Bank Auctions – The Cheaper & Smarter Way to Buy Your Dream House

Currently Economy is going through very Bad Phase…High EMI’s, No Salary Hike & Fear of Job Loss are giving jitters to majority of Salaried Class…By the way, i am also part of this Stressed, Depressed but still well Dressed lot :) but fortunately things are still not that bad for many.

Every phase is blessing in disguise for some irrespective its Good or Bad, i mean Bad phase is also beneficial or profitable for some lucky ones…Why, i will explain…In this uncertain environment, Specially Salaried class find it most difficult to serve their Home Loan EMI’s, which form a major chunk of Salary…Whenever a salaried class opt for Home Loan, it is based on certain assumptions of periodic salary hike, Job will remain safe, No unexpected expenditures etc etc..Unfortunately, if any of these assumptions go wrong then biggest casualty is Home Loan EMI…Most unfortunate part is, This world is emotionless i.e. Banks need their money back at any cost…If person default regularly then Banks put such properties on Auction to recover their amount…

Now Good Part (Buyer’s Perspective), Properties sold under Bank Auctions can be bought for as cheap as 30% from Current Market Rate. Yes, i am not kidding and there are reasons behind the same…Firstly, the price of properties sold under Bank Auctions is fixed according to Govt Guidance Value whereas Current Market Price is normally 3-4 times in upcoming areas and 2 times in developed areas…Secondly there are only few bidders in bank Auctions as these properties are usually bought by investors or people who have ready funds available for purchase…Hard Fact is that these properties cannot be bought through Home Loan..Lets see how..

Whenever bank auctions these properties, u will see 2 terms in Auction Notice

(a) Reserve Price: Reserve Price is Minimum Bid Price i.e. Starting Bid Price of Auction or Lowest Price at which Bank is willing to Sell the Property through Bank Auctions.

(b) Earnest Money Deposit (EMD): It is actually Good Faith Deposit i.e. Amount to be deposited before Auction Process by Potential Bidder showing that he is a serious buyer..Only after depositing EMD, a person is eligible to participate in Auction Process. EMD is refundable for unsuccessful bidders.

After Auction process, successful bidder need to deposit 25% of total Sale Amount (including EMD) on the day of Auction itself and rest amount needs to be deposited within 15 days from Auction…

I think, its quite clear that only person with ready funds can fulfill these stringent payment conditions…Now Let’s take practical example..Suppose Bank has put up Property A for Auction with reserve price of 50 Lacs therefore EMD will be 5 Lacs…Potential Bidders need to pay 5 Lac upfront in order to eligible for participating in Auction Process…

Assuming Person B bought property for 60 Lacs during Auction process. On same day, he needs to pay 15 Lacs i.e. 25% of Sale Amount…As he has already paid 5 Lacs as EMD therefore rest 10 Lacs should be deposited on the Day of Auction after Auction is over so that he fulfill condition of payment of 25% of Sale Amount i.e. 15 Lacs to be paid by Auction Date…Rest 45 Lacs i.e. 75% of Sale Amount should be deposited within 15 days from Date of Auction.

Recently, one of my friend requested me to accompany him for couple of Bank Auctions therefore it gave me an opportunity to understand complete process….Fortunate for my friend, he bought Auctioned Property 25% Cheaper then Market Rates.

Normally Notices for Bank Auctions are Published in B Rung Newspapers and not in most Popular ones…For benefit of my readers I am listing following websites which provide bit comprehensive data on properties listed for Bank Auctions…Hope these sites will be useful for my readers

http://www.foreclosureindia.com/

http://indiabankauction.com/

Lastly those buyers who would like to take cost advantage of Auctioned Properties through Loan route, can opt for Loan against Property…Only catch is, first you need to arrange for 100% funds from own sources or through Short term borrowing of 1 Month or so from Mortgage institution or from friends & relatives….After buying property through Auction, you can take Loan against Property and can repay the borrowed amount. Secondly, Interest Rate under Loan against Property option will be slightly higher compared to Normal Home Loan Rate & there is no income tax benefit available to salaried class in this case…Kindly do your homework properly in terms of cost benefit analysis before choosing this option.

Note of Caution: Properties under Bank Auctions are sold on “As is Where is & What is There is Basis” which implies Bank does not take any responsibility regarding Title of the property i.e. on encumbrance front, No liability of Bank. In the event of any legal dispute or any other claim on property, Bank does not indemnify the buyer from same. The complete responsibility of encumbrance rests with Buyer for auctioned properties.

Whereas in normal sale deeds, buyer can put a clause where the seller indemnify the buyer legally from any encumbrance on property prior to date of property registration therefore buyer is safe from all encumbrances prior to purchase.

Most important point is to insist the bank that Original Borrower of the Property, whose property is being auctioned by bank should become the “Confirming Party” in your Sale Deed / Registration with the bank so that in future he should not file case in court to cancel the auction.

It is always advisable to take help of Local Competent Professional Property Lawyer before participating in Bank Auctions as he can help you in understanding the rules and regulations. He can also help you to check Property Title and encumbrance on property (If any).

Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.

About the Author Nitin Bhatia (159 Posts)

I am a Blogger, Credit Counselor, Reviewer and Author of write ups on Real Estate, Personal Finance, Financial Planning, Home Loans, Marketing & Current Affairs. I write blogs for leading web portals in India.


  • roger

    Nithin u r so brilliant that u put the borrower in loop while buying property in auction. Most of the leading civil advocates are hardly aware of this fact and they simply mislead the auction purchaser with their bogus knowledge.

