Author: sumeet sarna

Foreclosure means when a person has given money to a person so that he can purchase that property takes possession of that property because that money has not been paid. Buying a foreclosure is often selling as a way for both the one who is tenant and investors to get a great deal on the property. However, it is being well said that financial rewards do not get without hard work. There are some problems these properties commonly possess and difficulties you may see while purchasing them.

What are the problems which are been mostly seen while purchasing a foreclosed house?

The most important thing is that before entering the foreclosure market is that the properties are were given up by the proprietor who could not be able to make debt payment anymore. Most cases the houses are very poorly maintained after all if the owner is not able to make payments then he or she is likely to be falling behind on making regular payments. Also, some people are forced to buy the foreclosed houses. This often involves removing appliances and fixtures and sometimes even outright smashing.

After the householder leaves foreclosure to sit to get neglected then when it is often inviting criminal activity. Despite many potential problems foreclosures can be a big deal. If someone is willing to fix a problem then most of the people will not deal with it, one can buy a home at a significant discount. However, you may see additional issues when it comes to purchasing the property it gets in the move in condition.

Issues with Lenders

Buying a home from the landowner has its own problem as a result of the increased level of the authority and the limited clearness should be there those who buy foreclosures.

Financing

A Lender will not give you money for a home they will consider you that this appraises below the purchase price. If you are an investor and paying cash, then there will be no problem.

Time Delay with the owner Bank

It is being well said that bank should want to unload REOs (Real estate owners) as quickly as much possible but in reality, the bank sometimes drags their feet in considering offers and throughout the escrow process.

No Seller Disclosures

Since no one has lived in his or her own house from the bank so he is likely not to have knowledge about the problem of the existing property. Thus, you must uncover everything yourself. So, you can do it during the home inspection or through your experience or by asking the neighbours.

Competition

Foreclosures can be a great deal they are attractive for shareholders looking to real properties or can use them as the apartment. Since investors make all-cash offers fewer one. Their offer would be more attractive to the bank than those who are owner occupants.

Tips for Buying Foreclosed homes

Foreclosed properties are considered as nonperforming assets hence banks who own these properties are actively marketing them in the best way they can. One of the days they do so is to sell at discounted offers to potential homebuyers and investors, this is the actual reason as to why foreclosed properties are being sold at an actual market price. Maybe foreclosed properties may not be on most Filipino homebuyer’s purchase plans. But it can be because of that they feel that they are taking advantage of other misfortunes, to Filipino hesitate to buy foreclosed homes.

But nowadays many Filipino homebuyers are now seeing foreclosed properties in a different way. Not there are people who are seeing for foreclosure properties as an affordable means to become a homeowner. But many investors are making money out of buying foreclosed properties by turning them into saleable items.

A person who is trying to opt for foreclosed properties has its good sides too. Although when foreclosed homes are sold at a lower price it seems to be attractive. Not all foreclosed properties are good deals.

There are some steps which must keep in mind while buying the foreclosed homes.

Know Where to Look

To find foreclosed properties go to banks, lending institutions, SPAV companies, and Government financial institutions like the Social Security System, Home Mutual fund, National Housing Authority. Moreover, the banks and financial institutions also keep an eye on brokers and brokerages that help them to market and sell the foreclosed assets. By checking out their website a one can find the best property deals.

Get your Financing Ready

As with many competitions among buyers will give you more chances of getting the foreclosed property as you want. When you are more qualified for housing loan by banks you will be more attracted towards sellers. This can tell that how much creditworthy you have and the actual buyer who has a house loan approved and that can be used anytime.

Work with a Bank or Accredited Broker

Foreclosed properties are sold at “as-is”, “where-is” basis, so as buyer due persistence work is utmost important. But it is mostly easier to say rather than doing it, especially when there are some documents which are lined up for inspections there is no need to mentioned documents, but titles are to be verified. However, working with a bank or Accredited broker reduces the risk of property.

Attend Property Auctions

Property auctions are mostly organized by bank owners or real estate brokers are the best way to discover foreclosed homes rather than going to property websites is of no use. Attending auctions also let you have a face to face to discuss your purchase, seek their advice.

Have some cash to spare

You have a good chance while acquiring the property and you must keep your eyes on and you must be ready to make an attractive offer and deal with payment term.

Inspect the Property

Foreclosures are mostly sold at the “as-is” or “where-is” so do not hesitate while inspection. These properties are previously owned by someone so do not expect that property would be on the tip to top shape. Though most of the offers during auctions may require minor repairs.  Seasonal real estate workers or flippers are recommended to investing in a foreclosed property that can be fixed for 30 days or maybe less. By this way, they can sell, or move into the property in a short time.

