Is it safe to buy auction property? Six things a buyer need to keep in mind
Before going ahead, potential buyers must get answers to some important questions. For instance, how long will it take for a bank to hand over physical possession of a distressed property? How will the payment plan work if the property is won in an auction? How can a buyer ensure that there are no dues against the property, such as electricity bill, water bill or property taxes.
Read on to know what a buyer must keep in mind while taking part in an auction to buy a property?
Payment plan of an auction property
An individual looking to buy a property in an auction must have a clear understanding of how the payment plan will work. The process of paying for an auctioned property is different from the typical payment plans for other properties. According to experts, the auction notice itself mentions the payment plan. A potential buyer is required to deposit a certain sum called the «earnest money deposit» (EMD) to participate in the auction. This amount typically varies between 10 and 25% of the property price.
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Nitin Jain, Partner at Agama Law Associates, says, «Usually, the payment plan for stressed assets is given to the preferred successful bidder. It is mentioned in the auction notice itself. Usually, 10 to 25% is to be deposited while applying to take part in an auction and the balance payment is to be paid within a period of 15 days of winning the auction which can be extended up to 90 days at the discretion of the bank as mentioned under Security Interest (Enforcement) Rules, 2002.»
A successful bidder has to pay 25% of the agreed sale value on the auction day and the remaining amount should be deposited
