Hidden Facts About Auction Properties

You might have seen public auction notices in newspapers daily. Most of the time, these are properties that were purchased with bank loans that the owners could not repay, leading to the auction.

There are specific buyers who specialize in purchasing these auctioned properties.

Mostly, those working in banks, real estate professionals, and real estate investors show interest in buying such auction properties.

Their belief is that the auction price is determined based on the market value. Banks also employ good property valuers to appraise these auction properties, making them seem reliable and free of encumbrances.

However, in reality, market value appreciation is often driven by development and sometimes by speculation. It is beneficial to auction properties in developing areas. However, properties in speculative areas with inflated prices can lead to financial losses.

In real estate, artificial price increases are like bubbles that burst after a short period, reducing property values. Banks also contribute to these bubbles by overvaluing properties to market their home loan schemes profitably. When the government sees these inflated registration values, they increase the guideline values in those areas, further inflating prices.

This artificial price inflation, known as speculation, is like setting high prices and then offering discounts in auctions.

Another important point to consider is that properties under bank loans are not always 100% reliable. Bank officers and legal advisors are human and can make mistakes in haste. Hence, caution is necessary.

Typically, banks review sale deeds and parent documents to identify legal issues. However, they might overlook revenue department or survey issues.

If a person pledges two properties for a loan, one of the properties might be substandard. Reviewing land documents in the office without physical inspection can lead to errors. Always inspect properties in person before making decisions.

In DTCP-approved plots, buyers might acquire plots under high-tension power lines at a low cost, register them at high guideline values, and pledge them with other properties for bank loans. Sometimes, documents might be accurate, but possession of the land might not be secured.

Legal complications and rental issues often lead to properties being mortgaged with banks and subsequently defaulted on loans, bringing them to auction.

Remember, not all properties are auctioned due to the inability to repay loans. Some people deliberately default on loans as part of a strategy. This information is provided to caution you to be careful while buying auction properties, not to discourage you from doing so.

Additional Key Points:

1.Due Diligence: 

Always conduct thorough due diligence before purchasing auction properties. This includes verifying legal documents, property titles, and physical inspections to ensure there are no hidden issues.

2.Legal Advice: 

Seek legal advice to understand the potential risks and liabilities associated with auction properties. Legal experts can help identify any encumbrances or pending litigations that may affect your ownership.

3.Market Research: 

Research the local real estate market to understand the true value of the property. Avoid getting swayed by speculative prices and make informed decisions based on realistic market conditions.

4.Inspect the Property: 

Physical inspection of the property is crucial. Check for any structural issues, illegal constructions, or encroachments that may affect the property's value and usability.

5.Check for Encumbrances: 

Ensure the property is free from any legal disputes, encumbrances, or pending dues. Encumbrance certificates and property records can provide insights into the property's legal status.

6.Understand Auction Terms: 

Familiarize yourself with the auction process and terms. Understand the payment schedules, bidding rules, and any conditions imposed by the auctioning authority.

7.Financial Planning: 

Have a clear financial plan in place. Ensure you have the necessary funds to complete the purchase and cover any additional costs, such as registration fees, legal fees, and renovation expenses.

8.Post-Auction Process: 

After winning the bid, promptly complete the post-auction formalities. This includes payment of the remaining amount, obtaining the sale certificate, and registering the property in your name.

By considering these points, you can mitigate risks and make informed decisions when purchasing auction properties.