    • sampath Raj

      The irony is that even leading real estate portals recommend people to buy property in bank auctions without knowing the basic fact that banks convey defesable title to the auction purchaser.

  • Housingfinance98

    Mr. Nitin
    You have furnished accurate information regarding property auction process. I too in same business in delhi and mumbai. worked as HEAD OF LOAN DIVISION earlier. sunny sharma…housingfinance98@yahoo.com

    • monica gupta

      Hi Nitin, Thank you very much for all the valuable information. I am interested in buying a bank auction property. I have checked the above mentioned sites but there r no options available between virar and churchgate in mumbai, all r sold out. kindly advice where can i find list of bank auction properties .. it would if u could share ur contact details or email id so that i can avail more information on this subject. monicagupta7@gmail.com Regards Monica

      • Nitin Bhatia

        You may visit the office of home loan providers like SBI, HDFC or LIC to check out list of current properties put on auction. This list is normally put on the notice board. Secondly, you may check the Auction section of your local newspapers.

        In Mumbai, its little difficult to get bank auction property as middlemen or real estate agency mafia control the same due to high property prices but if you will put efforts, you may get good deal.

        You can post your queries in this comments section, i answer all the valid queries posted on my blog.

  • Kirit

    I need to advise on auction properties.
    I am planning to buy auction property in borivali mumbai. which costs around 30 L. and market price is 60 L.

    There are some auction agencies, which deals on the same.
    I want to take loan on same properties. All payment will be by cheque.
    According to agency, If I take the loan, I need to give 30% of property amount(9 L) to agency and remaining to the bank.
    But If I pay 100% amount (30 L), whole amount cheque will be to the bank.

    Is there any risk involved in buying auction properties ?
    If no risk involved then should I pay 30% to agnecy (as I want to take loan on the properties) ?

    • Nitin Bhatia

      I will not recommend you to deal through agency. You should hire a local lawyer and directly approach the bank for details on auction property. Secondly, you should directly approach bank for availing Home Loan.

      As suggested by me in article, you should insist that original borrower should be “Confirming Party” in your sale deed with bank.

      Lastly, i will not recommend you to pay to agency. All the dealings related to “auction property” should be directly with the Bank

  • Pralhadjana

    Dear Nitin,

    Thanks for sharing your experience but i dont have complete reseve money and the dealer says that he will refund every penny is the dealing does not takes place. Also, he will sell the flat at the reserve price and negotiate with the bank for this commission. He confirms that the property will be bought by the company and then the registration will take place between the company and me….pls guide….

    • Nitin Bhatia

      I will not recommend you to go ahead with this transaction through dealer. Kindly deal directly with bank.

  • Prasad kabadi

    what is the first step to buy bank auction property?
    from where we get list of all action properties?
    plz reply in details..

    • Nitin Bhatia

      You may take the help of Local Competent Property Lawyer to close the Bank Auction Transaction. You can get the list of bank auction properties from the 2 websites mentioned by me in my article. You can also refer local newspapers for details in auction section.

  • Manojm2

    Is this safe to purchase this property via broker who are exclusive in foreclosure property ? i got their detail from makaan.com Pls suggest..

    Manoj -Mumbai

  • Nitin Bhatia

    I will not recommend

  • Vikash

    I am buying a property which is purchased by person on bank auction.can i get loan for that property and is it safe to take such property..Please guide me ASAP.

    • Nitin Bhatia

      Please check the title of property, if it is clear then its safe to buy and you can apply for loan also.

  • Aakanksha Mishra

    Dear Nitin,

    in your advise below you have mentioned repeatedly that not to engage wtih any third party or a broker, could you please let me know that if we do what are the disadvantages for the same, since we have already paid out 30% cheque to the dealer, in this scenario what will be the best option for us?

    thanks
    aakanksha

    • Nitin Bhatia

      Dear Aakansha,

      There are 2 disadvantages
      1. Your money is at Risk.
      2. You will not get full monetary advantage of Bank auction property. Normally Broker ask for 2 cheques, one in the name of Bank and second in his name. Cheque in the name of Broker is his commission which is normally 25%-40% of total amount.

      If feasible, take your cheque from dealer. If cheque is not en-cashed yet & u have not signed any legal agreement with broker. You should immediately stop cheque payment.

      You shud directly approach bank for Bank Auction Property. Also hire competent local lawyer who can help in this process.

      Thanks & BR
      Nitin Bhatia

  • Yoginakochar

    In a bank auction, if the borrower(owner of property) is a wilful defaulter, he will not be a “Confirming Party”. How safe is to participate in that auction? Can he establish any claim later?What is the risk if the bank is not in possession of the property?

    • Nitin Bhatia

      1. Its not safe. Pls ask bank to make him confirming party.
      2. Without checking documents, i cannot say whether he can establish claim later by approaching court against the bank or not. Request you to hire local competent lawyer who can check all details and advise accordingly
      3. If bank is not in possession of property then i will not recommend you to participate in such auction.

  • Aakanksha Mishra

    Thank You Mr Bhatia, your advise was very valueble.

    Regards
    Aakanksha

  • Yogesh Jorapur

    excellent information…thank God and you as I was about to buy the disputed property…

  • Sonali

    Hi Nitin,
    I surely need ur help in this regards as i m very very new to real estate and planning to buy a bank auction property. I would love to talk to you and discuss my concern with you if u dont mind :)… Can you please get in touch with me on my mail address sharmasonali1804@gmail.com. I would be waiting for ur email.
    Thanks in advance.

    Sonali

    • Nitin Bhatia

      Hi Sonali,

      I have sent u a mail with all the details. Kindly check the same.

