Risks To Look For While Buying Homes

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Risks To Look For While Buying Homes
Jan 2018
In Green Homes
The repossessed properties sold by banks can
actually appear to be a steal for the bargain the
hunters, but they come with their own
risks. Buyers should definitely remember that the
claim of the bank on property put up for the
auction is limited to the outstanding loans
against it. So, the base rate is determined by
the amount that is outstanding.
This basically explains why the auctioned
properties go at the discount to the prevailing
market rate and the discount can be high as 30
in some of the cases.
The retail investors, however, find it difficult
to bid for properties as the high net worth
realty investors generally corner them with help
of the agents, bank managers, etc. Though the
introduction of online auction platforms has made
process transparent now, risks involved with the
properties remain auctioned properties as is,
where is' basis. This clearly means the bank in
the question will not take the responsibility
should issue arise with the future property. This
is opposite of the normal house buying deed where
the home buyer can put the clause asking the
property seller to indemnify the home buyer from
any of the encumbrance on the property prior to
registration date. Since the auctioned properties
are coming with an as is, where is' clause, the
banks do not take the responsibilities. The
prospective home buyers need to ensure that risk
is commensurate with the discount they actually
are getting. In other words, the investors of the
auctioned properties required to be much more
careful. Using risk-return norm, they should
understand that the rate is cheap as of the risks
associated with it. One can take the closer look
at possible risks that the interested parties
might actually encounter as well as tips to
mitigate these. Loans from other Lenders
The bank's auctions the property will cover all
the dues but there is no guarantee same property
is not mortgaged with other lenders. The problem
is acute on the land parcels than the constructed
housing apartments or on the commercial
properties. This is as most lenders insist on the
original sale agreement, no objection
certificates and share certificates from the
residential societies, etc. and thus, you get a
fair idea by getting the details from there. One
need to independently verify, however, in
addition to documents provided to one by the bank
with other agencies such as tax authorities,
municipalities, etc. for selling the land. Since
India does not have unique property id, it will
be difficult to find all mortgages that are
linked to the property from available documents
of land.
Ensure that if it is joint property, all the
owners are co-borrowers for a loan as well as
bound the auction process by the bank. Otherwise,
other property owners can create troubles
later. Other outstanding dues Through bank will
recover the dues fully from bid amount, the
winning bid as to bear all related liabilities on
the property like the electricity bills, society
dues, property taxes, etc. at times, these dues
can actually be substantial. This is as people
default on
2
residential loan EMIs last. There is a higher
probability that borrower might have the
defaulted on other expenses way before that.
Meeting society members as well as asking these
about pending dues is a way of going about it.
You have to verify, however, other dues such as
gas bills, electricity bills, etc. yourself. The
pending stamp duty claims the previous owner has
shown the value at the time of registration as
well as the department has actually raised any
claim on that can be another issue as well. This
can be verified by comparing value shown with
prevailing rates in the region. For the
under-construction properties, the dues may be
pending towards the developer, thus check
directly with the developer. Property
titles Basically, it is presumed that titles of
property are clear as the banks have already lent
against it. This may, however, not be true. With
the competition picks up, there are various
examples of banks those are lending against the
properties with no clear titles. For examples,
for buildings that do not have any occupation
certificates. Even if banks might have taken
complete precaution at time of the illegality,
giving loans might have happened later. For
instances, the developer may have developed more
than allowed by the unique plan. The completed
buildings with the certificate of occupation are
reasonably safe as well as the title of property
issues figure more in the under-construction
properties or the land parcels. Buyers must
ensure that project is fully-approved and the
builder is moving accordingly to approve the
plan. Even if one is buying the developer one
require to check the historical documents. Real
Estate Regulation and Development Act has made
life easy for the home buyers, but all the
properties coming up for the auction now are
non-Real Estate Regulation and Development Act
ones. Hire a realty lawyer and vet all the
transaction for the reasonable period of time
such as least for 30 years and ensure there are
no such legal tangles involved. Tenants in the
house The opportunity for previous owners staying
in the house is lesser as banks generally ask
these to vacate before the auctioning the
property. If it is let out, however, the tenants
may be staying in the house as well as it becomes
the responsibility to evict these. Freeing a
house of the tenant is pretty difficult in India
especially the tenant has been staying there for
longer time. The strategy is to be avoiding a
house which is occupied already. Physical
condition Present owners will stop paying towards
the upkeep of the property once these realize
they are going to lose it. Before the auctioned
property, the existing owners might stop
maintaining the due to the financial stress.
While it is not a big issue, one needs to visit
the house as well as the locality to assess the
situation. Take help of the good civil engineer
to assess work to be done in the apartment and to
the building. If the building is not clearly
mentioned properly, it has to be renovated as the
new owner, one will ask to contribute. Also, give
for the substantial amount of money for the
maintenance and repairs after getting the
possession.
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