How to buy a Non-Performing Asset (NPA) property through local agent?

In the real estate sector, purchasing a Non-Performing Asset (NPA) property can present challenges but also opportunities for substantial rewards. Therefore, it is crucial to comprehend the associated risks and potential gains. Have you ever considered if it’s feasible to buy an NPA property through a local agent? Let’s explore this by delving into NPAs, the precautions to observe and the approach to acquire such properties.

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Non-Performing Asset (NPA): Meaning

Non-Performing Assets (NPAs) are advances or loans where the interest and/or principal payments on the default asset or property have remained overdue for more than 90 days. Before seizing the asset, defaulters are given a 60-day notice period under the Security and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act to settle their liabilities. When borrowers fail to repay loans, banks have the authority to seize the assets for which the loans were granted, often categorised as NPAs. Resolving NPAs typically requires significant efforts by lenders, including restructuring loans, recovering assets, or writing off bad debts. Effectively managing NPAs is crucial for maintaining the stability and resilience of the banking sector and ensuring the efficient allocation of credit in the economy.

Is it possible to buy an NPA property through a local agent?

You can purchase an NPA property through a local agent, as these individuals act as intermediaries, facilitating communication between the buyer and the bank regarding NPAs acquisitions. Their duties encompass providing pertinent information about NPA properties to prospective buyers. Local agents play a vital role in assisting buyers in assessing and advancing property acquisitions. Their involvement fosters transparency and effectiveness in transactions involving the purchase of NPA properties. Now, let’s explore the process of buying an NPA property through a local agent.

How to buy an NPA property through a local agent?

Here’s a step-by-step guide for buyers looking to purchase an NPA property through a local agent.

Choose an agent: Select an experienced real estate agent who can help you identify suitable properties based on your requirements. The agent will also guide you through the legal procedures associated with purchasing an NPA property.

Seek financing for purchase: Your local agent will assist you in obtaining approval for NPA finance from a licensed bank or financial institution.

Negotiate: Once you’ve identified a suitable NPA property, your real estate agent will help you negotiate the bid with the entity from which you’re purchasing the property, whether it’s a bank or another financial institution.

Inspect NPA property: Your local property agent will also assist you in conducting a thorough inspection of the NPA property to assess its condition.

Sign purchase agreement: Before signing the NPA purchase agreement, your local agent will help you review the terms and conditions of the deal carefully to ensure they meet your needs.

Close purchase: Your local property agent will also assist you in completing the necessary paperwork related to the purchase of the NPA property to finalise the deal. Following this, ownership of the NPA property will be transferred to you as the buyer.

What to check while choosing an NPA property?

While investing in an NPA may appear enticing, it’s crucial to conduct the following checks before proceeding with the purchase.

Site visit: Before bidding for the property, visit it personally. Conducting a thorough inspection can unveil crucial details essential for a prospective buyer. It’s advisable to engage a professional for a comprehensive site analysis.

Ascertain reasons for discount: Look for any loopholes to understand why the property is being offered at a discounted price. Banks typically offer a 10%-15% discount due to the issues associated with such properties. To comprehend the reasons behind the discount, consult neighbours and compare prices of similar properties in the area.

Check for dues: NPAs may come with pending dues, such as utility bills and maintenance charges left unpaid by the previous owners before the bank seized the property. The bank may not clear these dues before auctioning the property. Therefore, potential buyers should investigate any outstanding dues associated with the property and assess whether the bidding price reflects its fair value.

Market value: Consult local authorities, consultants, and brokers to determine the market value of the property. Comparing the market price of similar properties in the vicinity can provide valuable insights. Additionally, review historical price trends on property websites and upcoming infrastructural developments in the area to estimate potential returns.

Possibility of loan: Assess the feasibility of obtaining a home loan for the property. Even in the case of an NPA, potential buyers should explore the possibility of securing a home loan to enhance the property’s credibility.

Mutation deed: Check municipal and tax records to verify if the property had a sole owner. If the property had multiple owners in the past, obtain the Mutation Deed from the municipal body. Obtain complete ownership details of the property from its inception to avoid future discrepancies. Share these records with a legal expert to confirm the absence of encumbrances.

Housing.com POV

While purchasing a Non-Performing Asset (NPA) property through a local agent poses its challenges, it also presents lucrative opportunities for substantial rewards in the real estate sector. Understanding the risks and potential gains associated with NPAs is paramount. The involvement of local agents as intermediaries streamlines the process by facilitating communication between buyers and banks, promoting transparency and efficiency in transactions. The step-by-step guide outlined for purchasing an NPA property through a local agent offers buyers a structured approach, from choosing an agent to closing the purchase. Additionally, conducting thorough checks before proceeding with the purchase, such as site visits, inspecting the property, assessing reasons for discounts, checking for pending dues, determining market value, exploring loan possibilities, and verifying ownership records, ensures informed decision-making and mitigates risks. By adhering to these precautions and adopting a diligent approach, buyers can navigate the complexities of purchasing NPA properties with confidence, maximising the potential for successful acquisitions and long-term returns on investment.

FAQs

What is a Non-Performing Asset (NPA)?

A Non-Performing Asset (NPA) refers to a loan or advance where the interest and/or principal payments on the asset or property have been overdue for more than 90 days.

What happens if a borrower defaults on a loan?

When a borrower fails to repay a loan, the bank or financial institution has the authority to seize the assets for which the loan was granted, often categorised as NPAs.

Can I purchase an NPA property through a local agent?

Yes, it is possible to purchase an NPA property through a local agent. These agents act as intermediaries, facilitating communication between buyers and banks regarding NPA acquisitions.

What precautions should I take before buying an NPA property?

Before purchasing an NPA property, it is advisable to conduct thorough checks, such as site visits, checking for pending dues, ascertaining reasons for discounts, verifying market value, and exploring loan possibilities.

Why should I consider investing in an NPA property?

Investing in an NPA property can present lucrative opportunities for substantial rewards in the real estate sector. However, it is essential to understand the associated risks and potential gains before proceeding with the purchase.

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Dhwani Meharchandani

Dhwani is a content management expert with over five years of professional experience. She has authored articles spanning diverse domains, including real estate, finance, business, health, taxation, education and more. Holding a Bachelor’s degree in Journalism and Mass Communication, Dhwani’s interests encompass reading and travelling. She is dedicated to staying updated on the latest real estate advancements in India.
Email: [email protected]