      Thanks & BR
      Nitin Bhatia

  • Anushka

    Hi Nitin Bhatia

    I am also need ur help in this regards as I am planning buy auction property(Mumbai). My email Id is anu_shranu@rediffmail.com.
    Thanks & waiting for your reply

    Anushka

    • Nitin Bhatia

      Hi,

      I have dropped a mail on ur email id. You may check the same.

      Thanks & BR
      Nitin Bhatia

  • Mahen_patil211

    i have taken a pre-sanctioned home loan from Axis Bank for an amount of 2000000 and on the same i have purchased a resale flat in Vasai ever-shine  sale agreement  value is 2250000 and also stamp duty and registration approx 160000.

    so at the time of disbursement bank ll include Stamp duty and registration or not?

    Pls let me know.

    Awaiting for your kind reply.

    • Nitin Bhatia

      As per RBI guidelines, Stamp Duty and Registration will not be part of Home Loan/Disbursement. 

  • Sam

    Hi Mr Nitin

    I m interested in buying a Auctioned Property too,
    I Have many doubts related to it.
    Could you plz help me.
    My email Id: sam150388@gmail.com

    • Nitin Bhatia

      Request you to post ur query, i will definitely answer the same.

  • Lalitabulusu

    Hi,
    I am Lalitha Akella and looking auction property at Mumbai and my budget is on 25 lacs.  Please help me how to contact bank people and how to participate in auction.  My mail id is lalitabulusu@hotmail.com

    • Nitin Bhatia

      I have mentioned couple of websites in my post, which contain listing of all bank auction properties or refer local newspaper which contain notice on such properties. You can also visit local office of Home Loan providers (HFC or Banks) to check on properties put for auction by bank. 
      You can yourself participate in Bank Auction but if u need help then you may hire a local competant property lawyer, he will help you with entire process.

  • Farida Patne

    Hello,
    I am interested in buying auction property/ flat in Andheri- Jogeshwari (mumbai).
    My budget is 25- 27 lacs. Please guide me how to contact bank people and how to participate in bank auction.
    My e mail id fypatne@gmail.com

    • Nitin Bhatia

      I have mentioned couple of websites in my post, which contain listing of all bank auction properties or refer local newspaper which contain notice on such properties. You can also visit local office of Home Loan providers (HFC or Banks) to check on properties put for auction by bank. 

      You can yourself participate in Bank Auction but if u need help then you may hire a local competant property lawyer, he will help you with entire process. 

  • PATILPR

     I WANT TO PURCHASE BANK AUTION FLAT, HOW TO MAKE REGISTRATION FOR IT TO BANK DIRECLY

    • Nitin Bhatia

      If you are highest bidder in bank Auction then you can register the property directly with bank

  • Lalitabulusu

    Do the bank will pay the registration charges? or we have to pay? Do we get any broker to deal all these things or we can directly deal with bank.

    • Nitin Bhatia

      You need to pay registration fees..You can directly deal with bank or hire property lawyer instead of broker.

  • atanu chakraborty

    Dear Mr Bhatia,my question is how can the bank not take responsibility for the property it is selling. if you are not the owner you do not hold the right to sell anything,right!

    • Nitin Bhatia

      Dear Sir, Bank is not the owner of property but just a custodian of Mortgaged property till they recover their dues. They have right to sell only to recover their dues from Borrower in case of default. If they can’t sell then no Borrower will clear the bank dues…

  • Subir Sarkar

    dear nitin,

    ARCIL register me an auction flat without signature of borrower.they did’t provide me any information about borrower and said borrower is not necessary,becouse it’s not rull/act, after auction of the property.they provide me 1)agreement copy of borrower with promoter 2)confirmation leter with promoter & bank 3)police intimation 4)notice 13/2 & 13/4 5) two news paper notification copy 5)original register paper of borrower and handed over flat. plz told me is it the legal ?

    contact me email- sarkarsubir006@gmail.com

    • Reuben

      You did not mention the mode of conveyance in ur favour. Have u been given sale certificate or sale deed .pl let me know. The title should be vested upon u in any of the above said

      methods.

      • Nitin Bhatia

        Title is vested only through Sale Deed not through Sale Certificate

      • SUBIR SARKAR

        SALE CERTIFICATE

    • Nitin Bhatia

      I will not recommend…As suggested borrower should be confirming party in your sale deed

  • Vikash

    Dear Sir,
    I participate in bank auction and deposit money to bank, now bank not ready to give possession.,…..they saying me that he sale the property a
    “as it is it basis” …pls suggests me what to do

    • Nitin Bhatia

      Hi,

      Pls check with bank on reason for not giving possession. If it is under legal dispute and you agreed to buy on “As is where is & What is there is basis” then you can’t do anything..You have to wait till legal case is over.

      Tks

  • Vssr Kumar

    definitely all the readers must read ur blog as well as queries posted below by ur followers.

  • keshav

    sir may i know what is the registration expense as in the stamp duty for bank auctioned properties . is it 2%>

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Registration expenses vary from state to state. There is no special treatment to Bank Auction Property in this regard. Standard Registration charges of your state will be applicable.

  • mkb

    Dear Nitin,

    Your blogs are very insightful & helpful. I have a couple of queries on this article. Hope you can provide the answers at your earliest convenience.

