Planning To Buy A Resale Property? Here's Your Guide

Are you planning to buy your dream home but want immediate possession rather than waiting for the completion of an under-construction property? Then, a resale property could be the most viable recourse.

Resale property is an economical bet, as compared to opting for a ready-to-move-in property due to factors including depreciation, age of property, definite final cost of the asset, etc. But, purchase of a resale property has too many legal and technical implications and procedural requirements.

MakaanIQ helps you know more about a resale property.

What is a resale property?

Resale signifies that a property is being sold by the person who was allotted the same property. In other words, when property once purchased is now put on sale by the initial buyer, the property is said to be on resale. The resale of property can either take place from the first assignee or from the beneficiary, who had purchased the property from some other party.

Resale by first beneficiary

In case of financing the purchase of resale properties wherein the sale agreement has been executed between the home loan applicant and the first time beneficiary (i.e. the person to whom the developer had initially allotted the property), without transfer of possession of property, the following is to be complied with to get the funding from the lender:

• Banks compute Loan-to-Value ratio (LTV) on lower of the document value (i.e. the agreement value on the basis of agreement to sell or ATS) and the market value of the property, as per the empanelled technical valuator's report.

• No Objection Certificate (NOC) must be obtained from the developer regarding the sale of the proposed property by the present assignee for creation of mortgage.

• Tripartite Agreement (TPT) must also be executed between the home loan applicant, present assignee and the developer of the property.

• The resale property transaction can only be executed if the property is at least 75 per cent constructed, as certified by the lender's empanelled appraiser.

Marketability

One of the important aspects of buying a resale property is to ensure a clear marketable property title. After you finalise the second-hand or resale property, you need to make sure that there are no claimants on the property. This is why the legal verification of the property is initiated by the lender.

If the property in question has joint or co-owners, all of them must authorise the sale. The banks can refuse to offer the loan for the resale of property if any of the original documents are missing from the chain of titles of ownership papers. The age of the property is also a constraint for banks to fund money for the resale.

Loan on resale property

To check if there is a loan running on the resale property you plan to buy, the lender verifies if the original documents have been mortgaged with any bank or financial institution. No fresh resale home loan can be acquired until the existing owner repays the running loan in full and gets the original property papers released formally.

Technical valuation

The technical valuation and appraisal of the property plays a very crucial role in funding the resale properties. Most of the lenders fund up to 80 per cent of the market (or technical) value of the property or the agreement value of the property (as per ATS signed), whichever is lower. The banks safeguard their interests by appraising and assessing the asset at a lower rate, considering the depreciating value in future.

Points to remember

The resale home loan can become difficult to obtain for the applicant under below mentioned circumstances:

• If any paper is missing from the chain of title deeds or  documents, especially when the property has moved from one party to another frequently.
• If the resale property is over 20 years of age.
• If the property was not formally registered primarily.
• Resale properties always include additional expenses like renovation, repairing, furniture and fixture etc. Thus, getting a higher loan amount sanctioned (to get funding for these additional costs) can be arduous with an old property.

Other tips

• It is a good practice to only invest in properties that have nearby facilities such as schools, hospitals, banks, markets etc. These are the factors that drive appreciation in both capital and rental value of the property while helping you lead a quality lifestyle. Don’t hurry in deciding the location. Give it time and explore several options that suit your budget. 
• Paperwork becomes extremely important to check whether the seller is the legal owner of the property and whether the property is in the government records. Also, check the draft of Builder Buyer Agreement (BBA) thoroughly when looking at buying a flat from the resale market, verify title of the resale property and check the original payment receipts against the installments paid by the owner. It is also important to take a No Objection Certificate (NOC) before buying resale property.
• Ensure no previous dues remain in terms of water, property or electricity and also understand the reason behind sale of the property so that you can make a wise decision.
• Loan on home is another parameter that you must examine with extreme caution and care. The lender determines the condition of the building and then decides the loan amount. Usually, banks don’t lend more than what is mentioned in the sale deed. 
• If the property is older than 10 years, the structure and plan of the building, cracks, moisture and walls, must be examined well to avoid wasting money and to not face issues at a later stage. Properties that are even older, need stringent examination.