The idea of a property auction might seem intimidating to the buyers. And why not, after all, you get a chance to buy a property through the bank that would have been otherwise unavailable.
Auctions present you with many opportunities and advantages of buying a property, but it does require due diligence that cannot be ignored. So, it is best to be prepared if you are planning to take part in a property auction. Here are a few things to know-
Banks will not be able to reclaim the property
While buying a property through the bank seems a good opportunity to many, buyers also shy away as they fear that the same bank, might at some point of time reclaim the property. However, this is not the situation. Quite recently, the Calcutta High Court has stated that a bank which sells a mortgaged property has no interest in it after the issuance of the sale certificate. According to this rule, the title and security of the immovable property rest with the one to whom it has been transferred. This means that the bank cannot claim an interest in the property once the sale certificate has been issued.
You will have to clean up the mess
Another important thing to take care of is the squatter that may surround you, once you buy a property through an auction. After the bank transfers the property in your name, you are the sole owner of it, so you might have to deal with the rest of the issues. For example, if there are illegal residents still living in the house, such as tenants of the former owner, it will be entirely up to you to ask them to leave and vacate the house. Even in all other instances like these, it will be your responsibility to get the house off such squatters.
You can directly ask the bank regarding a property
A property under the auction with the bank remains available to be bought, even if the auction fails. It is not s uncommon to see that many properties fail to find a buyer or remain unbought during an auction. If you eye such a property even after the auction is over, there is no point in being disheartened. There is always an option to directly go to the bank and express your desire to buy that property. Though the discretion entirely rests with the bank, it still leaves you with a chance to make the property our own.
Know the kind of auction, you’re participating
It is also important to know the kind of auction that you are planning to participate in. While bank auction is one that everyone knows of popularly, when we talk of auctions, there might be another kind of auctions such as voluntary auctions, sheriff auctions etc. Voluntary auctions are those where the seller sells the property by themselves in a live environment to get better prices. On the other hand, sheriff auctions are the best to keep your eye on to get a good property at lower rates. These auctions are not much publicized and sometimes the only party appearing in the auction is the bank. There are strong chances that the bank might even let go of the property at 50 percent of the price.
There are taxes involved too
If you thought that there is no provision for taxes on property auctions, you might have to think again. Withholding taxes apply well on property bought through an auction. One percent of the agreement value of any property that is 5 lakhs or more, has to be paid to the Income Tax department by the buyer. So, you must try to factor this cost during the agreement in order to avoid spending money from your pocket. Other than that, you are not required to pay any utility bills. As per the norms of the Supreme court, the buyer of the auctioned property is not required to pay any dues or bills of the former owner of the property.
So, if you stay aware and informed of these facts before a property auction, not only will you be able to judge a satisfactory deal but also save a significant amount of money. It is always advisable to make up your mind about finances, as you may end up spending more in an auction than you initially planned to.