    >In case of bank auctions, considering the borrower is absconding & the said property has been vacant for many years before it is sold in auction. In your expert opinion, what should be next step in property registration. Also It will be very helpful if you can email me some important clauses to input in the property sale deed. The email id is enquiry20131003@gmail.com

    >In scenarios where the bank has provided the Sale Certificate, Lien removal letter, Newspaper auction notification copy but has not supplied the copies of circulars/orders sent to borrower under security interest act. What is the remedy in this case? Should this be pursued with the bank further on? Are they legally obliged to provide or does this depend on case to case basis../ In the event of its non-availability, is there any specific clause that can be input in the sale deed/agreement to safeguard the purchaser’s interest e.g. It is hereby informed that the bank has adhered to all legal requirements pertaining to the security act..so on.. Can you help and email me the appropriate clause to be used?

    I will be most thankful for your inputs in this regard and am waiting for your response.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      As i mentioned in my post that Original Borrower should be confirming party in your sale deed to avoid any future legal hassle. The auction can be legally challenged on many grounds therefore it is important to make original borrower as party to sale deed. In your case, original borrower is absconding therefore i will not recommend you to go ahead with bank auction

  • raja

    Hello Nitin,

    Thank you for an informative article. I visited foreclosure india site and found 2 buttons.1) Auction 2) posession for filtering the listed properties further. The auction properties have an auction date, whereas the posession properties dont have any auction date. So what is the status of these properties? Will they be sold or not by bank? Can the banks sell them without an e auction to individual buyers who visit their branch?

    Regards
    Raja

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Possession Property means that bank has taken either symbolic or physical possession of the property under SARFAESI Act after the borrower failed to clear the dues within 60 days of demand notice issued by the bank.

      Possession Notice is published in Newspaper cautioning General Public not to deal with the property. If anyone buy such property then Bank can charge the amount equivalent to amount defaulted from buyer.

      Possession Notice is a caution notice. Bank initiate Auction after 30 dates from date of possession (Symbolic/Physical). The Possession properties listed on the foreclosure india site are properties which have been served Possession Notice by the bank. If you are dealing in any property then you can just check whether any Possession Notice is being served on the said property from database. Possession Properties are put up for Auction after 30 days from the date of Possession.

  • Panduranga Acharya

    Hi sir,

    I have purchased a property in a Bank Auction last year and I was issued with sale certificate on 4th Nov 2012. same day defaulter has obtained stay against bank not to issue sale certificate and the matter was pending before DRT. I was also a party to the said case. court during Aug2013, vacated the stay since the sale certificate is already issued and a week before dismissed the matter for delay. can I go ahead register the sale certificate now?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Sale Certificate is not a Sale Deed/Registry. It is given to highest bidder and only shows that you have paid money to the bank for said property. Kindly approach bank and give written request to bank to register the property in your name. Till property is registered in your name, you are not the real owner of the property. Without sale deed, you will not be able to transfer property in future.

  • Anand

    Hi,
    I am planning to buy a auction property by ARCIL. I have verified the title and everything is fine. My lawyer is asking for 13(2) and 13(4) to ensure the notices were given as per the SARFAESI ACT. But the Bank is not ready to give a copy unless I submit the EMD. My question is can I submit the EMD and then withdraw before the auction date if the lawyer says notices are not good. Whats your suggestion.
    Regards
    Anand
    8884086832

    • http://www.nitinbhatia.in/ Nitin Bhatia

      I agree with you, you may submit EMD. If you decide not to go ahead afterwards then you should not participate in auction. You will get EMD back.

  • SANGEETA TRIPATHI

    HI I M SANGEETA HERE I WANT YOUR HELP SIR I WANT TO KNOW ABOUT ONE AUCTION FLATE WHICH I HAVE SEEN IN MUMBAI ADD FOR FLAT IS -104 H WING MATOSHREE CHS LTD , NEAR BHARTI PARK, MIRA BHAYENDER ROAD, MIRAROAD EAST THANE THIS PROPRTY IS AUCTIONED FROM DATE 30/10/2013 AND I GIVE DOWN PAYMENT 51000 AND REST IS 1340000 WANT TO PAY 15 DAYS BETWEEN AND NOW I AM CHECK THAT OLD DEFALTER IS PAID FULL AMT TO BANK SO WHAT WE WILL DO NEXT

    • http://www.nitinbhatia.in/ Nitin Bhatia

      It is not clear whether auction was completed on Oct 30 or bank issued notice for auction. Also whether you paid EMD or being a successful bidder, you paid amount on date of auction.

      If auction is completed then bank cannot cancel the same. Don’t worry, you will get your property. In case, bank only issued notice then defaulter can obtain the stay from recovery tribunal and claim the property back. You will get your EMD from bank.

  • Gaurav Gupta

    Dear Sir,

    I purchased a property in Dena Bank Auction in Jaipur. It is in a JDA approved colony. I got all its original Papers ( Sale deed , Registry chain, Kabja Patra, allotment recipts etc. ). I got registry of sale letter between me and Chief Manager Dena Bank also.It is a plot and around 3 months has been passed to buy it.

    What should i do now to make it more safe for future. As it is my investment for next 10 year.

    plz suggest.

    regards and thanks
    kkk992840@yahoo.com

  • http://www.nitinbhatia.in/ Nitin Bhatia

    I hope, the original borrower/defaulter was “Confirming Party” in your registration with bank otherwise if you got all the original documents then its sufficient.

  • Nayeem

    Mr.Nithin I bought a property in 2010 through SARFEASI auction in the yr 2010. I have been issued sale certificate and I duly registered it after paying the required stamp fee. When I tried to sell the property a year back I was told by the advocate of the proposed buyer that I could not sell the property as sale deed has not been issued in my favour. When I approached the bank for help they are not giving any proper replies and telling me every time to come after ten days or fifteen day. This has been going on for the last one year. Last week when I lost my patience I shouted at the chief manager he sternly warned me and said with the issuing of sale certificate the bank is ceased of matter and no sale deed can be issued. He poked at me saying that I could seek the help of court to resolve this issue.Mr. Nithin pl help me in this matter. I dont know what to do in this situation as my advocate is also totally helpless in this matter.

