All About Purchasing Distressed Properties

Distressed properties are a popular term in the general real estate lexicon. Is it worth buying a distressed property? Should you opt for the same over a regular property investment? These questions will be answered in due course but first it is imperative to understand the whole concept as it rests in layman terms. Proper understanding and evaluation will help you decide on the pros and cons of investing in distressed properties. Distressed properties are properties that have recently come into the market. They are put up for auction where interested buyers participate. This usually happens when the owners of such property are not able to repay the loan that has been borrowed from any financial institution or bank where the property had earlier been mortgaged as security.

According to real estate property market experts, the purchase of distressed properties is a practice that is gaining more and more ground in particular Indian real estate markets. This includes cities of the Tier II and Tier III variety, like Kolhapur, Jabalpur and Aurangabad. There are many similar cities which witness a favorable response from buyers and prospective home owners with regard to investing in distressed properties. Why is this really such a popular means of investment here? According to many property market experts and professionals, value buys are mostly on offer for buyers of real estate in cities that are considerably smaller. This is mainly because the realization on the base prices is higher in comparison to properties available in metro cities.

There is not high excitement among prospective buyers with regard to snapping up residential properties in Tier I cities. Distressed properties that are mainly bought in Tier I cities include commercial spaces, hotels and other business and office properties. These are large ticket purchases and this is a trend that is witnessed in large metros these days. Distressed properties are naturally more attractive to buyers for many pertinent reasons. Distressed properties are very appealing owing to some specifics. More often than not, the distressed property prices are always reasonable and very affordable which is a huge plus point of sorts. Distressed properties are very attractive to buyers as a result.

The base prices at these auctions are usually lower by thirty percent as compared to the original market prices for properties in the their particular locations. This causes quite a flutter among real estate buyers and enthusiasts. This makes them stalk such distress sales and NPA e-auctions are proving to be a very popular practice in recent times as well. As a result, one can gauge the level of popularity enjoyed by these auctions of distressed properties or distress sales as they are otherwise referred to. Alongside, according to official market statistics and other figures, more than one lakh properties were put up for e-auction in the period between 2013 and 2014 which is a staggering statistic to say the least!

You should always keep an eye out for liabilities that are unknown and undiscovered. Distressed properties sometimes come with some liabilities that are hard to shake off. These include things like taxes which are unpaid and the like. These are taken into consideration by banks while the base auction prices of property are fixed for properties acquired under the SARFAESI or the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act which came into being the year 2002. Buyers are quite aware of the restrictions involved in selling off these restricted properties and always endeavor to pay off the liabilities in question within a fixed time period. However, there may be liabilities that may be totally unknown for any distressed property and this may only come to light once the property is purchased.

The risks involved in the whole procedure of these purchases are high as a result. However, a little homework and care will help you avoid any common pitfalls that may arise as a result of such concealment of facts. You should always strive to perform a comprehensive background check of distressed properties under consideration. Always research all you can about a particular distressed property. Always find out what made it come under the distressed property category above all else. Always consider the location, the nature of speculation involved in the investment and check whether the land is involved in any dispute or controversies. Alongside, strive to find out about any unpaid dues by checking the official records of the land or apartment building from the public authority records.

Do not be in a tearing hurry to snap up any property, no matter how great the temptation may be. Always look at the discounted prices on other new properties which are offered by developers at times. In case, you get a ten percent discount on a new apartment it is no use going for a distressed property which is sold at the same price after discounts. Always look at the discount prices on offer as these properties are usually sold at prices which are fractionally lower as compared to the market prices prevalent these days. Distressed properties are not readily available at all times as well. Alongside, worthy properties that come up for distress sales are usually chased by equity, third parties, HNIs and realty funds as well. This only serves to push up overall property prices up a notch. This leads to the price of the property being marginally lower than the prices in the market as mentioned earlier.

You can actually skip distress sales for the time being. The overall demand in real estate sectors is decreasing rapidly owing to stagnant prices which are unaffordable for a large section of prospective real estate buyers. This is forcing developers to offer multiple discounts and freebies for buyers. They are rolling out the red carpet for buyers with hefty discounts, freebies like parking, additional amenities and flexible payment plans and also various other benefits. Always check out these offers and benefits thoroughly before making a decision. In case you have a tight budget and find a hassle free distressed property in a good location at a discounted price, you can only go for it then!