Carefully consider your location

Location largely affects your profitable of your location. If the property is in the high growth area or area which is developing into one, chances are good that its value will appreciate. The foreclosures close to transport infrastructures, such as airways, MRT and LRT lines, airports and new townships. If you are buying from any of these locations check if there are any infrastructure project currently in works.

Deliberate on your offer

Make sure you will not pay more than you should. Find out the market value of the similar properties in the surrounding of the house you are searching for. If someone is planning to sell or lease his property as soon as you have purchased it and check how quickly the homes are being sold. You might do it with a faster seller as it will let you avoid expenses maintenance and service tax.

Know Your Fees and Taxes

Other than part payment or down payment, the property selling price there are also fees and taxes to be paid. For example, Buyers must be taking care of his registration fees, transfer tax, documentary stamp tax. Buying foreclosed properties consist of a good deal and lots of efforts, patience and lot of creative work. But then again so do by the purchase of any real estate foreclosed or not. However acquiring the best property needs a lot of hard work, creative, motivation etc.

Find a real estate agent must be having knowledge about the complexities of the foreclosure market. Whenever you are looking for a bank property, you seek the guidance of the professional person who has knowledge about selling these type of properties in the local market.

Always remember, real estate agents are not lawyers. Foreclosure laws and regulation are tricky and they may vary from state to state. Don’t ever depend on a real estate agent for legal advice. Consult with the local real estate who knows about this purchasing work. Know the neighbours where you want to buy.

While buying a property, there are a number of legal documents that we need to check and keep in mind before buying a property. Whether it is to check the state of the property or legally converting the property into our name. All the legal documents need to be check. And an encumbrance certificate and possession certificate are two of those legal documents that we must check before buying the property, otherwise, we may have to face legal right issues in near future. And here, in this article, we will be explaining you each and every detail related to encumbrance certificate. Here, a look!

What is Encumbrance Certificate?

An encumbrance certificate is an important document that is required in the transaction/ sale/purchase of the property and is used as an evidence of single ownership. It is important to verify that the property you are going to invest in does not have any legal dues or monetary issues. And it ensures that whether there are legal dues or monetary issues on the property or not. It contains details about each transaction on the property.

An encumbrance certificate can be obtained from the sub registrar’s office where the property you are planning to invest in is registered. While it gives all the details of encumbrance on a property, there are a few documents that are exempted from being registered at the sub-registrar office. Therefore, it is highly advised that the owner must obtain both encumbrance certificate and possession certificate as a proof of legal and complete ownership of the property.

What is Non-Encumbrance Certificate?

A non-Encumbrance certificate is a certificate that shows there were no previous mortgage, home loan or debt on the property. And a non-encumbrance certificate shows the details only for the specific period of time for which you have applied to cross-check the previous details. A non-encumbrance certificate shows 12 years of the history of the property but you can ask for older details as well, but for that, some application fee is applied.

Why is Encumbrance certificate important?

People who are applying for a home loan against property or want to sell or buy property requires encumbrance certificate. If the previous owner has taken any debt on the property or any loan that is pending then you can easily check it on Encumbrance certificate and this is why it is important to check Encumbrance certificate before investing in property. You can also check the previous transactions that have been done on the property.

You can usually get 12 to 15 years of encumbrance details from the government authorities and financial institutions. However, if you still want to cross-check with another medium, then you can take possession certificate of the ownership from the village office.

What is Possession certificate?

A possession certificate is also known as an occupancy certificate. Possession certificate or occupancy certificate is the certificate that we can apply after the complete construction of the building. It can be applied by the builder or the owner of the building to local civic bodies.

A possession certificate is a proof that clarifies that the property is constructed according to the plan and the one who has the possession certificate in their name are the real owners. Possession certificate can only be obtained once after the construction of the building. Thus, one has to keep it secure. Though, the process of obtaining land possession certificate (LPC) includes one more step that is obtaining a building completion certificate. As per the state laws, one cannot legally move into the constructed building unless the owner gets a possession certificate from the local civic bodies. Also, the municipality can ask the building owner to leave the building and will consider it illegally occupied or will impose heavy penalties.

What you will find in an Encumbrance certificate?

In an encumbrance certificate, you can find all the transactions related to the property, which has been recorded by the registrar. The certificate is issued for the details of a specific period. One more important consideration is that the encumbrance certificate reflects only those transactions that have been registered with the sub- registrar’s office. The documents such as a short-term lease or testamentary are excluded from the certificate as they are not recorded at the sub-registrar office.

What is form 15 and 16?

