How to buy property at an auction
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The Auction Process: After taking possession of the property, the bank issues a public notice in local newspapers with details and information about the auction and invites bids.
Participating in an Auction: Potential bidders need to submit an application for bidding to the respective bank. This application must mention the proposed bid price, which should not be lower than the fixed reserve price of the property. Along with the application, the earnest money deposit (EMD) amount needs to be deposited, which is usually fixed at 10 per cent of the reserve price.
The auction is usually held 30 days after the issuance of the public notice. During this period, it is possible for the defaulting loan borrower to repay the loan amount to the bank. In case, the borrower clears the dues, the auction will be cancelled and the bank will return the EMD to the bidders.
If the auction goes through, the winning bidder needs to deposit approximately 25 per cent of the bid amount on the same day. The balance needs to be paid within a stipulated time frame, which is usually the next 15 days or an extended date mutually agreed to by the buyer and the bank.
If a person does not pay the remaining amount within the specified period, they would lose the sum paid earlier. Some banks do offer loans for buying auctioned properties; however, as there are stringent time limits, one needs to ensure that they have the necessary funds available before participating in a property auction.
Points to Consider: Though beneficial in terms of property value, buying a property in an auction is not feasible for everyone.
In case of aggressive bidding, the price could go much higher, eliminating the cost advantage. Therefore, a careful assessment of the property is critical along with wise bidding.