Look before you buy a used home

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You can get second-hand homes for a bargain now, but here are the checks you must run before buying one

Dull sentiment in the property market has thrown up bargain deals in older homes and apartments in many localities. You must, however, ascertain why the rates are so enticing. Is the building falling apart? Is the seller in financial trouble? Here are a few checks you can do before buying a used home.
Building quality

The normal life of a home is 25-35 years, depending on how well it is maintained by the owners, says Pradeep Misra, Chairman & Director – REPL, a real estate consultancy firm.
While homes older than 20 years may be suspect, age is only one of the factors that determine quality. Many relatively new apartments may suffer from a leaky roof or shaky walls if the plastering was not done properly. Do a thorough check of the structure to ascertain there are no hidden issues.
Remember that flaws may be easily covered up by a good paint job. For instance, cracks and mould can be brushed away effortlessly. Check if the wall is hollow by hitting it and ensuring that the sound resonates, advises Sam Chopra, the Chairman of RE/MAX India, a Delhi-based property brokerage service.
In addition, check for plumbing and electrical problems, as these issues could turn your investment into a money pit.
The pipes and fittings should not have any cracks and the water pressure must be good. Also, test water quality and ensure it is colourless and odourless.
Inspect the electrical wires for proper insulation and wire quality and also make sure you obtain the latest receipts for property tax, water tax and electricity.
If you are satisfied that the property is in good shape, safeguard yourself against any legal trouble as well. Buying a used home requires more legal due diligence than buying from a builder directly.
The general thumb rule when you buy a used home is to initially pay a token booking advance of ₹10,000-50,000 before you can ascertain the legal title clearance, says Chennai-based advocate Shyam Sunder.
If the seller had mortgaged the property for an existing bank loan, check if EMIs were paid regularly and the loan amount availed by the seller was standard before entering into a formal sale agreement.
One red flag is when the seller demands over 50 per cent of the property value at the time of signing the agreement itself.
If you are taking a bank loan as well, the outstanding amount on the seller’s loan will be paid directly to the seller’s bank. The advance amount should be calculated taking this into account.
Another warning sign that Shyam Sunder points out is sellers insisting on closing the bank loan on their own, while demanding payment in their own name. Buyers are advised to pay the amount directly into the loan account of the seller.
Turn to online resources to help you detect troubles with titles or encumbrances. For example, in many states. you can apply online for a Non-Encumbrance Certificate for the last 30 years. Land revenue records are also available online in many states.
Layout approval, building permits and other such local government documents may also be checked online.
Cash deals

In many cases, a cash component of the sale price may be demanded because the market price of the home is much higher than the circle rates at which registration can happen.
Shyam Sunder advises that when paying cash, you should ensure that immediately after handing over the cash portion, the seller is accompanied to the sub-registrar’s office to register the sale deed.
Finding deals

As it is hard to stick to a standard price for used homes, the bargains you get could vary. For instance, if the property has been in the market for a long time and the seller has financial need, you may be able to negotiate easily. The deals you can get may also vary with the locality. For example, projects launched 3-5 years ago in the National Capital Region are yet to be handed over. Once these are completed, buyers may be able to find good deals when investors exit their investments, says Om Chaudhry, Founder and CEO, FIRE Capital, a real estate private equity fund.
Also, serious buyers tend to get discounts easily, says Chopra. As deals primarily go through brokers, find a reputed broker who is aware of market trends and prices. Don’t forget to check the prices of new homes as well. Under-construction and new properties are available in markets such as Chennai and suburban Mumbai at a 15-30 per cent discount to the secondary market, says Om Ahuja, CEO – Residential Services, JLL India, a residential consultancy.

Source: Magicbricks.com