Thinking of buying your dream house, then why not try to purchase it through an auction? Yes, it can be tempting to buy a property at auction. Sometimes, they act as a great way to avoid lengthy and uncertain buying procedures. These houses also offer specific advantages during home loan financing and are also low in cost as compared to a new house.
A house is auctioned when the owner becomes bankrupt or went into default. So in order to pay the loan amount, an owner auctions his property. In this way, auction houses are eventually sold at a bid price well below the average value practiced by the market.
So if you are planning to buy a house at auction, we explain everything you need to know:
Complete research before buying
Before you bid for your dream home, it’s important that you must finalise the location, typology, accesses and other relevant aspects related to the house. Then look at various auctions for the house that fits your needs. The interested party must subsequently register on the platform in question where the chosen house is being auctioned.
Check any outstanding municipal tax
A house gets at the auction stage when a homeowner defaulted in paying local taxes. So it becomes the complete responsibility of the buyer to check for such dues and clear them before acquiring the house. Bidding for a property without knowing the liability of such dues may enhance the property cost.
The legal titles are not with the bank if the property is auctioned by them. So, when buying a property, under auction it is always advisable to get the ownership and other legal documents of the property duly investigated by a lawyer. This will help you in relieving from any type of hassle at later stages.
TDS on purchase consideration
In case of auctioned property, the home buyer has to deduct tax at source at 1% from the purchase consideration in case the property value exceeds 50 lacs. Although you are buying the property from the bank, the TDS has to be deducted and credited to the account of the original owner. So, you need to obtain the PAN details/copy of the original owner of the property as you need to credit the TDS to PAN. Failing to do so, the home buyer has to deduct the tax at 20% instead of the stipulated rate of 1%.
Arrangement of funds
Once the person wins the bid, they have to proceed with the payment of the housing. After the auction is done, one must pay 10% of the bid amount offered for the house and the remaining amount must be disbursed up to the date of writing.
A home buyer can also avail a home loan for such property, but you have to arrange all the funds beforehand as the banks will issue the cheque once the property is auctioned. Keep in mind that you must acquire an in-principle approval for the loan amount based on your income before you enter to the bidding process.
So by keeping all these important aspects in mind, you can become the proud owner of an auctioned house and that too at affordable price.