Is it Permissible to Participate in Auctions Held By Banks? – Ask Shaykh YQ #243

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Yasir Qadhi

Channel: Yasir Qadhi

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Today I begin my q&a with a question from SR zeyneb from Mumbai, India, mashallah Tabata, Allah, may Allah help your situation over there in that land, she emails and she says that sometimes she participates in auctions that are done by lenders and sometimes banks, when they take possession of the object when the lenders are not able to pay off the loan. So the auction is then done, let's say for a car, maybe a house, maybe a piece of land. And so she's asking is it permissible to participate in such auctions?

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107 mi COVID ICA Illa de Jalan, no, he him first IRLO lickity in kidding.

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Now, this question is actually composed of two separate questions. So let's start with the second one first, which is the auction and then the first one will be banks doing auctions, which is slightly different than the concept as we will see. So the the concept of auctions having an auction. And of course, an auction is a mechanism of selling something where different buyers come together and they bid on the same item publicly, everybody knows there's a auction going on, or you know, a group of people can know there's an auction going on. And so, the point is, you know, that the price is going to be not set, it is going to be given to the highest bidder and the auction will

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then be sold or whatever the item is going to be given to the highest bidder. This concept in Arabic is called one of the terms for it is Bayer as Mazaya. The the the sale in which people are bidding against one another higher bids mosaica from zyada. And you're bidding against one another. And the vast majority of scholars of our tradition of all of the legal schools this is the default position of the muda hip is that with minor differences of the conditions, but the default is that it is allowed. It is halal, that the concept of auctioning something off and then selling the item to the highest bidder. It is something that the default position of the OMA the majority of the OMA says it

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is allowed the dissenting voices are small and we can ignore them. And the evidence is for this are many of them is that it is authentically narrated in a very, very interesting and beautiful Hadith that the Prophet sallallahu alayhi wa sallam himself auctioning off items he himself took charge, and he auctioned off items. And the hadith is reported in Sunon at Timothy and as symptomatic says that there was a man from the unsought who came to the Prophet sallallahu alayhi wa sallam begging for some money. So the Prophet sallallahu alayhi wa sallam said, Don't you have anything in your house? He said that yes, I do. Or messenger of Allah. I have a thin carpet if you like that type use

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I put on my floor rug, okay, and I have a as an ornament, not an ornament, a mug that I can drink from. Okay, so I have this in my house, I have a carpet, I have a rug, you know a thin rug that is there and I also have you know utensil that I purchased and I use it for my drinks. So the Prophet sallallahu alayhi wa sallam said Bring me these two items. So the man brought these two items, the Prophet sallallahu alayhi wasallam picked up these items and said, Who shall buy these two items from me? So a man in the audience said, I shall buy it for one dyrham So the profitsystem said Will anybody buy for more than a did hum and he continued to ask who will buy for more than a did a home

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then another man stood up and said I shall buy this for to their homes. So the promises in gave him these items for to their homes. Then he turned to the uncertainty. And he said that go and purchase with one of these did hums food for your family and with the other dyrham go purchase an X and bring it back to me. So he went and he bought food for his family and with the other Dorami purchased an X you know to chop wood. And then the prophets Allah Allahu Allah who was said when he brought him back the acts the promises and put it in his hand, he put it in his hand, and he said go and chop wood and sell wood. And I don't want to see you for 15 days. You keep on selling wood, keep on

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buying and cutting wood and selling wood. So the man came back after 15 days, and he had owned now 10 Digital homes and some of these dead homes he had used to buy clothes

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Some of these he used to buy food for his family. So he explained to the Prophet Sall Allahu Allah said him that in these last 15 days, he earned 10 their homes from chopping wood and selling it. So the Prophet sallallahu alayhi wa sallam said, for you to do this, go and earn your money, it is better for you, then you go, and you beg people that will be a mark of shame on your face on the Day of Judgment, it is not allowed to beg accepted three situations. And this is a famous Hadith, you are not allowed to beg, asking for money except in three situations. Number one is an extreme poverty that you cannot get out of. Number two is that you have a debt that is forcing you to

