2nd Legal Charge Exchange Problems

JJ_Young

Hi there,

I am completely new to this property buying business but thought I had done very well so far. Found a nice place 7 weeks ago, had the offer accepted by very nice family who said they were selling up to go and rent a place in the country. They said they wanted to rent first to see how they liked it. Anyway they have been very enthusastic about completing as early as possible and we were finally in a position to exchange contracts on Friday when our solicitor put everything on hold saying we can't proceed yet because the vendor has a second legal charge on his mortgage that they have just found out about! I'm not sure what this means and whether or not I am now going to get my house at all. Everything has run smoothly up until now and I drove by the property yesterday which is now empty..they have gone to their rented property. Can anybody offer me any advice or hope? I have booked removals, given notice on the lease to my house and will basically be out on my ear whether I get the place on time or not!

Incisor

If they have gone already, it looks to me, given their charm etc, that they were hoping to avoid a repo possibly, but didn't take into account your offer not being enough to cover the mortgage and their loan secured on the house.

If this is the case, you probably won't get it on time, although ultimately you might get it if your offer looks to be the best that can be expected.

Premier_2

When someone buys a house, they often borrow money via a mortgage which is secured on the property

However people can have other loans secured againt the property too (this is a second charge). e.g. often people with lots of small loans will get one big loan and secure it against the proprerty - that's what the guys like Norton Finance usually offer.

However, the loan companies will be paid off first (after the mortgage company) before any balance goes to the owner. If the owner didn't realise this, then the owner may not be able to buy the next house.

Worse still, the total of mortgage & loans may be more than the value of the house itself, and that will also complicate things.

JJ_Young

Thanks for your help guys. When we put our offer in , they rejected it the first time and stated the minimum amount they could accept to 'meet their own own costs'. We agreed to it because it still seemed reasonable. The positive side of me hopes this is because they knew what they owed and that it now just a paper ex to make sure all the loans are cleared. Also, it seems weird that they would commit to a lease on top of a mortgage at this early stage. How would they stand if we got freaked and pulled out? In a mess I should think. It's all becoming very peculiar!

Premier_2

As you haven't yet exchanged contracts - you are free to walk away at any time, at least from a legal standpoint (perhaps not from a moral standpoint)

However, if the price you are offering does not cover the current charges on the property (after the solicitor & others take their fees) and the seller can't meet this shortfall from other funds - you might find the solictors will not exchange.


Edit: But I'm not implying you should pay anymore - you should only be paying what you believe it is worth - the charges are not your problem.

Incisor

JJ_Young wrote: »

... Also, it seems weird that they would commit to a lease on top of a mortgage at this early stage. How would they stand if we got freaked and pulled out? In a mess I should think. It's all becoming very peculiar!

They might be in that mess already.

When we put our offer in , they rejected it the first time and stated the minimum amount they could accept to 'meet their own own costs'. We agreed to it because it still seemed reasonable.

As Premier says. They probably forgot about solicitors fees. It does indicate they are right on the edge with this, particularly if they have had to fork out up front for a rental. In your position, I might reiterate the offer subject to exchange in 14 days or whatever, just to try and concentrate minds that the bird in the hand is about to fly.

lincroft1710

Agree with Incisor set a firm exchange date or walk away.

JJ_Young

Thanks to you both. It's not an ideal situation but I really want the house!

Incisor

JJ_Young wrote: »

Thanks to you both. It's not an ideal situation but I really want the house!

Then ask what the shortfall is and offer to pay it but demand their fridge, TV, cooker or anything else you can think off to make up. They will have to move them abck, so won't be in mint condition.

But you are better to walk away.