HOW TO BUY BANK AUCTION PROPERTIES FAQ (frequently asked questions)– COMPLETE GUIDE
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What is auction property ?
Banks in India oftentimes announce property auctions as a means to recover defaulted loan dues of borrowers. The property in question here is the property pledged by the borrower to the bank as collateral or guarantee against the loan.
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Who will sell the property for auction ?
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Benefits of auction properties ?
1.PRICE ADVANTAGE: Approximately 20 – 60 % cheaper than the market price.
2.LEGALLY SAFE: Since Banks / Financial Institutions have given loans after verification of all the legal aspects only, these are 100 % legally safe.
3.CREDIBILITY OF SELLER: You are buying from a Bank / Financial institution, which is authorized by Govt of India to sell such properties.
4.TIME FRAME: Entire transaction will be over in less than one months period. Ownership in one month.
5.TRANSPARENCY: 100 % transparent transaction.
6.PROBABILITY: 90% chances of winning in the Bank Auction. -
How to buy auction property ?
The Bank will set a base price or reserve price for a particular property based on the valuation report. The bank will fix a day for auction and 10% of the EMD amount(earnest money deposit)has to be paid as Demand Draft or RTGS prior to the day of the auction in order to participate in the auction. If you win the auction by bidding the highest price then you have to pay 15 percent of the sale amount which should be paid as a Demand draft or RTGS to confirm your sale order. The balance amount should be paid within 15 days to 1 month.
Simply pay 25 % of the property value on the day of auction. The remaining 75% amount should be paid within 15 days to 1 month.
Further the Bank will give you all the documents such as Sales Certificate, Original Sale Deed and the Parent document of the property after you pay the remaining 75% -
What is EMD ?
The Bank will set a base price or reserve price for a particular property based on the valuation report. The bank will fix a day for auction and 10% of the EMD amount(earnest money deposit)has to be paid as Demand Draft or RTGS prior to the day of the auction in order to participate in the auction.
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How to Get Earnest Money (EMD) Back ?
Earnest money is refundable. if you are unsuccessful and wish to get the refund of your EMD, you have to give EMD refund request to bank. Within 1-3 working days, your payment will be refunded.
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What is sale certificate ?
A ‘sale certificate’ refers to the legal document issued by the Authorised Officer (AO) to the buyer of a foreclosed property in an auction.
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Is it safe to buy Auction property ?
Yes it’s 100% safe to buy bank auction property compared to owner sale properties as the documents are already pre verified by the bank.
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Who will pay the Existing dues of property purchased in auction ?
Auction properties are sold on an “As is where is” “whatever there is basis”.
It is the responsibility of the prospective buyer to discharge dues such as property tax, society maintenance charge, pending EB bills. (Attachments will not cover). -
What are The Legal Checks One Should Do Before Investing in The Property ?
As some final thoughts, we have some tips now that you should make sure of before investing your earnest money in an auctioned property. It is true that auctioned properties are relatively safe and trustworthy, but do not forget to make sure of the following: Encumbrances,Statutory dues,Title and mortgage documents The point here is to check the outstanding payments like municipal taxes, society dues, litigations, electricity bills, municipal dues, and other taxes attached with the property, etc. It is highly likely that the bank defaulter would not have paid such charges and since the properties are sold under ‘as it is where it is basis,’ the ball will be in your court. You will need to prepare yourself in advance for how much money, over and above the sale price, you are willing to spend for possession of the property.
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What are the types of possession ?
Symbolic possession and physical possession.
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What is Symbolic possession ?
Symbolic possession means that the bank might have rights over the property but it does not have the key to the property. Banks get the possession notice under section 13 (4) and If there happens to be no further proceedings, the bank has the right to take physical possession of the property under Section 14 of the Act through District Magistrate or Chief Metropolitan Magistrate. “Symbolic possession is when the bank has the legal right over a property, even though the previous owner continues to have physical possession (occupancy) in the property. Under the law, banks are required to take physical possession and then transfer the rights to the buyer.
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What is physical possession ?
Physical possession means a bank or financial institution have the key of the property.
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What is the meaning of CMM court ?
The Chief Metropolitan Magistrate’s court located at Egmore chennai.