  • http://www.nitinbhatia.in/ Nitin Bhatia

    Property transaction is incomplete till the execution of sale deed. I mentioned the same in my post. You need to take the matter with bank. You should take following steps

    1. Hire local property lawyer and take his legal opinion in writing.
    2. With written legal opinion as base. Register complaint with Bank through Grievance Redressal mechanism and wait for official stand on same. If not satisfied, you may approach RBI appointed bank ombudsman of your area

    Even then if bank does not listen to you
    1. Through lawyer send legal notice to bank and request bank to respond to legal notice.
    2. File case against bank in consumer court (Deficiency of Service)
    3. Lastly file a civil suit against bank for fraud and forgery in transaction.

    • Nayeem

      Sir thank you so much for replying. I discussed your reply with my lawyer and he says that courts would not direct the bank to execute sale deed as the transfer is effectuated through issuance of sale certificate alone in bank auctions . More ever my lawyer says that properties are not transferred in the mode prescribed by transfer of property act in SARFEASI sale. I was not aware of the basic rule that I should have insisted the bank to execute sale deed in my favour after the completion of sale . I came to know of this lapse only when I tried to sell my property after three years. The value of the property I bought has almost doubled and the irony is that I am unable to sell it inspite of having a good buyer. sir pl answer me detail as to how to resolve this issue at the earliest. My email id is rosewell419@gmail.com

      • http://www.nitinbhatia.in/ Nitin Bhatia

        Under SARFAESI Act, Sale Certificate is completion of auction process as SARFAESI Act only deals with payments defaults and scope is limited only to recover the dues from defaulter through auction route. SARFAESI Act does not address the issue of transfer of ownership.

        Absolute Sale Deed is transfer of ownership of property. Now bank has recovered dues by auctioning the property and Sale Certificate is issued. It only means bank has successfully auctioned the property to you, recovered their dues & handed over possession of property to you.

        Property ownership can only be transferred through Absolute Sale Deed to be registered in Registrar office of your area.

        Legal opinion is divided on this topic but going by the judgement of Honorable Supreme Court of India. Any transfer of property ownership can and should only be executed through sale deed thus it overrides the provisions of SARFAESI Act. Please hire good lawyer and consult.

        • nayeem

          Thank you sir. I will seek the help of a good lawyer and I will let you know the developments and seek your advice in this regard at the earliest.

          • http://www.nitinbhatia.in/ Nitin Bhatia

            Sure

  • Joel

    I heard there is a provision which benefits the buyer from litigation. Is there any law which protects the buyer.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      As i mentioned in my post, all bank auction properties are sold on “As is Where is and What is There is” Basis. There is no law to protect buyers from litigation’s. As i suggested only way to safeguard is to insist that original borrower should be “Confirming Party” in your Sale Deed so that he or his legal heirs should not approach court in future.

  • Suraj Patki

    hello sir,
    thank you so much for the blog with only right and to the point information it is very helpful..

    sir i wanted to ask you that i want to buy a property which is put to auction by a nagri sahakari bank (it is in Maharashtra and i don’t know whether the bank is authorized to sell the property) when i inquired with the property owner he claims that the amount remaining to pay to the bank is only 5000 rs and that they have notified the bank not to auction their property…but when i inquired with the bank the person responsible for auction told me that the amount is 1,39,000 (one lakh thirty nine thousand) he showed us the documents that were all original and told us there was no problem to buy the property and after the auction if i get the property i have to pay 25% of amount on the day and rest within one month.but i have towait for 1 month to see that the the original owner of the property can pay the amount,,if not the property will be registered in my name but he did not say anything about how the registration process will take place…i am really confused about the entire process ..sir i really want the property because it really in budget.
    sir please tell me what documents should i check before the auction ((the auction is within 10 days from now)) and what are the points that i should follow to safeguard the property if i win the bid…will there be any problem in future by the now owner of the property because i don’t think that the owner will be a confirming party in this case…. waiting for you answer…

    • http://www.nitinbhatia.in/ Nitin Bhatia

      If i am not wrong, you are referring to Dombivli Nagari Sahakari Bank Ltd. Bank is governed by RBI. As i mentioned in my other comments that bank auction property carry risk element. As i have not seen property documents therefore can’t suggest specific points but most critical point is to make defaulter a confirming party in your sale deed with the bank. If owner is not confirming party than risk element is much high. Also property should be registered in your name instead of bank only issuing sale certificate in your name.

      You should hire a local property lawyer who can help you in verification of property documents. Some of the imp documents are
      1. All original documents submitted by defaulter with bank
      2. Public Notice 13(2) & 13(4) under Sarfaesi Act
      3. Two newspaper notice copy. One English and another vernacular
      4. Possession notice
      5. Police Intimation

  • Nitis

    Hello Sir,

    I going to purchase the property in bank auction but in the terms and conditions section ,one of the claucse has been mentioned that possession of the property will be done by the buyer of that property . Actually I don’t have an idea .Please Guide .

    Another question is – If i will buy the property , how can I arrange money in short span . Is their is possibility by which I can be able to mortgage that property so that I can fund that property because the source from which I have arranged the money from , I have to repay them back in 2 or three months . Please give guide me .