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basically bankruptcy, you are completely out of money, and you're owning lots of people in debt. In this case, you can call people and say I need money i You can beg for money. And number three, is that when you are taking part in what is called the blood feud, ie you're settling the debt, when a tribe has a member of a tribe has killed another tribe, and they're going to go to war, something's going to happen. And a man stands up and says I will take care of the blood money, there's a lot of money. So when you are trying to bring reconciliation between two people, then you will you will need help from other people, then you will stand up and say, Dear brothers, you know, I'm bringing

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so like, between these two tribes, I need money for this. So this is a heavy thought process. I'm allowed begging publicly in three situations. And I should say not begging, necessarily, but asking for money. So you're allowed to stand up and ask for money publicly and three situations. Number one, when poverty is extreme, and it is beyond your control, obviously, what are you going to do May Allah protect all of us that people genuinely are that to number two, that the debt has overcome your you're going to declare bankruptcy and number three, when you are bringing so like between people, the point being all of this tangent because it's a beautiful Hadith. And I want to do to all

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know, this hadith, all of this tangent because what the Prophet SAW said and picked up these two items, and he made an auction who's going to buy this one Dirham, who's going to go more, who's going to go more who's going to go more that he said to their homes, then he said gave it to him for to their homes, the Imam Al Cassani, the famous Hanafi jurists, he comments on this, he says, the fact that the prophets ism did this shows that it is permissible because he would never do something that is mcru. So the fact that he did it himself, it shows that it is permissible. And Emanuel Cassani said, this type of transaction has been commonly done throughout the lands throughout all of

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our centuries, and it is well known. And you know, nobody has really stopped it. It is the part and parcel of how people do business transactions and quote, and we also have another tradition inside Bahati that a man passed away, and he had a lot of debt, and in his will, and in his will, he had said that I have a slave who is going to be a freed however, he had debt he had to pay off. And so when you have dead this takes priority. So the Prophet sallallahu alayhi wa sallam, the children came, they said, We don't have money to pay the debt off. So the Prophet system himself, he said men yesterday had the lab who's going to purchase this ABD. And so a person stood up and purchase

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stabbed with that money, he then paid off the debt. Imam Al Bahati quoted this hadith under the title, the chapter of the Messiah that the chapter of auctioning the chapter auctioning, and even 100 comments, the fact that the Prophet sallallahu alayhi wa sallam said, Who shall purchase this abd indicates he was offering to the highest bidder, so that the maximum amount of money can be given to the bankruptcy to the debtors to those that are, do money. And so this concept of selling for the highest price, it is well known, it is established in the sooner the famous theory or even a bureau by said that the people that I saw in my lifetime growing up and he grew up in the generation

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after the Companions, he said, the people around me I saw all of them doing this type of transaction, and they didn't consider this to be problematic. And this is a report also in Sahih al Bukhari therefore, the vast majority of scholars are pretty much although the medina you can say they're small groups of tabula and others early scholars, they said it's not allowed in the reasoning was also an innocent and good one. They said that the Prophet sallallahu alayhi wa sallam forbade in an authentic hadith that you bid against the bid of your brother and this is an authentic hadith. However, the prohibition of bidding against the bid of your brother, it is easily understood

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that you do not bid against the bid of your brother once the bid of your brother has been accepted. And there is an agreement and there is an understanding and before the transaction has occurred. So simple example, the Hadith applies in non auction type of scenarios. So for example, you say to your friend that I have a car for sale, do you want to buy it? And he says yes. And so you agree to a price? He goes, I'll buy it for $5,000. Okay, is it close next week? You know, we'll transfer I just need the car for a few days, we'll transfer so we have agreed, and everybody knows, now another person hears and he goes, Oh 5000 I'll pay I'll pay six to you. And so he's going to go into

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finance.

