Know the potential pitfalls before you invest.

While bank auctions offer properties at 20-30% below market value, they earn this discount because they carry risks. Understanding these risks is the difference between a profitable investment and a financial nightmare.

1. Occupancy Issues

This is the biggest risk. Banks often auction properties with 'Symbolic Possession', meaning the defaulter is still living there. Evicting a borrower can be a long legal battle. Always check if the bank has 'Physical Possession'.

2. Pending Dues

The 'As is Where is' clause means you inherit the liabilities. This includes unpaid electricity bills, water bills, property tax dues, and society maintenance charges. These can run into lakhs. The bank is generally not liable to pay these; you are.

3. Title Disputes

While the bank has rights under SARFAESI, there could be third-party civil suits claiming ownership or family disputes pending in court. A bank auction does not automatically extinguish all third-party claims if they pre-date the mortgage. Always hire a lawyer to verify the title history.

4. Structural Condition

Banks do not renovate properties before sale. A closed house might have leakage, termite damage, or structural weakness. Since you often cannot inspect the interiors of an occupied house, you are betting on the condition.