    Thank you ,

    Nitis

    ( E-mail id – silvestor_007@yahoo.co.in )

    • http://www.nitinbhatia.in/ Nitin Bhatia

      I hope you have inspected the property. If bank has possession of property than no need to worry but in case property is not in possession of bank that there is every reason to worry. Ideally You should not agree to this specific clause related to possession. It is the responsibility of bank to handover peaceful possession of property to successful bidder.

      As i mentioned in my other comments, for bank auction properties it is advisable to arrange all funds from own source initially. After getting the possession, you may avail Home Loan against property. Another option is pre-approved loan i.e. 1st get your loan approved than go for bidding. A word of caution, Home Loan/Home Loan against property are not approved easily for such properties until unless title of the property is clear.

      Yes, you can avail loan against property after completing the auction process. It is advisable to be pro-active in this regard i.e. you visit the bank from which you wish to avail Home Loan and take list of all the documents required by bank for Bank Auction Property so that you can arrange all these documents in advance at the time of buying property through Bank Auction.

      • sana

        No bank would extend loan for the property which is going to be bought in auction. As Mr. nithin has said the bank could extend loan only after the property is registered in ur name. i would definitely say that the very bank which is auctioning the defaulters property would not sanction loan for buying the proposed property. More ever it is the duty of the bank to arrange possession. If it is least worried about arranging possession there is no point in buying such a property.

  • Suraj Patki

    thank you for your reply sir,,

    sir , when i asked the general manager of the sahakari bank he told me the auction is not going to be under the SARFAESIA ACT instead it is going to be under maharashtra rajya sahakari sansthan adhiniyam 1960 kalam 107(( महाराष्ट्र राज्य सहकारी संस्था अधिनियम १९६० चे कलम व नियम 107)) are they both same or different.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Sarfaesi Act is different from Maharashtra Rajya Sahakari Sansthan Adhiniyam 1960. In case of default, A bank can auction the property only under Sarfaesi Act. I would suggest you to hire a Local Property Lawyer, who can help you in understanding the clauses of Maharashtra Rajya Sahakari Sansthan Adhiniyam 1960. Yesterday, I tried to study this Act but it is available only in Marathi and unfortunately i can’t understand Marathi.

  • Subrahmanya Adiga

    Dear, sir, I am going to buy property in Bangalore as it is auctioned by UBI to some party. the possession of the property in that party who is selling to me. My question is when auction in taken place the defaulter of loan is absconding. Now I can repurchase same from party who purchased from bank through auction. He has original sale deed and EC and tax paid receipts. Any problem is there?. Please help me
    Subrahmanya
    M:9741126975 and my mail id is :adigask@gmail.com or adigask@rediffmail.com

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Dear Sir,

      I have taken liberty to delete your mobile no from your comment to protect the privacy of my readers. To answer your query

      If the original sale deed from bank is in the name of the person who is selling to you and he has all the following documents from bank than i don’t foresee any issue in this deal.

      1. All original documents submitted by defaulter with bank
      2. Public Notice 13(2) & 13(4) under Sarfaesi Act
      3. Two newspaper notice copy. One English and another vernacular i.e. Kannada
      4. Possession notice
      5. Police Intimation

  • Arun

    1) In case of sucessful bidder what are the steps to be followed to safegaurd succesful bidder rights on acutioned property under SARFAESI.

    2) How to verify if there is no additional unregistered charges on the property which is put for auction?

    3) In case if there is unknown charges on same property at the time of auction, who will own the responsibility of those charges once after bidding process is complete.

    4) Under Circumstances of Original borrower is not willing to be as “Confirming Party” which is likely in most of the cases what are best measures that can be done to avoid any legal complications?

    5) If Physical Possession is in the hands of owner, what is the process to get physical possession of the property?

    6) Which are all the key documents that needs to be collected from bank or any other authority?

    7) I have observed that there are two rules under which property auctions are carried out

    a) SALE UNDER RULE 38 AND 52(2) OF SECOND SCHEDULE TO THE INCOME TAX ACT1961, READ WITH THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 – Generally with DRT auctions

    b) SARFAESI ACT 2002 with Bank aucitons

    which one of above these rule safeguards succesful bidder interest better?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      You have asked very specific questions which can be answered only after going though all the documents related to auction but i am trying to answer the same from broader perspective.
      1. You need to ensure all necessary steps are followed during the auction as per SARFAESI Act

      2. Property is sold on as is and where is basis therefore you can only check whether there is any lien on property from sub-registrar office but regarding any other unknown charges, you cannot find out

      3. Successful Bidder will be responsible for all such charges

      4. You should insist on Original Buyer as Confirming Party else it might go into legal dispute in future. Bank cannot indemnify you against any legal action from original buyer / legal heirs.

      5. The bank can auction the property only after getting the physical possession by serving possession notice to the original borrower.

      6. Some of the imp documents are
      a. All original documents submitted by defaulter with bank
      b. Public Notice 13(2) & 13(4) under Sarfaesi Act
      c. Two newspaper notice copy. One English and another in vernacular language
      d. Possession notice
      e. Police Intimation

      7. SARFAESI ACT

  • Arun

    Thanks for the information :-)

  • Ab

    though the above information is protected by copy scape it is not a foolproof method. i was able to extract the complete text of the above writeup. use image instead.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Thanks for your valuable inputs. I will do the needful. Thanks again.

  • Somashekar

    Dear Nitin,

    Some queries from my end

    1) By law, is there protection for the buyer who buy such properties through bank auctions?
    2) I want to know if there are agents who do this work in Bangalore.