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What is the meaning of CJM court ?
Chief Judicial Magistrate court located at Kanchipuram, Thiruvallur and Chengalpattu District.
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What are properties that can be sold at an auction ?
All types of real estate, including Flat, vacant plot/Land,Individual house, Agriculture property,commercial property, industrial property.
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What is DRT ?
• The Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) provides speedy redressal to lenders and borrowers through filing of Original Applications (OAs) in Debts Recovery Tribunals (DRTs) and appeals in Debts Recovery Appellate Tribunals (DRATs).
• The Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act) provides access to banks and financial institutions covered under the Act for recovery of secured debts from the borrowers without the intervention of the Courts at the first stage. Securitisation Appeals (SAs) can be filed with the DRTs by those aggrieved against action taken by secured creditors under the SARFAESI Act. -
What is SARFAESI Act 2002 ?
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act (SARFAESI Act), 2002
The SARFAESI Act, 2002 aims to regulate securitization and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interests created on property rights and for connected matters therewith. The Act has simplified the recovery procedure for banks and specified financial institutions for recovery of secured debts from borrowers without intervention of Courts at the first stage. Borrowers can file applications in the Debts Recovery Tribunals (DRTs) against action taken for enforcement of security interest under this Act, with the appellate jurisdiction for such applications lying with the Debts Recovery Appellate Tribunals (DRATs).The Act is applicable to cases where security interest for securing repayment of any financial asset is more than Rs.1 lakh and the amount due is 20% or more of the principal amount and interest thereon. The Act is not applicable to any security interest created in agricultural land and certain properties not liable to attachment under some specified Acts.
Read more -
What is a sale certificate? How is it different from a sale deed ?
After the bidder wins the auction A ‘sale certificate’ will be issued to him only after the full payment to the bank. A ‘sale certificate’ refers to the legal document issued by the Authorised Officer (AO) to the buyer. Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (‘SARFAESI Act’), if the borrower of a mortgage defaults on her equated monthly instalments (EMIs) three times consecutively, the lender has a right to acquire and auction off her property. An AO is appointed by the lender to foreclose the property, auction it off and issue a sale certificate to the buyer of that property.
A ‘sale deed’ on the other hand, is a conveyance document recording the sale of a property from a buyer to a seller. A ‘sale agreement’, or ‘agreement to sell’ enlists all the conditions that a potential buyer and seller of a property must fulfil so that the property can be purchased by the buyer on a fixed date. -
What is Bank E Auctions and requirements ?
The details of properties put up for e-auctions may be accessed through the links provided in the Bank advertisement. There is designated contact person also for auction at the Branches whom prospective Buyers may approach to for any clarification regarding the auction process and the property he /she is interested in and may inspect the properties of their interest.
Requirements for participating in e-Auction
EMD for the particular property as mentioned in the e-Auction notice.
KYC Documents – to be submitted to the concerned Branch.
Valid Digital Signature -Bidders may approach e-auctioneers or any other authorised agency to obtain digital signature.( not mandatory for all banks/court auction )
Login Id and Password– Will be sent to the email id of the bidders by e-auctioneers after the deposit of EMD and submission of KYC documents to the concerned branch
Bidders to login and bid in the bank website / auction portal / Auction service provider site during the auction hours on the date of e-Auction as per auction rules. -
What is the different between auction and owner sale properties ?
Auction properties are 20 – 60 % cheaper than the market price.
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What is a Non-Performing Asset (NPA) ?
NPA expands to non-performing assets (NPA). Reserve Bank of India defines NPA as any advance or loan that is overdue for more than 90 days. “An asset becomes non-performing when it ceases to generate income for the bank,” said RBI in a circular form 2007. To be more attuned to international practises, RBI implemented the 90 days overdue norm for identifying NPAs has been made applicable from the year ended March 31, 2004. Depending on how long the assets have been an NPA, there are different types of non-performing assets as well.
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What is interim Sale Certificate ?
The interim sale certificate is the certificate issued by the bank after successful bidder payed 25% of the highest bid amount to the bank.
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What is Digital Signature ?
Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates.Examples of physical certificates are drivers’ licenses, passports or membership cards.Certificates serve as a proof of identity of an individual for a certain purpose; for example, a driver’s license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally.