There are two categories in which you can get your encumbrance certificate. One is form 15 and the second is form 16. Here, have a look at the details of form 15 and form 16.

Form 15

Form 15 is an encumbrance certificate. If the encumbrance is registered with the property then form 15 is issued. In the form 15 certificate, the documents registered to the property or the information that, if the property is a gift, lease, partition, second party involvement, mortgaged or not. And on form 15 all the information related to tax, loan and transactions are written date wise in detail.

Form 16

Form 16 is Nil encumbrance certificate or non-encumbrance certificate. If the property you are looking for does not have any encumbrance during the time period you have asked for then form 16 will be issued to you.

Documents required to get Non- Encumbrance Certificate

1. Written application on a plain paper.
2. Copy of documents of evidence showing ownership of the property in the name of the applicant. For example- sale deed, GPA etc. Also, make sure the documents you take to show as evidence are the original one.
3. Copy of ration card showing address, which should be attested by a Gazetted Officer. Affidavit of the applicant regarding the ownership of the property in question
4. An affidavit from two advocates which proves that the property is free from encumbrance.
5. Copy of letter/reference of the authority before whom the certificate is to be submitted.

How to obtain Encumbrance certificate online and offline?

Given below is the procedure to obtain Encumbrance certificate online and offline:

• At first, you need to download the form 22 from government website of registration. And affix it with Rs 2 non-judicial stamp and address it to Tahsildar. Also, give an attested copy of your residential proof as these details are required to get a certificate.
• Now provide the correct ownership details like, where the property is situated, who is the owner. You must write a full description of the property in the application.
• And then pay the requisite fee, and it must be paid according to the period of encumbrance. The encumbrance year period starts from April 1st of a calendar and it closes on next year’s March 31st. The encumbrance certificate is generally provided in the regional language of the state or you can also obtain an English translated certificate by paying an additional fee.
• The application written by you to get encumbrance certificate must be submitted to the sub-registrar office, under which the property has been registered.

How much time does it take to get Encumbrance certificate?

The approximate time taken to obtain an encumbrance certificate is usually 15-30 working days. Usually, people get their encumbrance certificate within 20 days, but it surely does not exceed more than 30 days to receive the certificate.

So, this is what encumbrance certificate means and the reason it is required in property buying.

When you are buying a property, the main thing that you need to focus on is to keep a big amount of money aside. But the transaction of such a big amount is very risky, as you first have to fulfil all the clauses and agreements and then the money is transacted. For situations like these, escrow is very helpful. Escrow is the home buying process where the payment is kept safe by the third party until the deal is closed and the house officially changes the hand.

To help you all understand the concept of escrow in a better and informative way, in this article, we will be telling you each and every detail about escrow and its importance. So, here have a look at the blog.

What is Escrow?

Escrow is an agreement between two parties where one is selling the property or working for the other party in exchange of money and to transact such big amount a third party is also involved in the financial agreement who regulates and holds the payment in an escrow account or to themselves. When all the clauses are completed and all the terms of the financial and home agreement are met as discussed and overseen by the escrow company, then the third party transacts the amount to the second party.

The concept of escrow is very useful in case of transacting a large amount of money and where many obligations and clauses need to be fulfilled. For example, you are borrowing mortgage loan from a bank, then you will get an escrow account, where the lender will deposit the monthly mortgage payment. And by collecting the amount each month, the escrow account reduces the risk of you falling behind on your obligations to your insurance provider.

How does Escrow works?

The Escrow officer is the third party- someone who is forming the closing company, an attorney, or a title of company agent (an agent may vary from the state). The third party is the one who assures to make everything sort so that the closing proceeds smoothly and includes the transfer of money and all documents. It protects all the necessary parties ensuring that no funds and property change hands until all the necessary requirements have been met.

Why is Escrow important?

When you plan to buy a home and pay the first instalment, the paycheck of the first instalment is then placed in escrow. Which means the payment is not directly going to the seller. It will be saved in the escrow account that we can consider the third party. And until all the legal work is done, nor you neither the seller can touch it, as it is securely saved in the escrow account. Thus, the escrow account in important to both the parties.

For instance, if the buyer pays the first instalment and for some reasons, the legal agreement and paperwork is not done, then the buyer can easily get the money back and won’t have to repeatedly ask the seller to give it back. And same goes for the seller, if both the parties directly pay and sell the property and if the seller signed the property papers in the name of the buyer and the buyer does not pay the whole payment because of any reason, then it can be a big legal issue. But by using an escrow account, you won’t have to handover property without getting cash at first place and vice versa.

How much does escrow cost?

The escrow cost varies as per the buyer and seller. Both parties pay the fee which is about 1% to 2% of the total cost of the home.