    With Regards
    Somashekar

    • http://www.nitinbhatia.in/ Nitin Bhatia

      1. No, you have to safeguard your interests. Pls go through above post regarding same.
      2. I will not recommend dealing with agents for bank auction property

  • Ramapada Acharjee

    Dear Sir,
    I bought Flat in Bank auction(State Bank of India) from a person who had SALE CERTIFICATE (for immovable property) . Fact is original owner > Statebank of India > Mr X (this person had SALE CERTIFICATE) > I BOUGHT FROM MR. X . Mr. X went to court and property Mr. X sold to me by court registration fees. Anything more required in this deal?
    Ramapada Acharjee
    ramapadaa@yahoo.com

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Sale deed is missing in this transaction. The transaction between SBI & Mr. X is incomplete as SBI has not executed sale deed in favour of Mr. X. Sale Certificate is not the proof of ownership. As per the ruling of Honorable Supreme Court of India, The property transaction should be registered in Sub Registrar office and any other mean/method of property transfer is null & void.

    • anwer

      Mr. Ramapada could you please tell us the mode of transfer through which you bought this property. First of all Mr. X is not in a position to execute sale deed in ur favour as the property has not been conveyed to him absolutely.

  • Sekar

    Dear Sir,

    I have identified a property put up on auction by HDFC for a flat built by one of the reputed developers in Bangalore and the papers are completely clean as I have also have other friends who have purchased flats in the same complex.

    Unfortunately, the original borrower of the flat passed away and hence the property is up on auction. I understand from HDFC that the borrower’s nominees (mother & wife) were okay to sell the house. Going through your posts below, I see that you have mentioned about the “Confirming Party” multiple times. In this case, given that the borrower is no more, request your advice on the alternate options please. Should I proceed and participate or ignore the same.

    Also, would you be able to advise if HDFC or any other bank would be able to provide a loan for this ? It might be difficult for me to arrange for the remaining 75% of the amount within 15 days in case I win the bid during the auction.

    Thanks,
    Sekar

    • http://www.nitinbhatia.in/ Nitin Bhatia

      HDFC cannot auction the property if the borrower is passed away. The property will now be inherited to the legal heir of deceased through WILL or under Hindu Succession Act / other Succession Act. The inheritor will be confirming party in your sale deed.

      If HDFC auction this property than the legal heirs of deceased may stake legal claim on the property in future.

      • Sekar

        Thanks a lot for the clarification. I understand from HDFC that the legal heirs were willing to dispose off the property through auction. So, is it safe to go ahead if I get a confirmation from HDFC that the legal heirs will be the confirming party and will be signing the sale deed ?

        • Sekar

          Dear Sir, Apologies for the continuous clarifications. Just had a word with the senior manager at HDFC. He confirmed that only he will be the other party signing the sale deed and not the legal heirs. He also said that this is perfectly fine under Section 13.2 and 13.4 of the SAFAESI Act 2002 where the financial institution has full control on the property. Request your advice on this please.

          • http://www.nitinbhatia.in Nitin Bhatia

            A Bank or HFC cannot issue sale deed. HDFC will only issue Sale Certificate to you which is not the absolute transfer of ownership. I will not suggest you to go ahead.

          • http://www.nitinbhatia.in/ Nitin Bhatia

            HDFC Manager cannot sign Sale Deed, infact you will get Sale Certificate from HDFC which is not considered as transfer of ownership as per the ruling of Honorable Supreme Court of India.

        • http://www.nitinbhatia.in/ Nitin Bhatia

          As i mentioned that first the property needs to be transferred to Legal Heirs either through WILL or through Succession Act than only they can dispose off. Without transfer, legal heirs being confirming party in sale deed does not have any legal standing.

  • Sid

    Dear Sir

    I have seen quite often that banks advertise for several properties for auction belonging to same party to recover their loans.
    Say suppose bank gets only one successful bidder against one of the properties listed in the advertisement.
    Can bank sell only one property and put rest for auction again.
    What if bank raises more funds via auction then required for the outstanding amount.
    Is notional possession enough for the bank or physical possession is required to auction the property ?

    Please help.

    Thanks

    • http://www.nitinbhatia.in/ Nitin Bhatia

      All unsold properties are again put for auction or are disposed off if bank find some buyer at Reserve Price.

      Bank only recover the amount due to Bank from auction, any amount received over & above the “amount due to bank” from auction is transferred/paid to the defaulter.

      Though under SARFAESI Act banks are auctioning property with notional possession but it is mandatory to issue possession notice by the bank and take physical possession. Even if bank is auctioning property with notional possession but it is the responsibility of bank to handover physical possession of the property to the successful bidder.

      • Sid

        Thanks.I also wanted to know if it is mandatory for banks to sell primary mortgage first and then recover remaining amount by selling collateral and guarantors mortgage property?
        Secondly can bank sell property at fairly lower rate then current market price. Say if current market price is 25 cr primary and collateral is 4 cr and guarantors is 1.6 cr. Can bank sell it for just 10 cr to recover amt ?

        • http://www.nitinbhatia.in/ Nitin Bhatia

          You are right, 1st the Primary Mortgage is auctioned and if bank is not able to recover their dues from primary mortgage than 2nd preference is given to collateral’s of defaulter and last preference to guarantors property. In certain cases, if bank is not able to sell primary mortgage due to legal issues than they may decide to cease Guarantors property 1st or sell collateral’s 1st.

          Bank arrive at Minimum Reserve Price for auction and property is being valued by certified valuers. It is normally circle rate / guidance value. Reserve Price may be much lower compared to Market rate depending on circle rare / guidance value. If you don’t agree with the Reserve Price fixed by bank than you can challenge the same in court before auction is conducted and take a stay on same.