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Whose name Sale Certificate issued ?
The sale certificate shall be issued in the name of the successful bidder who has submitted his KYC documents for the auction.
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Whether Sale certificate can be issued to third party other than the successful bidder ?
The sale certificate shall be issued in the name of the successful bidder.No request for change of name in the sale certificate other than the person who submitted the bid / participated in the e-Auction will be entertained.
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Whether all banks ask digital signature for auction ?
Some banks ask for digital signature not all banks. if you need digital certificate please call or whatsapp 8681073762.
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What is Inspection date for auction property ?
The date on which the auction property shown physically to the prospective buyers by bank appointed people or company.
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What is Reserve Price ?
Reserve Price is the base price for the auction property below which the property will not be sold.
It is starting price from which auction begins. -
What is Bid Increment ?
The bid increment is the amount by which the current high bid is raised each time someone places a higher bid.
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What is Auto-Extension ?
Auctions Auto extension gives you the ability to automatically extend the auctions end time by X seconds, if someone bids in the last Y seconds of the auctions duration.Example: unlimited extension of ‘05’minutes i.e., the end time of e-auction will be extended by 05 minutes each time if bid is made within the last 05 minutes before closure of auction.
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Whether EMD carries any interest ?
The EMD shall not carry any interest for successful or unsuccessful bidders.
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Who is Successful Bidder ?
The Successful Bidder is the one who placed the highest price compared to others by the end time of the Auction.
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When is successful bidder notified ?
The Successful/highest bidder will be notified to their registered email.
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What is the time available for the Successful Bidder ?
The successful bidder shall deposit 25% of the sale price inclusive of EMD already paid immediatley on declaring him/her as the successful bidder and the balance 75% within 15 days from the date of confirmation of sale by secured creditor.
The successful bidder shall deposit 25% of the sale price inclusive of EMD already paid immediatley on declaring him/her as the successful bidder and the balance 75% within 15 days from the date of confirmation of sale by secured creditor. -
What will happen if 15% amount not in time by the Successful Bidder ?
After declaring Successful Bidder if the successful bidder fails to pay remaining 15% after sale confiramation the EMD will be forfeited.
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What will happen if 75% amount not in time by the Successful Bidder ?
After deposting 25%(including EMD) by the Successful Bidder if the successful bidder fails to pay remaining 75% after sale confirmation within 15 days of the auction,the deposit 25% made by him/her shall be forfeited by the bank.
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Whether bank has right to cancel the auction ?
Yes bank has right to cancel the auction.
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Whether bank has right to postpone the auction ?
Yes Bank has right to postpone the auction.
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Whether authorised officer has right to accept or reject the final price ?
The Authorised Officer may accept/reject the final price of e- Auction without assigning any reason thereof.
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What is e-auction date ?
The date on which online auction conducted by the bank appointed providers for online bidding for only EMD payed bidders.
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What is immovable property ?
The properties like Sites, Plots, Flats, Villas ,Duplex Houses, Factory Lands, Agriculture Land, Non Agriculture Land, Shops, Offices and Commercial Properties.
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What is movable property ?
Properties which can be moved from place to place like Plant and Machinery, Cars/Buses/Vehicles,Gold Ornaments etc.
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How long will it take for the bank to give possession of the property to a person who has won the bid?
In cases of the auction of distressed assets, the courts in several judgments have observed that banks should ensure that after winning the auction bid, the bidder shall get the peaceful possession of property within 6 months from auction, subject to the payment terms agreed between the bidder and bank.
In case if the auction authority fails to deliver the possession of property within a stipulated time period (generally six months), the person have right to get a refund of the bid amount deposited with the Bank along with interest and damages.
“You may get the possession immediately after the completion of the sale and registration of the property in your name. However, it may vary depending on the property, location, final payment from the buyer and legal procedures involved. -
How to register?
Registration at MSTC portal -> Authorization of documents from MSTC -> Attach interested properties -> Pay Pre-Bid EMD required against property -> Participate in auction (bidding) -> Bid reject/accept by bank -> decision email to H1 bidder. At present there is no registration fee.
