The benefits of buying at auction include expanding your options and possibly purchasing properties at a discount. You may face less competition when compared with buying the traditional way, but you will also be dealing with a different pool of potential buyers — often, experienced investors. While repossessed properties sold by banks may appear as a sleek deal, they come with their own set of risks.
When we talk about buying repossessed properties, we are talking about swimming in murky waters thus making it imperative to make sure the process is clear. Perhaps the biggest risk of buying at auction is that you’ll have limited knowledge of the properties for sale, making an expensive misstep a real possibility.
Here are five pointers to keep in mind:
1. Outstanding taxes and dues
The most fearful fact about buying auction homes is that banks sell such properties on an ‘as is, where is’ basis. Simply put, the financial establishment will not be liable for any issues related to the said property in the future.
In such scenarios, it is likely that the defaulter of a home loan has also defaulted in the payment of local taxes and society charges. Through this auction, the bank will (in most cases) recover all the dues but the new owner will have to deal with other monetary responsibilities like amenities bill, municipal taxes, etc.
New owners must ascertain outstanding amounts with respect to municipal taxes and society charges. For under-construction properties, it is advisable to reach out to the builder directly.
2. Property’s physical condition
The current owners might cease to properly maintain the property due to financial stress or in view of the fact that they will be dis-entitled from the property. Therefore, it is the new owner’s responsibility to visit the property and check for any physical maladies that might be there.
3. Multiple loans
Banks may conduct due diligence in respect to properties but there have been several instances of the owner stealthily mortgaging properties to multiple lenders. It is highly recommended to conduct your own research by communicating with other stakeholders like the municipality, tax authorities and others to obtain crucial information about the land being sold.