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After the agreement has been done, this was not an auction. This was an agreement, an offer was made, the offer was accepted. But the keys haven't been done. Now a third party comes and says, Oh, I will pay six. What do you think is going to happen? People are going to be hurt feelings are going to be hurt, it will bring awkwardness. Why do you do let it be called last it was last now don't get involved once the agreement has been made. So there is a Hadith do not bid against the bid of your brother, this hadith is not applicable to the auction. And we know this because the processing himself did auctions. The point is when you're in an auction environment, everybody knows the point

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of that environment is to bid against each other. So the problem that will come when an agreement has been made, and then you come and you say, I'm going to bid against you there's going to bring problems in Ohio, Islamic brothers are going to be hurt. And that's why it has not been allowed. Once there has been a verbal agreement. However, in an open auction where everybody knows they're coming to the table for an auction, there is no ill will in this regard. And therefore it is completely permissible. And just FYI, the mathematically Stamey, the Council of Islamic jurists, which is the largest Council global Council in the world, and it is one that I generally when it

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comes to especially finance issues, I generally like to follow this council so that I can say, hey, you know, they're the ones that said this, not me in their annual meeting in 1993. In Brunei Darussalam. They issued their fatwa their decree, in which by unanimous consensus, they allowed auctions to take place with some basic conditions such as the item is known. And the people know that it is an auction, meaning that is not to people who have agreed and then you come and outbid them no is the context is there, or it is explicitly announced that this is an auction, and also of the conditions. By the way, this is an important condition, that there should not be a fake plant

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amongst the crowd that is meant to increase the prices because what happens sometimes there's deceit and the one who's selling the item will plant a friend or a paid person to always edge up the price when reasonable. And when he thinks that he's going to get more for it, so that the price can be jacked up. And this is something that is not allowed. Also, the fatwa has said, the field Council has said that even if the auction is closed to a limited group of people, or you have to pay to be a member to be in this auction, no problem. They're reasonable fees as long as there's no gambling because you're opening an option, it's not a gamble that you know, you you pay money and then

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randomly one person is chosen as gambling. But if you pay to be a member of a certain club, or you pay to be within an auctioneering group, and to be a member of that group, in and of itself, this is permissible because you're paying for a membership. Once you're a member now you can auction for an item and and purchase it, no problem. So all of this is permissible inshallah that was a lengthy answer. So then inshallah never have to go back to the question of auctions per se. That having been said, our sister from Mumbai says she typically goes to the auctions of banks, and this is where we go to another issue then. Okay, so Auctions is one thing, and Auctions is holid. Overall, the second

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part purchasing from a bank, an item that the bank has confiscated, because of the default of the loan, because the bank has given a loan to the lender, the lender has paid back a certain amount, and then the lender has

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been unable to pay. And so obviously, the bank confiscates everything back and then sells the item, and then takes the money. Now, overall, from me speaking generically, from an Islamic perspective, obviously, what the bank is doing is how long there is no question about this, any person who lends money, if the lender defaults on the loan without an excuse, okay, you have the right to take him to court, you have the right for the court to force him by selling certain items, even if it is the item that he purchased to give you your full money back. However, you do not have the right to take more than your money. And so what the bank does is a type of injustice with that is explicitly

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haram, because it is the height of injustice, to get a large portion from of the loan from the lender, and then take even more by selling the item. Let me give you the standard example here in America, that a person

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takes the loan for a house, okay, and let's just be simplistic and say the house is $100,000. So for 10 years, the man is paying, paying paying and he pays back, let's say $60,000. After 10 years, he loses his job, and for three months he cannot pay the loan. So for three months, if he is defaulting on the loan, the bank will repossess the house, okay. All of the 60,000 that the man has given goes to waste. The bank will then sell the house typically for more than 100,000 because the price will have gone up. So even let's just say 100,000 in the bank sells

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Even let's just say which is not the case, typically, the bank will make a profit doesn't matter profit or not. The point is the bank will get, let's say, 100,000 from selling, the bank already has taken 60,000 from the lender. So the bank has a grand total of $160,000. And the lender goes away with nothing. 10 years of paying back literally flushes down the toilet and goes to waste just because the poor man lost a job, he couldn't pay for three months. But the what, what a height of injustice here, right? How much lunamon That's why this area does not allow interest loans, it is the height of injustice, it is a type of volume, even if the person agrees for it, it is not