How does Escrow protect buyers and sellers?

An escrow protects the buyer and seller from the risk of losing money and losing property respectively. For example, the buyer has a home inspection of the house and sees that the roof needs to be repaired and the seller admits to repair the roof. However, if the buyer still does not find the roof repaired as much as they were expecting. In this case, the seller won’t see the pennies of the buyer’s money until and unless the seller fixes the roof as per buyer’s requirement. Thus, if both the parties go for an escrow, then the seller will surely get the money in exchange of his property and the buyer can maker seller do all the legal work or repair work that is mentioned in the agreement and until the agreement clause is fulfilled, the buyer’s money is safe in the escrow account.

Once the transactions from both the parties have been deposited completely in the escrow account and the legal work and agreement is signed, then the earnest money deposited will be submitted to the escrow holder. And the flow of money must not be in an irregular manner otherwise it can be an issue. Because an escrow holder obeys only the instruction written in the agreement.

The duties of escrow holder include but are not limited to:

• The coordination between the flow of documents and funds.
• Arranging the order of search and this will indicate the record of ownership.
• Responds to the lender’s requirements.
• Responds to the authorized request from the parties about the transaction.
• Facilitate the signing of the loan documents.
• The closing of the escrow account when all the conditions are met and funds as per the instructions.

Is Escrow important while purchasing the house?

Escrow serves as a neutral state for the depository for the exchange of documents, information, money and closing the deal. Escrow is not mandatory when a house is being sold but it is highly recommended. Only the risk of losing money or property is reduced by giving a chance to escrow. The escrow agent is a trustworthy agent by the bank or by an ensured company who cares to assure that the documents, records and information are provided on time and the parties are satisfied with the requirement of the timely transaction. Since the sale or purchase of the home is one of the most important parts of the one’s life. As in includes the hard earned money or property of both the parties respectively.

Escrow plays an important role in property transactions. The real estate and the escrow not only just involve sale or purchase but also includes the lease refinancing. The personal property also includes the purchase of the business opportunity, of a mobile home, as well as the handling of the sales and stock transfers. Bulk sales usually involve the sale of a business and mostly the notice is being provided to the creditors before the business when the transaction is completed. The escrow can handle the most important and difficult tasks. After the submission, it tells that escrows are not utilized solely on real estate matters and can have benefits for cases which are real and have own personal property transactions. The exchange of cash for the property is not as simple as we think.

In most of the processes of real estate, it includes billions of hurdles which has to be passed on. The unique thing about the escrow is that it provides the protection of the parties involved and arises over those hurdles; It is just like putting on a helmet for security and safety.

If you are a lender, seller or a buyer, just make sure that no property, assets do change the hand rights away. There is a certain period of time where the transaction requires specification. The person who is holding the privacy of consumer might protect important documents and funds as well. And the person who purchases the property usually faces many difficulties in terms of money in the purchase. The escrow account procedure includes all the deposits of the decided amount of money and by the agent, it is deposited into the bank. This might be payable only when the seller agrees and the contract terms are completed.

In real estate, there are two types of escrow accounts for the home buying process and the account is being open for the mortgage lender to pay some property related costs. If the escrow account is the part of the loan then the monthly payment should be paid for the insurance and taxes and it also includes the mortgage payment. The monthly payments of the escrow account are being deposited by the mortgage serviceman. The Real estate account is also known as pre-closing escrow accounts. The third party holds the account which is separate from the seller and buyer. It protects all the interests which are being involved in the transaction. These accounts include all funds, paperwork which is required at the time of the transaction. An escrow account provides protection for each and every person and of course for both the parties (seller and buyer).

So, this was all the information about Escrow, escrow account and its importance.

If you’re looking to put a property on rent or thinking of letting out a property on lease, then rent agreement is a thing that you must know before you initiate your quest for the right property. A property can be occupied on lease according to the Registration Act, 1908. As per this act, a registration of a lease agreement is a must if the rental period is more than 12 months.

What Is A Rental Agreement?

A rental agreement is one of the important aspects most of us often don’t pay much attention to it. Also known as the lease agreement it is a legal contract made between the landlord and the tenant. The agreement is a very important legal document comprising all the terms and clause related to letting out a property on rent. It may include factors like monthly rent, security deposit, basic information regarding the property such as size, address, type, and the duration of the agreement. Both the tenant and landlord would be bind after signing this document. Therefore, it is advisable to thoroughly go through a rent agreement deeply and reading out all the rules and clauses before signing it as you can negotiate on certain factors.

Why Is It Important?