To bid a tender form along with earnest money deposit (DD/banker’s cheque) needs to be submitted before the tender closing date. It is important that while submitting the tender form, detailed KYC document also is submitted as non-submission of KYC document may lead to rejection of tender form. -
Who will pay Pending dues?
The buyer is also responsible for paying any unpaid fees associated with the Bank’s Auction property. These contributions include municipal taxes, society charges, statutory dues, electricity bills, and more.
The buyer is also responsible for paying any unpaid fees associated with the Bank’s Auction property. These contributions include municipal taxes, society charges, statutory dues, electricity bills, and more. -
How to ensure there are no pending dues
If you are considering buying a bank auction property, it is important to do your due diligence and to be aware of the risks involved.
The bidder should ask for all the relevant property documents which include sale deed, title documents, property tax receipts, electricity, water and other utility bills, etc. The bidder shall also conduct a proper title search from the concerned authority/registry, before bidding on immovable property, before bidding. Apart from conducting due diligence, it is also necessary to obtain NOC from the local authority. Apart from conducting a title search, it is also important for a bidder to check that there is no other pending loan/mortgage or legal case pending against the property.
The buyer can also hire a qualified attorney with experience in property matters to review the documents and make sure there are no hidden issues. -
What documents should a bidder ask for?
1. Verifying the antecedent title deeds and checking the original documents with the bank like loan agreement and/or mortgage deed;
2 Whether the bank is in lawful possession of the property being auctioned
3 Whether there is any litigation concerning the property;
4 Whether there are any past dues of any society or government authority such as property taxes, etc;
5 If the owner of the property is a company, then check with ROC if any other financial institute has charge/ mortgage over the property;
6 Check in the office of the Sub-Registrar of Assurances to be sure if there are any adverse title claims;
7 If the property is in a society, the NOC of the society is for sale of the property. If the property is land, then revenue records should be seen to ascertain whether the name of the owner is mutated therein as owner.
8 Plan copy of CMDA/DTCP
9 Building plan approvals
10 TAX receipt
11 EC-ENCUMBRANCE CERTIFICATE
12 Paper Publications
13 Sec 13 Notice
14 Sec 14 Notice (if available)
15 Parent documents of the property -
Following are a few relevant documents a bidder may ask before bidding in any property:
i. Title Deed and Ownership Documents which includes sale or conveyance deed, previous title document to establish ownership history, etc
ii. Property Tax and Utility Bills
iii. Encumbrance Certificate
iv. Approved Building Plan and Layout Plan
v. NOC from Local Authorities ( if available )
vi. Completion and Occupation Certificate ( if available )
vii. Auction Catalog provided by the auctioning authority, which should include terms, conditions, and any obligations of the buyer.
viii. Auction Invitation or Notice
ix. Property Inspection Report
x. Photographs and Video -
Rights of the borrower
Courts have attached prime importance to the right of the Borrower to reclaim its title of the property/ an opportunity to the Borrower, before sale of auctioned property is executed.
The bidder shall always keep in mind that borrowers do have certain rights in a property that is being auctioned, especially when the property is being auctioned due to loan default or mortgage foreclosure. For instance borrower have the right to participate in the auction, the borrower also have the ‘Right of redemption’ i.e. to cure the default by paying the outstanding dues, including the loan amount, interest, penalties, and any other associated costs, before the auction takes place, which may result in nullifying the whole auction process. Further, the borrower always has legal remedies especially in cases where the foreclosure process was conducted improperly and that may result in prolonging the auction process. -
What if the borrower does not vacate the property?
There can be situations where a borrower does not vacate the property even after it has been auctioned by the bank. Jain says, “In case the borrower does not vacate the premises, the bank is entitled to initiate the proceeding under Section 14 of the SARFAESI Act and take physical possession of the property with the help of the relevant courts in the jurisdiction where the property is situated.” Gupta says Section 13(2) of the SARFFAESI Act requires a defaulting borrower to discharge his full liabilities within 60 days. If this does not happen, the secured creditor (bank) can take possession of the secured assets of the borrower under 13(4) (a), including the right to transfer by way of lease, assignment or sale, for realising the dues against the secured asset. “Section 14 further lays states that where the possession of any secured assets is required to be sold or transferred by the secured creditor, he may, for the purpose of taking possession or control of any such secured assets, request the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof. The Chief Metropolitan Magistrate or the District Magistrate shall, on such request being made to him, take possession of such asset and documents relating thereto; and forward such asset and documents to the securedcreditor.”