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something that is allowed. Now for the bank to do this with the lender is not allowed for you to give a loan, and then take back more than the loan. And by the way, if you were to give a loan, the man purchases something, he cannot pay it back, you sell the item, you take the default. So in this case, you would take 60,000 that he has paid you for the house, then you would take 40,000 from the house. And if there were fees involved by going to the court, you may take the cost of the fee so that you don't have to pay the lawyers, fees and whatnot. But you cannot pocket a dime more than the 100,000 that you gave the person it's a loan is not a business in Islam, loans and businesses are

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two separate transactions, you do not become rich via loans. Loans are not a business mechanism. This is the fundamental difference between Western capitalism between the economic system of John Smith and Western capitalism versus the Islamic Shetty, we do not make a business of giving loans, loans is an act of charity, an act of compassion, an act of kindness, you give a loan because somebody is in a difficult situation, and he must pay the amount back. Exactly. And if he wants to gift you without any agreement that he's going to give more, that is sooner. So it is sooner to give 100,000 and then some gift or something that you know, just take this because JazakAllah not put in

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the contract. The point being It is haram for a lender or a bank to take more and to then confiscate and then sell and take all of this, however, and this is where we get complicated. So I hope you're paying attention after all of this right? This is a multi layered question. I'm deconstructing it. So we understand how we approach this issue auctions or Helen

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banks, repossessing houses and taking the entire amount of the loan plus the amount of the house is how long, okay, now, put the two together. You have something the bank is done is haram, you have something that bank is going to do with it. That's halal, which is auctioning, okay, can you as a third party, you're not the lender. And you're not the lender, you didn't get the money. You didn't take the money. You are simply wanting to buy a house and you like this house you find who owns it, oh, the bank owns it because the bank repossessed it because the person defaulted on his loan. So you're buying the house and you have a clean and simple transaction. Let's not get into the issue of

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mortgages, right now that I gave a whole longer question about that. And you can listen to that q&a that I've done as well. Let's just say you have 100,000 and you want to purchase it clean from the bank, one transaction you give the money. Even if it's a you know, an auction, can you purchase the house that was acquired via haram through a Halal means? In other words, we can we can

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rephrase the question. And that is that this is a very weird way to phrase it does the Listen to me now does the Haram pneus of the house remain and persist after the bank acquires it such that it is held on for you as well to buy or the Haram sin is on the bank. And now it is held out for you to come in and then purchase from the bank via an auction. See, this is where it gets a little bit complicated. And of course, you're going to have you know, a number of voices here. I'll just be very simplistic for the purpose of this q&a And say that there is a much deeper discussion here. And there are many scenarios and expectations and exceptions sorry, not expectations, exceptions beyond

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the scope of our q&a, but to be simplistic the position that I advocate, which would be the position of the majority of scholars to the best of my knowledge and it is not the only position is the following when a specific item is acquired via volume and complete, how long without any some semblance or shall we call it without any ambiguity that it is clear cut loaded and how long and you are aware that this has been acquired illegally, then it is not allowed for you to purchase it. Simple example. You know for a fact that a particular person is selling you let's just say a used iPhone or a used Rolex watch right dubious character and for

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Whatever reason let's just not get into how you know, you know for a fact that he stole this watch. He stole it he broke into somebody's house, or he pickpocketed and now he's selling you this item on the street for a measly price.

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Can you say I didn't steal the iPhone, he stole the iPhone, I didn't steal the watch he stole the watch. No, you cannot. If you know for certain or with a fairly reasonable amount of certainty so there are dubious characters and dubious places they know they they are selling on the black market. And you know that this has been acquired via blatant Hallum ie breaking and entering or stealing or pickpocketing there is no ambiguity. This is clear cut injustice and the item is haram and it will remain how long for those who know it is haram. Now obviously, if you don't know and somebody whom you think is honest, has a watch and he sells it to obviously you don't have to do a background

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check and a survey and it's not your business he has an item he sells it okay you're scot free, but if you know that the item is haram and it is stolen and it is not acquired legally, then you are not allowed to acquire it it is not legal Islamically i in the eyes of Allah that money is haram and the watch is haram and if you own it, it is not your own you do not own it, you may think you own it, you do not own it, because it was never allowed to be owned by the thief in the first place. So the Haram pneus of the watch remains haram because you know that it is illegal and it is a stolen and so you cannot purchase it. However, when there is an ambiguity, we call it a Shubha. When there is a

