The Process of Auctioning a House

In India, statistics show that people who take home loans usually repay them within 7 to 10 years. However, the number of people unable to repay their home loans is also increasing. What happens if a home loan is not repaid? The banks repossess the houses and auction them. Is buying an auctioned house profitable or risky?

Advantages:

When a house is put up for auction, the bank's legal experts thoroughly investigate the property. They comprehensively review the documents to ensure there are no defects or issues. Only after confirming that the documents are clear and free from any problems does the house go up for auction.

Buying a house through a bank auction reduces the chances of legal issues. There won't be any trouble from the previous owner. The price of the house in a bank auction is usually reasonable, as the bank aims to recover its money rather than make a profit. This makes it a good deal compared to buying from builders or other sellers.

The auction process is governed by auction rules and the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act).

Disadvantages:

If the previous owner still resides in the auctioned house, they must vacate it immediately after the auction. However, some may have rented or leased out the property. Tenants might refuse to vacate immediately, citing their agreement, and may continue to stay until the lease expires. This is the only major downside of buying an auctioned house.

Auction Procedure:

Anyone can participate in a bank auction for a house; it is not limited to the bank’s customers. Upon winning the auction, the buyer must immediately pay an advance amount. Therefore, it is essential to have the advance payment ready before attending the auction.

After paying the advance, the remaining amount must be paid within a specified period, which the bank will provide. If the payment is not made within this period, or if the buyer backs out, the auctioned house will be automatically canceled, and the bank will auction the house again.

Real estate brokers often participate in auctions. When many brokers participate, they may collude to manipulate the auction price, either raising or lowering it. If such a situation arises during the auction, buyers should be cautious.

Summary:

- Anyone can participate in the bank auction.

- Advance payment is required immediately upon winning the auction.

- The remaining amount must be paid within the specified period.

- Legal complications are minimal as banks thoroughly verify the documents.

- Issues may arise if the property is occupied by tenants or the previous owner.