The buyer must read the terms and conditions regarding the possession of the property before participating in the bid, says Shetty.” All said and done, it is always safe to go for a property that is already in the possession of the lender.
There can be situations where a borrower does not vacate the property even after it has been auctioned by the bank. Jain says, “In case the borrower does not vacate the premises, the bank is entitled to initiate the proceeding under Section 14 of the SARFAESI Act and take physical possession of the property with the help of the relevant courts in the jurisdiction where the property is situated.” Gupta says Section 13(2) of the SARFFAESI Act requires a defaulting borrower to discharge his full liabilities within 60 days. If this does not happen, the secured creditor (bank) can take possession of the secured assets of the borrower under 13(4) (a), including the right to transfer by way of lease, assignment or sale, for realising the dues against the secured asset. “Section 14 further lays states that where the possession of any secured assets is required to be sold or transferred by the secured creditor, he may, for the purpose of taking possession or control of any such secured assets, request the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof. The Chief Metropolitan Magistrate or the District Magistrate shall, on such request being made to him, take possession of such asset and documents relating thereto; and forward such asset and documents to the securedcreditor.”
The buyer must read the terms and conditions regarding the possession of the property before participating in the bid, says Shetty.” All said and done, it is always safe to go for a property that is already in the possession of the lender. -
What if there are unapproved structural changes in the property?
A borrower may has made some structural changes to the property before defaulting on the loan. How can a buyer be aware of such changes and what can they do about these? Gupta says, “There is a duty cast upon the bank under clause (9) of Rule 9 of The Security Interest (Enforcement) Rules, 2002, to deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7). Hence, if there are any unapproved structural changes in the auction property, the bank needs to rectify it.”
Shetty says the buyer should determine the nature and scale of the unapproved structural changes in the property. Minor alterations might be relatively easy to rectify, but major changes could be more complicated and costly to address. “Carefully weigh the risks and potential costs associated in correcting the unapproved structural
changes. Consult an expert to assist you in such cases,” he says. -
What if there is a delay in giving possession to buyer?
Sometimes a bank may be unable to give possession of the property to the buyer on a specific date. In such a scenario, what can a buyer do? Gupta from Athena Legal says, “Buyer can send a written notice or legal
notice to the bank after making the payment and ask the bank to hand over the possession of the said property after clearing all the disputes over it. After selling the auctioned property, if the bank delays handover of possession, the bank is liable to refund the total amount paid with interest. There is a duty cast upon the bank under clause (9) of Rule 9 of The Security Interest (Enforcement) Rules, 2002, to deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7). The interest rate that will be payable to the buyer in case of refund depends on the case to case basis. In the Rakesh Kumar Kaushal case, the Allahabad court held that the respondent (Allahabad Bank) cannot shirk away the statutory responsibility to deliver possession of the property free from all encumbrances. Therefore, the buyer can take legal recourse for relief.” -
Time period of Possession of auction property
The next question that needs an answer is how long will it take for a bank to give possession of the property to the person winning the bid. It is important to understand that a bank is auctioning a property after a borrower has defaulted on the payment of the loan. Hence, it is important for a buyer to know the tentative date of possession.
Jain of Agama Law Associates says, “While buying the house in an auction done by a bank, a purchaser needs to look at whether the auction is via symbolic possession or the bank is having physical possession of the
property. In case there is only a symbolic possession, the purchaser needs to wait for some time for the bank to give physical possession by obtaining it through a court procedure.”
Adhil Shetty, CEO, Bankbazaar.com, says, “The time taken for a bank to give possession of a distressed property can vary depending on several factors. Under the SARFAESI Act, banks have the power to take possession
of a property without involving the court if the borrower defaults on the loan. The process typically involves sending a demand notice to the borrower and giving them 60 days to clear the dues. If the borrower does
not comply, the bank can take possession of the property and sell it through a public auction. The entire process can take a few months, usually around 2-8 months.”