When a bank loans a particular amount to someone in lieu of the property he mortgages, do you know what happens to the property when he is unable to repay the amount on time?
In such cases when the borrower cannot repay the amount to the bank on time, the lender bank has all the right to recover the amount by selling the mortgage property through auction. The bank definitely sends several notices to the borrower over a period of six months before sealing the property for auction. If the sales amount exceeds, the difference is handed over to the original property owner i.e., the borrower.
So if you are standing on the other side of the line waiting to buy a bank auctioned property, here is a guide to help you through the process.
Why to Participate:- The only reason why banks sell-off such properties is to recover the amount due to them which is in most of the cases lesser than the price of the property. Hence, the most important advantage of buying a bank auctioned property is that you can avail as much as 30% discount on the prevailing market price of that property.
Why Not to Participate:- There is always a flipside of everything; same is the case with bank auctioned properties. The main disadvantage is that you will have to pay a larger amount upfront. So cash-in-hand is really necessary. Also, the owner of the property has the right to go to the Debt Tribunal if he is dissatisfied with the auction and the price at which his property is sold. In this case, the matter might get stuck in a long time litigation.
How to Participate:- Banks notify the public before holding such property auction usually through their website and newspaper along with its details. The information includes the price at which the bidding starts that is the reserve price, the earnest money deposit (EMD), date, time and place, etc. Anyone who is interested and eligible for the purchase can participate. You have to go through the list of properties and select the one you want to bid on. Then you will have to submit a tender form for the same to the office of authorized officer along with 10% of the EMD. If you are the highest bidder, the property will be yours.
One of the important things to consider is the payment timeline. After you pay 25% upfront, the rest 75% will have to be paid within the stipulated time frame. If you fail to do so, you will not be entitled to the ownership of the property and the previous amount will also be forfeited. Also, do not forget to collect the original title deed of the property from the bank.
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