  • Shikha Bhargava

    hello sir , a very informative article . I have a peculiar query . in my case defaulter is builder and I am flat purchaser . the fact that property is mortgaged was known to me in registered sale deed between me and old builder. the old builder defaulted for lack of funds and bank has auctioned the property to highest bidder . ..what is my status ??

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Unfortunately if the status of property was known to you than prima facie you don’t have strong legal case to pursue. It also depend on legal clauses mentioned in your sale deed regarding mortgage status of property i.e. is there a specific safeguard clause to protect your interests in case of default by the builder. I would suggest you to hire a competent local property lawyer who can help in this case.

      • Shikha Bhargava

        I have consulted 3 learned senior lawyers and all have different opinions. they say and I quote
        1 the old builder has given list of flat owners to the bank . the bank has mentioned in the auction notice to take note of bonafide purchasers and the same will be mentioned in the sale certificate to the new builder as well . he will honour yur rights . the new builder will be bind by the same terms as the old builder.
        2 file SA in DRT as third party . DRT can direct the bank to continue with auction but protect the rights of flat owners .
        3 only new builder is now in a position to complete construction. let him take over if he does not honour yur rights or asks for more price than what was agreed upon by the old builder , then go for civil suit .
        which one shud I follow

        • http://www.nitinbhatia.in/ Nitin Bhatia

          As i have not seen your documents but based on information shared, my personal opinion is that legal opinions are but confusing. Either of the lawyer has not understood your case properly. I would like to know whether property is getting auctioned under SARFAESI Act or is being sold under UNDER RULE 38 AND 52(2) OF SECOND SCHEDULE TO THE INCOME TAX ACT 1961, READ WITH THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 i.e. DRT auctions..Pls confirm on this

          Legal Opinion 1 is referring to SARFAESI Act and Legal Opinion 2 is referring to sale by DRT.

          I beg to completely disagree with 3rd legal opinion.

          • Shikha Bhargava

            thank u sir . as much we know the property is public auctioned under sec 13(4) of sarfaesi act .

            • http://www.nitinbhatia.in/ Nitin Bhatia

              In this case, i beg to disagree with all 3 legal opinions. All owners should approach the court and request the court to issue injunction against bank auction and request the court to issue order to make all the owners as party to the case to safeguard owners interest. Till owners are not a legal party to this case, legally new builder is not bound to take care of their interests.

              Another option is to approach court and seek injunction against bank auction. Next step ask for permission from court to form association of owners. After forming association which is legal entity, Owners may bid for property and take control of property. After that association may decide to complete construction on its own or may hire a builder for same. In my opinion, this is the best option in the interest of owners.

              • Shikha Bhargava

                sir, stay for auction was demanded under sec 17 by two parties separately in DRT. one by old builder ,the result is : few formalities here and there , DRT has already given a go ahead for auction to the bank. second by flat owners ,PO is yet to pass an order. I am yet to decide which way to go …….

                • http://www.nitinbhatia.in/ Nitin Bhatia

                  I can understand the agony on personal front…All the best

  • http://www.nitinbhatia.in/ Nitin Bhatia

    As i have not seen your documents but based on information shared, my personal opinion is that verbal commitments don’t have any legal standing. Secondly, it is mandatory to take bank’s permission in case collateral property is being sold. You cannot challenge the same, if permission was not granted by bank.

    Details of Guarantors mortgaged property must have been mentioned in the MODT and Guarantor mush have signed the documents to mortgage the property. It is not necessary to mention the details of guarantors mortgaged property in sanction letter. Sanction letter is only principal approval of Home Loan with T&C of Home Loan. To answer your queries

    1. It is at the discretion of bank but not binding
    2. Under SARFAESI Act, bank has right to auction mortgaged property including collateral / property of guarantor to recover their dues
    3. Legally, it is treated as company
    4. Bank is not obliged, Email is not considered as official communication channel. Email is not permitted as evidence in court of law. it is advisable to maintain written communication in sensitive matters like this.

    I would suggest you to hire a competent local property lawyer who can help you after going through all the documents. I tried to share my opinion based on limited information shared. If you wish to avail my detailed opinion/consultation on chargeable basis, you may write to me at info@nitinbhatia.in

    • Sid

      Sir, Head office had given written permission to the branch to release collateral to help pay off loan amount. But bank did not have the permission to us. Yesterday even the DGM was surprised to know this and said their team members couldn’t process this properly.

      We ll as you said I will email rest to you directly.

      Thanks

      • http://www.nitinbhatia.in/ Nitin Bhatia

        As you mentioned DGM, It seems your loan is from Govt Bank / PSU Bank. if yes, You may file RTI application and request for bank’s internal communication regarding your case. It will help you in legal case & you may file a civil suit for stay on auction.

  • mukesh sharma

    Hello sir, my name is mukesh sharma sir i purchase a auction commercial property from hsiidc in panchkula (chandigarh) but property is pahar ganj new delhi i give the all amount & bank give me no dues certificate & give the physical possession sir i want a sales deep sir please suggest what document is requirement from bank so i did not take any problems for sales deed

    • http://www.nitinbhatia.in/ Nitin Bhatia

      I am assuming property is auctioned under SARFAESI Act. Documents required differ from state to state. Some of the common documents required are

      a. All original documents submitted by defaulter with bank
      b. Public Notice 13(2) & 13(4) under Sarfaesi Act
      c. Two newspaper notice copy. One English and another in vernacular language
      d. Possession notice
      e. Police Intimation