If you are considering buying a property in auction, this is the article for you.
From ready-to-occupy properties to open plots, you get a wide variety of housing units to choose from. But buying a property from an auction is a two-edged sword. While a property auction might be a boon to potential homeowners in some ways, it also has its set of cons. Let’s have a look.
Pros of buying an auctioned property
#1 The property might be priced lower than market value
Auction houses are a win-win for both banks and homebuyers. Here, you can find a sweet deal on a let-out property in a well-connected location for a relatively lucrative price. These properties are priced almost 15-20% cheaper than their original market price.
#2 Great convenience
Next in the benefits of an auctioned property is zero construction project delays. Most properties sold in auctions are usually ready-to-move-in properties. Free of delay and fraud risks, the property is free to use once the deal is closed.
However, before making a purchase, check for outstanding municipal tax and society dues as well. Plan the funding since you’ll pay the balance amount on short notice.
#3 Prime location
There is always a chance that the properties being auctioned can be located in prime and posh areas. These properties might not be an option for you due to high market rates or unavailability of the land but now fit well within your budget.
Cons of buying an auctioned property
#1 Bidding
Since this is an auction, you can’t anticipate what the highest bid might be. Hence, there’s no assurance that you’ll buy the house for the desired price.
#2 Physical assessment
Auctioned properties are sold on an “as-is-where-is” basis. Before you buy, it is essential to check the physical condition of the property and study the bidding documents well. If there are any repairs and leaks, that might add extra expenses to the deal. This will take away the added cost advantage when you buy the property at lower than market value.
#3 Mandatory pre-bidding deposits
Before the bidding starts, bidders are supposed to shell out 10% of the property value as deposits. If you lose the auction, you’ll be reimbursed for the money you deposited. But if you win, you must pay a significant percentage of the property value to the financial institution on short notice.
To sum up
Buying an auctioned property can be a smart investment decision, considering you understand the pros and cons beforehand. Go through the bidding documents and physically assess the property before making the purchase.
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