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|3rd July 2011, 21:49||#1|
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Join Date: Aug 2006
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Selling an apartment - Documentation/Things to be aware of
We've got enough resources for buyers who are out purchasing land and apartments - detailing the procedures they need to follow and the documents they need filled out and filed before concluding a transaction.
However, I could hardly find anything with respect to seller's. What I was looking for is a legal guide or documentation to-do's from a seller's perspective - to protect the seller's interest when negotiating, entering into, and concluding a property transaction.
Let me start with a few pointers and questions:
1. When identifying a buyer, ensure you decide upfront how you want to structure the transaction. This makes it very clear for the buyer to decide how he/she should work the deal out. You should know the current guideline value for your property. Find out at your local sub registrar's office.
2. Ensure you have all the property documents neatly filed in copies so that potential buyers can have a look at them as they visit you. Also make sure you have the original documents in a transparent file and sorted in chronological order. A transparent file will make sure the original documents are preserved and you dont staple pins all over them (which need to be removed when making copies - thus making a bunch of holes all over them).
3. The property related documents you must have in your hand should include:
- The sale agreement between the previous seller and yourself
- The sale deed between the previous seller and yourself
- The construction agreement entered into by the builder and the first purchaser
- The parent document, or the link document which will detail the property's ownership antecedents for the past 30 years or so. This will be a massive bound book in most cases.
- If an apartment, you should also have an approval provided to the builder by the local municipal development authority (in chennai, it is the CMDA or the Chennai municipal development authority). This will be a big document which approves the entire block of apartments and will also approve the standard layouts of the apartments in the particular block.
- If in Bangalore, you will also need the Khata document for your apartment.
- It will be helpful for the buyer if you also have a No Encumbrance certificate from the local sub registrar's office where you've registered your apartment. However, its important that the buyer's do this themselves so they have original verification done on your apartment or property.
4. Other documents will include the latest property tax receipts and water tax receipts.
5. Make sure you know what the undivided share of the property is with respect to you. This is what most buyer's are keen to know. You will find this on your sale deed and sale agreement.
6. Request for a draft of the sale deed from the buyer's lawyer so you can have it vetted before you sign it. Same goes for the sale agreement or any other document you'll end up signing with the buyer. Draft first - sign later.
7. Prepare a document which lays out all the documents in original which you have handed over the buyer and ensure they sign "received". This indemnifies you from them losing the documents in the future.
8. Ofcourse, if the apartment was purchased with a bank loan, then those documents including a letter from the bank if you have foreclosed the loan is mandatory.
Now a couple of questions:
1. I assume its alright to progress directly to the registration if there is not much time to be spent between closing out on price or for the buyer to arrange for the funds. I mean skipping an advance, sale agreement etc. and having everything inked and done at registration time?
2. What other documents does a seller need to have from the buyer when selling the property? What kind of documentation will need to be shown to the Income tax department - for income from sale of property? Would just a copy of the sale deed be enough?
3. I agree and understand that the consideration mentioned in the sale deed has to written out on a demand draft. Not a cheque or any other banking instrument.
If there's anything else we need to be aware of, please do chime in. If people buy, they'll need to sell too
|4th July 2011, 14:47||#2|
Senior - BHPian
Join Date: Jun 2007
Thanked: 149 Times
Re: Selling an apartment - Documentation/Things to be aware of
Absolute necessity - register the agreement to sell (no - not the transfer deed). I recall reading somewhere that agreements to sell need to be registered. This was not required till about 3 years back. So, I am not very sure. If required, take legal advise on this.
Absolute necessity - do not issue any paper - not even receipts for cash, and certainly not agreements for sale - unless you get a sizeable part of the total sale value as advance. (my rule of thumb is 1/3 of sale consideration). Remember that once you enter into an agreement for sale, even if the other guy defaults, you are not free to sell the property to anybody you please. You will be stuck with the property, liability to pay interest on the advance you got, and still be deprived of the cash you wanted from the sale.
Absolute necessity - meet a tax planner on how to structure the finances and payments, and tax implications for you.
Absolute no-no:- Accept payment in cash. Plenty of fake currencies around there.
Maybe - cheques. (I disagree with what is posted above on this) Issue a receipt for the cheque; sign documents / transfer deeds only after the cheque is cleared. You can accept cheques for initial advance, etc., and specify that the deal fails if cheque bounces. Even if you accept DD as final payment, specify in transfer deed that the payment is by DD, and mention the number, date and issuing bank in the transfer deed. (some buyers who take loans for purchase will pay by DD only).
Absolute no-no:- payment in black. Let us face it - it is very tempting; but being the salaried class we are, we will find difficulties in accounting for all that mess later on in life. Even capital gains tax rates are very reasonable nowadays.
Absolute no no- Do not part with possession unless and until you get 100% payment. Once you enter into an agreement to sell, and part with possession, all you have is a right to recover the balance with "reasonable interest". In legal sense this is always in single digits.
Absolute no-no. Pay today, sale deed now. Enter into an agreement, and allow for some days - a fortnight or more for final sale deed. Any person - even with huge financial capacity will need at least that long to look into your documents, and arrange funds, which will almost always run into six or seven digits. Unless you get to know the buyer, and his sources of funds, this can be very risky. (Selling to people with "law-and-order" problems can invite scrutiny for you later on).
Nowadays, both buyer and seller need to quote their PAN number(s) and photographs on transfer deeds.
But, beware of buyers wanting more than 1 month time to close the deed. I have allowed up to 6 months. But do a very thorough background check on him if he asks for any time longer than 1 month.
A truant buyer, like a truant builder is a nightmare. Be very careful of the person who you are dealing with. Some smart alec brokers pose as genuine buyers, enter into an agreement with you and then sell the property to another person for as much as 50% premium. Such persons, when they fail to find another buyer will give you hell of a time.
Most important - Hand over original prior deeds only at the time of the final registration.
Edit:- Having separateagreement to sell and the final sale deed, with a short time in between also helps in convincing the IT authorities and also in proceedings in undervaluation (for stamp duty) - especially in Kerala.And err... some things cannot be stated in public, no??
Last edited by BaCkSeAtDrIVeR : 4th July 2011 at 14:53.
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