended period agreed between you and the bank.
• If you win the bid but do not pay the required amount within the specified periods, you will lose the money paid earlier. 

AUCTION INFORMATION SOURCES

• You will need to scan newspapers for announcements by banks regarding such auctions. 
• You can contact real estate agents who may have this information. 
• Web sites such as  http://www.foreclosureindia.com/,  http://indiabankauction.com/  http://bankpropertyauction.com/ provide online listings of properties which banks advertise to auction.

In a normal (offline) property auction, bidders gather at the auction venue where their bids are considered. Banks may also allow competitive bidding among the bidders for improving their offers.

CONSIDERATION BEFORE BIDDING

If the auction attracts aggressive bids, the price could go up and dilute the cost advantage. So, it is important that you make an assessment of the market value and bid prudently to get a good deal. Also, to be on the safer side, it is better to check the property documents before deciding to bid, or engage a lawyer to verify the title.

Also expenses on any repairs, renovation, unpaid property taxes, electricity dues and statutory liabilities will have to be borne by the buyer. The buyer also has to bear other expenses such as stamp duty and registration fees. So, do a proper inspection to assess the true cost of owning the property.

Flat/Apartment Resale - Second hand

People call it in different ways, second-hand flat, flat resale, apartment resale etc etc How does one go about scrutinising the title deed records while acquiring a second-hand flat? Here is a checklist which should be verified before proceeding with buying a resale flat or apartment.

You can get a list of second hand flats or aparment in http://classifieds.sulekha.com/search/chennai/second-hand-flat.htm


1. The flow of title as I have described in these columns.

2. If the flow of title is in order, then, you need to check if your present vendor has the following: a. Registered Sale Deed in respect of undivided share in the land b. Construction Agreement (or sometimes called Builders Agreement) under which the flat is constructed.

3. If the flat is assessed to property tax and if property tax is paid up to date.

4. For a completion certificate from CMDA.

5. For a CMDA-approved plan. Check for deviations.

6. If there are deviations, see what has been done. In most cases, you will be given a copy of an application for regularisation together with a receipt to show payment of fees to the CMDA. This will not do. There have been several regularisation schemes promoted by the Government. Barring the first, all the others have been stayed by the High Court, and the CMDA is currently restrained from processing any regularisation applications. There is no certainty whatsoever that the courts will hold these subsequent regularisation schemes to be valid. If they are held to be invalid, your dream flat could quickly be turned into a pile of rubble.

7. The nature of the deviation. If the deviation is total, or if your proposed flat is on an unauthorised floor, then, I can only recommend that you drop the idea. Of course, if you are the type of person who doesn't mind risky transactions, it is your choice and you are free to do so.

8. Scrutinise the originals of all documents. They will normally be with the Flat Owners' Association. Check the Bye Laws of the Association and see if your vendor has any dues to the Association. 9. If the flat has proper electricity, water and sewerage connections. Check to ensure that all these utilities are paid up to date.

10. Check to ensure that the flat has rainwater harvesting mechanisms in place.

11. Ensure that the flat promoter retains no residual interest over common areas, terrace, and so on.

You will have noted that the most serious concern spelt out above is with regard to deviations and regularisation.

If you have very serious doubts or desire any clarifications, you can always approach the officials at CMDA.

Buying house - Where to begin from

Buying a house is the real dream for almost 99% of the citizen. either it be a flat or independant house or bunglow or villa or anything, everyone has thought of buying one out of his hard earned money :) and this post is for those who want to buy it for the first time (ofcourse in India).

Step 1: Pre-approved loan - If you have enough money to buy house, then you can skip this step. otherwise go to an reputed housing finance company and submit your documents for a pre-approval of house loan. This way you not only get to know your eligibility, but you also get an option for legal opinion for unlimited property. Many banks / housing finance institutions charge 0.5% to 1% of the loan amount as processing charge. ofcourse I bargained for a fixed sum of Rs.10,000+service tax. Once you get a preapproved loan, it is valid for 1yr and if you dont find a house within a year, you can renew the approval for another 6months with a minimal service charge.

Step 2: Property Search - If you want to buy an

Apartment, you can visit reputed builder and check if they have any tieup with banks or housing finance institutions, so you can avail loan from them.

Individual house, then check for the below documents like, Encumbrance Certificate (EC), Sale Deed, Parent Sale Deed, Approval from CMDA/MMDA/DTCP etc, Corporation Tax book, Electricity book, patta, chitta, plan approval, water tax book from the seller

Approved Plot, then check for EC, Approval from CMDA/MMDA/DTCP , Sale deed for purchase of the land, Plan layout, layout should have ample public space provided for library, school, playground, park, road, community hall

Finally check if government has any proposed project coming in that area like railway line, road extension, overbridge etc which could affect the propety

Step 3: Price fix - Go to the neighbouring places and enquire about the prevailing prices and come to an average price of that area. If you have survey number, you can go to www.tnreginet.net/igr/guideline_value.htm and get the current guideline value of the land. Ofcourse actual market rate is almost double or triple the guideline value. If you have old building less than 30yrs, then calculate Rs.500 per sq.ft. of the total built up area, if new building calculate Rs.1200 per sq.ft of the built up area. Doing all these will give you an approximate rate for which you can buy that property. Bargain with the seller and fix the price

Step 4: Document verification - Get a photocopy of all the above said documents and submit it to the bank for legal advice and how much they can offer you for the property. Banks do a legal opinion and technical verification on the property and advice you to get any missing documents.

Step 5: Sale Agreement - prepare a sale agreement for 10% of the actual amount, pay the 10% amount in DD to the seller and get the sale agreement signed in all pages.


Step 6: Loan Approval - Submit the sale agreement in the bank and get the your loan approval for the remaining amount, which bank will provide a DD on the date of registration at sub-registrar office.

Step 7: Sale Deed - Get hold of a document writer and prepare the sale deed, and a quotation from them on how much stamp paper to be brought, how much registration fees to be paid, on whose name DD has to be taken.

Step 8: Registration - Once everything is ready, you can register your property

Ofcourse all these require personal experience when you go directly. This post is just to know the process and get a feel of it, because something is better than nothing, so get to know little about the process and then start with this. This is purely from my experience of buying a house :) there could be many other challenges coming on the way, ofcourse life is full of challenges.