The vast majority of us who have ever taken a house or property on lease or leased a property, have encountered some type of friction throughout the tenure period. This must have developed a sour experience to a tenant-landlord relation. Such issues could hold legal grudges to avoid which both parties can legally make things simpler beforehand via a rental agreement. The agreement is very vital for rentee and landlord as it can provide property’s safeguard to the landlord whereas it protects the rentee from facing unlawful demands by the landlord.

It additionally anticipates renter select ownership of the property for the term specified in the agreement. It is also a powerful document for the owner in case there’s no demand of security deposit in advance where renter can claim unlawful reimbursement. In that way, you can see that this a vital document in the modern age scenario for both the owner and tenant.

What Are The Factors That Must Be Included In The Rental Agreement?

1. Name Of The Occupants:

Imagine a case where you’re the owner of a property and your tenant suddenly vacates the place or you’re living in a property as a tenant and people visiting your place or living with you is a concern for your tenant creating issues between you two. In both these cases, the righteous power of both the parties must be appreciated which is taken into consideration legally with a powerful document like a rental agreement. Mentioning all the names of the occupants in the rental agreement is a must so as to give a clarity about every individual living or should take responsibility of the place.

2. Duration Of Tenancy

To make sure the tenant will vacate the place on time or would not unlawfully try to take possession of the property, mentioning the duration of tenancy in a rental agreement can put the owner on a safer side legally. On the other hand, the property owner cannot unlawfully force tenant to vacate the place prior to the decided duration of the tenancy if it is on your rental agreement.

3. The Rental Amount

The rental sum and instalment systems are specified here. The sum gathered every month, the date at which the lease is to be paid, punishment statement for any late instalment, and so forth. This will guarantee that neither one of the parties endeavours to assert unlawful money related requests and adhere to the stipulations expressed in the assertion.

4. Cost For Maintenance

During the tenancy period, the maintenance cost that should be bored by either the tenant or the landlord must be mentioned here. Any expenses including major or minor repairs must be covered within the rental agreement as a clause to get further clarity about these things in the future or during the tenancy period.

5. Rules That Must Be Practiced:

The agreement ought to obviously mention the treatment of the property and its surroundings. Factors like subleasing and restrictions to a major alteration of the premise must be mentioned here clearly.

6. Security Deposit (If Any)

Whatever security deposit has to be paid should be mentioned hereby in the rental agreement and should be signed by both parties as a sign of nodding on those clauses mentioned in the agreement. By this way, the tenant can protect themselves from the landlord’s unlawful financial demands if he wishes to vacate the place immediately. In a similar manner, a landlord will have a safety assurance in the name of the security deposit for a scenario where tenant vacates the place without paying any rent.

7. Renewal And Notice Period:

For the sake of prior knowledge, renewal and notice period should be mentioned properly in the agreement. The date should be mentioned properly in the document and should be signed by both the parties.

8. Amenities Provided

Just for the safe side, all the amenities that is provided within the property must be mentioned in the agreement along with their latest condition so as to avoid any damage or the financial settlement of any repairs regarding this.

9. Exit Clause

To clear out any penalties before leaving must be resolved under this clause.

10. Signature And Date

Both renter and landlord must sign the agreement at the end along stating it as a nod to all the clauses mentioned in the rental agreement failing to which might lead them to face legal penalties.

These were the major clauses every rental agreement must comprise and is a basic format of every rental agreement. The format of the rental agreement is of high significance and you must be aware of it before signing one. Remember, always read all the clauses carefully before signing the document.

One more major aspect of any rental agreement is the Police Verification of the tenant. This helps in a background check of the tenant so that any unlawful activity must be prohibited from using your property. This is an important thing to ensure the safety of your property and its neighbourhood. It is mandatory and not performing this is a punishable offence under Section 188 of Indian Penal Court.

Why Most Of The Rental Agreements Are Usually Of 11 Months?

According to the Registration Act, 1908, the registration of a lease agreement is mandatory if the leasing period is more than 12 months. To avoid stamp duty and other charges people generally opts for a rental agreement of 11 months which can later be renewed. Below are the stamp duty rates in Delhi in which a flat fee of INR 100 is added is security fee is paid. Also, a flat fee of INR 1100 is also paid as registration fee via Demand Draft (DD).

TIME	STAMP DUTY COST (On total average annual rent)
Up to 5 Years	2%
5-10 Years	3%
10-20 Years	6%

So, in order to avoid this stamp duty charges both tenant and landlord mutually usually opts for 11 months rental agreement which can be extended if the costing is mutually shared by both the parties.

Rental Agreement Format:

Here’s a sample format of rental agreement so as to give you a glimpse of how it should be:

You Can Download A More Elaborate Version Here