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Buying resale property? 9 things you must know
Buying a resale property involves many legal and other procedural requirements. It is prudent, therefore, to first understand the various procedures and safety measures for buying resale property to avoid hassles in future.
Buying resale property: A guide
1. Consult experts
It is ideal to engage a good real estate agent to locate a resale property. S/he would be in a position to locate sellers as well as guide you regarding the price of such properties in different localities. These agents would also be in a position to tell you about the seller of the property. Most real estate agents charge a fee and also help with registration, payment of stamp duty and other paper work involved in the purchase of resale property.
In addition, taking the help of a good lawyer would also help to make sure that things are clear legally also.
The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the director and chief financial planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.
Buying resale property? 9 things you must know
2. Title of the property
It will help engaging experts like real estate agents and lawyers to help you, but it is always better to be well-informed yourself when entering into deals for buying resale property. The first step in this regard would be to establish the title of the property seller; whether s/he is the real owner of the property or has been given the power of attorney to transact the deal. All the documents with regard to the property need to be clear. In addition you need to make sure that all the original documents with regard to the property that were given by the builder or original developer are in order.
3. Documents
Buying resale property seems great, but it could become a big problem if the documents regarding the original purchase and subsequent transfer of title are not properly stamped. Firstly it could pose great problems especially if you want to apply for a loan for purchase of the resale property. Subsequently it could prove to be unacceptable in case you wish to transact further on the property.
Buying resale property? 9 things you must know
4. Existing loan
It is also necessary to make sure that the property documents are not mortgaged in the bank's custody against a loan taken by the seller. The bank will consider a loan only once the loan taken by the seller is repaid and the documents released.
5. Loan eligibility
Buying a resale property would definitely provide you with a bigger space in case of older properties. However it is best to note that some banks may not lend money on buildings older than 10 years. This may be due to the reason that they may not want to take the risk of the price of the property going down. Banks also ensure that the bank's outstanding loan should always be lower than the value of the property in the market.
Buying resale property? 9 things you must know
6. Property valuation
Next it is imperative to note that the loan amount is highly dependent on the cost of the property. Technical experts would evaluate the property. However it would be useful to yourself avail the services of a property valuator at a small fee before approaching the banks. The bank's property valuator may evaluate the property at a much lower rate. They would also like to safeguard their interests against the fall in the price of the property in future.
7. More down payment
Most banks wish to make sure that you accept responsibility for the maintenance and good upkeep of the resale property. So banks would expect you as the purchaser of the resale property to pay a certain percentage of the price as down payment. You may have to pay about 20% of the price as down payment; property of Rs 50 lakh would requires Rs 10 lakh as down payment.
Buying resale property? 9 things you must know
8. Age of the property
This down payment could be more in case of older properties. In addition, banks usually lend only on properties that are up to 20 to 50 years old depending on your lender. The tenure of the loan also decreases with the age of the property.
9. Fees charged by housing societies
The bank may grant the loan and you may make the down payment, but there could be another problem. It arises out of the need for some societies that ask for a heavy fee for transfer of ownership. It is best to consider this cost also when coming to a conclusion while purchasing resale property in cooperative and other societies.
Conclusion:
Buying resale property would give you a chance to settle in your own house fast and save you of high rents paid and the need to frequently shift your place of living. Taking a loan from the bank could give you tax deductions on the interest paid soon. You would not have to wait till the possession as in the case of new flats. It is always prudent to be well informed about the various details of the resale property.