Would You Like To Sell Your Non-Distressed Property Through Auction?

The moment the word e-auction is said in matters of property, we quickly believe the said property to be one in distress. Surely, the purchaser failed to pay his dues, and the unit is going under the hammer. You may immediately become an interested party since this could be your chance to buy a property for much less than its actual valuation. You may not be aware but players out there are working hard to make sure your instant reaction when you hear of auction properties changes soon. As is a common practice in countries such as the US and the UK, India is also seeing the advent of auction houses that would help buyers sell non-distressed property—that is to say, they will be auctioning general properties.

In August last year, for instance, Auction House India (AHI) , a joint venture between the UK's largest property auctioneer Auction House and New Delhi-based NU Dimension Advisory, conducted its first auction of 35 commercial and housing properties worth Rs 135 crore in Delhi. All these properties were non-distressed general properties.

"With this first event, we are looking at establishing this novel and expeditious concept in the India realty space as well," AHI said in a press statement at that time.

Some online portals in India have also been carrying out auctions of general properties.

How it's done?

In case this method interests a seller, this is what he has to do:

You send a request to list your property for auction. Make sure you have all the documents in place before posting your request.

After analysing all the legal aspects, and evaluating the property, the company will publish the property in the auction catalogue. This would move ahead once you and the auction house agree on the value of the property.

In case of AHI, the property is put up for sale in the auction within six weeks. This may be different for different platforms.

After a competitive bidding, the property is sold to the highest bidder. To take part in the bidding, buyers have to deposit a certain percentage of the property value, typically 10 percent, with the auction platform.

At this stage, the exchange of contracts takes place.

Depending on the pre-agreed terms, the buyers pay the final amount within a stipulated time period.

Who does it benefit?

When compared to the traditional methods of property selling, the auctioning method is expensive. Brokers generally charge one per cent of the deal amount as brokerage fee. In the auction method, about four per cent of the total property value will have to be paid to the auction house. This charge would be jointly shared between the seller and the buyer, though not equally.

However, the auction method is certainly a much faster and transparent way to buy and sell a property. If a seller takes the help of an auction house, he would also have more audience.

Buyers, on the other hand, would benefit from the fact that the auction house would take care of all the legal aspects of the property, saving him much time, energy and hassle.

What the future holds?

It may take a while before the concept become popular here, as is the case in other countries such as Australia and New Zealand. According to PropTiger.com Chief Investment Officer Ankur Dhawan, this auction model may take off in two-three years if someone builds a platform and gets several banks on board. "It won't be a primary mode of selling or buying property, but again you can identify few niche areas," Dhawan was quoted by Mint as saying.