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How To Buy A Property Through Bank Auction

Besides announcements in newspapers by banks, are there any other sources from which a potential buyer can get information on property auctions? Are they other websites such as foreclosureindia.com?

Ans: Other than announcements in newspapers some banks update the notices in their own websites, i.e the interested investor has to visit 83 Bank Website for information. Foreclosureindia.com
is the only website providing such information free of cost across the nation for 33 cities covering almost 80 % area of India. The details of other sites along with comparison with those site is attached.

2.) Usually, how much is the earnest money deposit which a potential buyer needs to put up? Is it always upto 10% of the reserve price or can it be more/less? How much is the reserve price usually? Is it always at a discount to the market rate?
Ans: i. The Earnest Money deposit is usually 10 % of the reserve price. In some cases, the DRT’s are mentioning even 5 % also.

ii. Th reserve price is finalized by the Authorized officer in consultation with the approved valuer.
THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSESTS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002
8 (5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an
approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by
any of the following methods:–
(a) by obtaining quotations from the persons dealing with similar secured assets or
otherwise interested in buying the such assets; or
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.

The approved valuer will give two prices (a) Market value (b) Dis stressed value. This Dis stressed value will be generally 20 % to 30 % less than the market value. The authorized officer will finalize the reserve price based on the dis stressed value or as per his discretion.

iii. It is always at a discount to the market. Otherwise, Investors will not buy these properties due to two reasons. (1) 100 % white money is to be paid and source of funds are to be shown . (2). Registration charges are to be paid on the total amount. Generally in some of the states, around 40 % black money is being paid for buying of the properties and registration charges will be paid on 60 % white amount only.

3.) Can winning bidders obtain bank loans to buy the property? Will the same bank auctioning the property lend to the buyer?

Ans: i. Very few winning bidders are taking loans to buy these type of property due to the following reasons. (a) Loan has to be processed and disbursed with in 15 days, very tight schedule for processing of Housing loan. (b) Some Bankls like IDBI Bank, LIC Housing Finance and to some extent ICICI Bank are not encouraging to give loans for these type of properties. Further, in some cases, the same bank may lend to the buyer it depends on the credibility of the buyer.

If Reserve Bank of India issues a policy guide lines for sanction of Housing loans to these type of properties , then the percentage of sale of these type of properties will increase from around 50 % to at least 70 %.

4.) As I understand, full payment needs to be paid by the winning bidder to the bank within 15 days from the date of acceptance of the bid, else money already paid is forfeited. Given this tight timeline, is taking a loan (if possible) a practical option? Does this then restrict the property auction process to HNIs who have funds ready?
Ans: 1. Yes, full payment is to be made with in 15 days from the date of Aauction, else money already paid is forfeited.
2. Taking a pre approved loan is the practical option to buy these type of properties.
3. You are right partially and as per our observations, the NRI’s are also buying these properties.( Who are working in Arab countries & USA, UK etc ) .
Around 13 % of the visitors to our site are coming from USA, UK, Arab Countries, Singapore, Australia & New Zealand etc.
4. We have observed that some of the banks are extending the time to 30 days, in some cases.

5.) What are the chances of auction price being bid up sharply by potential buyers? If this happens, it would take away from the main attraction of the auction – getting the property at cheaper rates that market prices. When/How often does such a situation arise?
Ans: As per our observation, if the Banks have put 100 properties for auction, the success rate / sales may be like this.

1. No bidders are coming for around 45 properties , due to improper reserve price, No publicity, external political situations like Telangana issue etc. These properties are laying with Banks as unsold and they are providing provisions in their balance sheet for these NPA’s.
2. One to three bidders are coming for around 45 properties , the final auction price is being settled nearer to reserve price only.
3. Three or more than three bidders are coming for about 10 % properties and auction is being held and the final auction price is higher.
In our view, if any one is interested about any property, he/ she will have chance of winning that property is around 85 %.

6.) Does the as-is where-is clause increase risks for the buyer in the form of hidden costs, or is the buyer indemnified by the bank?
Ans :The hidden costs are mainly property tax, power/water/phone bill, maintenance fees such costs can be found by normally speaking to the head of the society/apartments. The buyer should always check these hidden cost before placing a bid for it. The Banks will not indemnify on paper. However, the Banks will put their efforts to resolve any issue arises considering their reputation.

7.) What is the risk of legal dispute after the buyer acquires the property? Can the original owner or other buyer competitors go to court, and cause trouble for the buyer?
Ans : After the property is sold there is no legal risk. In some cases the auction is conducted while the case is still in court. In such cases, once the case is settled the borrower is given an additional 15-30 days time to clear the dues. If the borrower is unable to do so, then the sale certificate is issued to the buyer. If the borrower settles the amount then the amount deposited by the buyer is refunded. :

8.) From the perspective of the buyer, are offline or online auctions better?
Ans : Online auctions are better. At present, Karnataka State Financial Corporation, Matexnet.com, and arms.net.in are conducting online auctions for selling of immovable assets in very limited way.

9.) How popular are online auctions by banks? Has it picked up? Why or why not?
Ans : Online auctions are less than 4 % of total auctions. Our view is that online auctions are in nascent stage in India. A lot is to be developed in terms of Technology, Processes, awareness, adaptability.

We have a vision to conduct online auctions in seven cities i.e tier I & II cities, New Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pune & Kolkatta in near future. We want to conduct the Auctions on fixed dates every month.