Trap 24. ‘This Property Is Cheaper Than The Market Rate, So You Should Buy’

All of us like a steal. When there is an offer at the supermarket where you get a kilogram of sugar free if you spend `1,000, you will likely add more stuff to your basket to reach that number.

In the case of house shopping, such deals or offers sound even sweeter because the amount of money involved here is much larger. But when someone is offering a property that is available at a lower price than the market rate, it should raise a red flag for you. Ask yourself: will you ever sell your property at lower rates? The answer would most likely be no. Of course, there are cases of distress sale but those are few and far between.

If a seller offers a property at a slightly lower price than the market rate, it could be due to a genuine need for quick cash, financial distress, or plans to move out of the city or country. “Typically, such discounts range from 2-5 per cent below the market value, as this may help him sell the property faster. However, if the price is significantly lower, say, more than 10-15 per cent below the market rate, it could be a red flag for several reasons,” says Sunil Dewali, co-CEO of Andromeda Sales and Distribution, the parent company of Andromeda Realty Advisors.

There may be hidden issues, such as structural damage, legal disputes, or pending regulatory approvals, that the seller is not disclosing. Additionally, there could be title problems, such as unclear ownership, encumbrances, or overdue taxes, which could lead to legal challenges.

Plus, such a property may involve investment beyond the buying price. There could be substantial repair and renovation costs later. In some cases, the seller might be looking to avoid paying taxes by underreporting the value of the property. This may lead to legal complications for the buyer.

“One should be extremely careful if a property is being offered below the market rate. It’s critical to do thorough financial and legal due diligence before exploring such transactions," says Ravi Shankar Singh, managing director, residential transaction services, Colliers India, a real estate services and investment firm.

Adds Dewali: “An unusually low price might also indicate a scam, where the property isn’t what it seems, or the seller is attempting to defraud the buyer.”

While buying a property, it is important to do your due diligence (refer to the earlier two points) whether the property is new or old, cheaper or more expensive than the market rates.