Buying at Auction and Charge Against Property

Georgie99_2

Hello

Have been watching a bit of homes under the hammer and am trying to get my head around understanding charges against property.

Programme I watched saw a couple buy a house which had been repossed by a lender and there was a charge on it. The show was all panicky saying they were taking a risk.

I thought the idea of lenders repossissing is to get there money back so surely, wouldn't they sell the house, getting what they could for it and remove the charge?

Or is it that a charge is put on the property by a second lender, i.e. a top up loan or similar. I guess the original lender takes there money first and the company with the charge hopefully gets there money too.

Sorry if I'm not too clear. Hope someone can help me understand.

Thanks
G

Richard_Webster

If you look at the Land Registry entries and the first charge against the property is in favour of the Bank/Building Society that has repossessed and is selling then they pass a good title to the buyer free of charges and and subsequent charges are automatically removed.

Anyway this will all be explained by the solicitor that you have asked to check the auction legal pack for you. You have asked a solicitor to check it haven't you?

Georgie99_2

Richard_Webster wrote: »

If you look at the Land Registry entries and the first charge against the property is in favour of the Bank/Building Society that has repossessed and is selling then they pass a good title to the buyer free of charges and and subsequent charges are automatically removed.

Anyway this will all be explained by the solicitor that you have asked to check the auction legal pack for you. You have asked a solicitor to check it haven't you?

I'm just trying to understand the process just in case we ever go down the road of buying at auction. Currently we're renting because our chain broke down.

I think what they were saying in the programme was, if not enough money is raised - then some of the charge could still carry over to the new owners and then they would be liable for the debt. So I'm still not clear - I guess if it is just one loan, ie. the original loan then there shouldn't be anything to worry about. But if there is a second charge there's where it might become a worry?

Richard_Webster

If the first mortgage lender is selling and your bid is accepted then the fact of them selling cancels both their charge and any subsequent charges. The charge cannot stay there. If there isn't enough money to repay the debt to them that's not your business - they will have to decide whether it is worth while chasing the defaulting borrower for the shortfall.

As far as any subsequent charges are concerned the Banks/Finance Companies owed money only get whatever change there is after the first chargee has been paid,and if there isn't any that's tough for them but you do not need to worry about that - their charges are "overreached" and wiped off.

The critical thing for you is that it is first mortgage lender selling and not the defaulting borrower trying desperately to get a buyer. If it is the borrower then you do need to be concerned there won't be enough money to pay off the charges - but if there isn't then the borrower wouldn't be able to complete and you could claim your deposit back etc.

Georgie99_2

Richard_Webster wrote: »

If the first mortgage lender is selling and your bid is accepted then the fact of them selling cancels both their charge and any subsequent charges. The charge cannot stay there. If there isn't enough money to repay the debt to them that's not your business - they will have to decide whether it is worth while chasing the defaulting borrower for the shortfall.

As far as any subsequent charges are concerned the Banks/Finance Companies owed money only get whatever change there is after the first chargee has been paid,and if there isn't any that's tough for them but you do not need to worry about that - their charges are "overreached" and wiped off.

The critical thing for you is that it is first mortgage lender selling and not the defaulting borrower trying desperately to get a buyer. If it is the borrower then you do need to be concerned there won't be enough money to pay off the charges - but if there isn't then the borrower wouldn't be able to complete and you could claim your deposit back etc.

Brilliant - thanks - I have a clear understanding now