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type of uncertainty in this regard, then in this case, the Haram miss of the item does not necessarily transfer after every transaction. So in this particular case, what the bank has done is how to sell the house, take all the money from the lender, and you know, from the sell of the house and to make a profit off of the loan. However, the one who took the loan, the one who borrowed the money entered into this contract, knowing that if I don't pay three times, the bank will repossess the house, and therefore he might be angry. His course is going to be angry, but he's not going to challenge us in a court of law. He's not going to say that, Oh, you know, um, he could say it's a

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very unethical, very wrong, but he knows deep down inside he agreed to these conditions right? And so this is a very important point because some of our brother and may Allah azza wa jal bless their sincerity and whatnot, but in their sincerity and idealism, they they think that fifth is any a very pious artistic in this regard. Yeah, my dear brothers and sisters, if you were to live like life like this, you yourself would not manage your own daily transactions, the Shetty has come to be a lived reality. And that's why you read the I need the books of fiction and they're actually PhD is done about the issue of how money when does it become halal and what not? And if you were to do

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this, then perhaps every single dollar bill you touch has been involved in the house transaction. What are you going to do then? So the point being that fear is a little bit more mature and sensible than the piety of Muslims that sometimes might not be within the bounds of the Sharia. Now, you say, I don't want to get involved with banks, good for you. I'm not telling you to go to the bank. If you want to say I'm not going to get involved with buying and selling from the bank to bank is an institution of injustice. Well, Xhaka LaHood don't buy from the bank. But don't use your fatwah to extract. Don't use your taqwa excuse me the whole pun is gone. Don't use your taqwa to extract a

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fatwa. Don't use your high level of Taqwa to say it's how long for everybody to purchase from the bank. No, it is not. The bank has acquired the land in a manner that is definitely illegal in the eyes of Allah. But the man from whom it was acquired from he agreed to this, and he knows he cannot challenge it. And therefore the item shall return to the bank in terms of legal ownership. And the bank then has the right to sell it to a third party ie our sister. What's her name? Our sister, Xena, from How can I forget? My daughter's name is Nina, our sister's Aina from Mumbai. She may participate in this transaction and she may bid on a house or a car or a land or anything that the

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bank owns, knowing that the bank has acquired via defaulting on the loan. And if she wishes to avoid getting involved with the banks, it is permissible and good and I have no doubt saying it is better for her and for all of you to have nothing to do with the bank. But it is not haram to purchase from the bank. Even though what the bank itself has done was held on when it acquired it I hope that insha Allah clarifies this issue and hope that we we broke it down for you so to summarize in a nutshell

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auctions

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are halal, as long as simple conditions are met. And whether the auction item is being auctioned by a bank, or by a director owner who actually purchased it completely legally, it is permissible for you to participate in such an auction. However, the item must be known by the way so I should mention here before I finish up, the item must be known, which means that, excuse me, which means that

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you cannot auction an unknown item. These days.

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There are scenarios where unknown items are oxygen, for example, people ship massive boxes in corn containers of ocean containers and then they don't pick them up, the containers are locked up, or people abandoned warehouses or storage is that are locked up. And after the lease has expired, the owner has the right to then publicly open it up in front of everybody and auction it off. In this case, the people who are bidding on these boxes, or the storage rooms, they don't know what is inside. And they're bidding anonymous. So they're bidding not anonymously, sorry, they're bidding on items. They don't know what they are, they're bidding on an unknown item, a box, what is inside the

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box, I don't know. But I'm going to bid 5100 and this would be haram because you cannot bid on an unknown item in an Islamic land. If such a box or container is unclaimed, the court will open it up and try to find the people if there is no paperwork and it is completely gone, then they're going to record and make an announcement so that when the original person if he ever comes back he will be given the price otherwise, then it will be auctioned off and they will have a mechanism of who will get that money if it is the owners of the storage where it is public well for whatever it might be, but it is not going to be for profit and you just auction it off for the sake of auctioning. So I

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hope inshallah Allah that answers this question. Yeah, man