Hi! looking for advice

Karmacazee

Hi everyone!

I'm new to this forum and I apologise in advance for not using the search function - my question is too complicated to condense into a few keywords, and I'm in desperate need of a bit of advice...

Right, so, here we go...

Somebody very close to me has a big problem with her former estate agent. Basically, a few years ago (before the financial bubble burst) she took out a mortgage with her ex-partner so they could get a house and live the family life with their newly born daughter. I don't have details right now about what type of mortgage it was or exact purchase figures or anything like that, but if it'll help answer this query I will try and find out.

Anyway, her partner built up a mound of debt which he kept hidden from her until she found out, and the relationship turned sour - this wasn't the only reason for the breakdown of their relationship, but we won't go into that here. He then lost his job, and they couldn't afford the mortgage anymore. She tried to earn the crust herself, but it wasn't enough. Having had enough, they separated. She begged him to sell at the time but he refused, claiming it as his "nest egg". A turbulent amount of time passed where they tried to make things work, but to no avail - all the while she was begging him to sell. During that time the market collapsed and their house dropped significantly in value.

So, she sought advice from an estate agent, and he convinced them that selling now would be a good idea - even though it was now in negative equity. They agreed and sold the house. I'm not sure how that happened, but she was desperate to get away from him, so I guess anything would do (and let's just say her partner wasn't the sharpest tool in the box.). The estate agent even told her that the debt would be cancelled, she wouldn't be affiliated with it, and that she would have nothing to worry about. A few months later she had a letter demanding repayments on the mortgage, split equally between her and the ex. The agent had basically lied and sold them down the river for the sake of a few hundred quid in commission. This is the most important detail here I think, and the whole point of my query.

As a result of all of this she is now £23k in debt to JP Morgan & Chase and is considering bakruptcy - bad news for someone who owns and runs their own business, and is very driven to be a succesful businesswoman working for herself.

She's so angry at the situation that it's beginning to take over her life! And personally I don't blame her. If I had 23 grand's worth of debt hanging over my head, and the smooth talking estate agent was living around the corner still doing business then, well, I'd be pretty stressed too, and pushed towards revenge....I also know of a few other people who have had problems with the agent in question, which makes this whole situation stink to high heaven.

I'd like to be able to offer her a glimmer of hope. Can she take the agent to court and sue him? Can she legally smear his business with bad reviews so that he doesn't get any custom? Should she take action against her ex-partner for being so bloody stupid? Can she take any kind of action that would vindicate her? Is bankruptcy the only option?

I'm lost - I've never been through anything like this and she needs advice from objective people in the know!

Sorry if that was a bit long winded, and if anything doesn't make sense I'll try to clarify. I'm just very concerned as it's really upsetting her and stressing her out beyond belief.

paddedjohn

why did the mortgage company let her sell with so much negative equity?

Karmacazee

I presume so that they could get some of the money back and get her into debt.

As far as I know she is refusing to pay, because that would imply that she is at fault.

Caroline_a

I'm a little confused. You say she runs her own business and yet she has believed that if she owes, say for example £150,000 on a mortgage - which is only another name for a loan - and then sells the property for, say £125,000, leaving a shortfall of £25,000, then she can just walk away?

Who did she think would cover the missing £25,000? She can't sue anyone for either giving daft advice or being stupid! The estate agent is not a financial adviser, and to sue her partner would just result in a counter suit for her being equally stupid!

(*figures used for ease of example only)

firstaspect

Unfortunately I don't think you'll be able to help give her hope of not having to pay off the money. Unless she has something in writing from the mortgage lender saying that the negative equity would be written off when the house was sold (which would be very unlikely) then there's nothing that can be done. As said above, if she's running a business she must know how finances work and if someone has a loan of X amount and only pays off X-£25k of it then there's still £25k to be paid by someone.
Sorry to not be able to offer anything more but the only advice I can give is that your friend speaks to JP Morgan & Chase and works out if they will do some sort of monthly repayment structure that she can afford.

tyllwyd

The story you've told doesn't seem to make any sense. She sold the house when it was in £23K - or was it £46K - negative equity? And she and her partner had a joint mortgage?

On the face of it, it was her decision to sell the house when it was in that much negative equity - her estate agent wasn't involved in the original decision to buy the house, and wasn't personally responsible for the collapse of the housing market, or the breakdown of her relationship - that's a very difficult sitation for her, but not something you could sue over.

So if the estate agent has done anything wrong, it all hinges on whether he told her that she could sell and walk away from the negative equity. I think we haven't been told the whole picture about that. Why did the mortgage holder allow her to sell up at that point? How are JP Morgan & Chase involved - were they the original mortgage holders, or was there some kind of new loan taken out to cover the negative equity?

princeofpounds

I think she is stuck really. Almost certainly the debt belongs to her (and her partner if he is on the mortgage too) unless the bank itself actively misguided her on the matter.

The EA lying... well it sucks, but I'm afraid she might as well have taken the plumber's advice on financial matters. EAs are just salespeople for piles of bricks, there are no qualifications or standing, it is not a profession and certainly not a source of financial advice. Unfortunately I can't see a way of pinning responsibility on the EA even though they were exceptionally duplicitous.

silvercar

The solicitor handling the legal work on the sale would have had to get the lenders agreement to sell. At which point the lender would have agreed to the sale subject to the negative equity being paid off or cleared by a loan or some other arrangement. What did her solicitor tell her would happen?

hazyjo

I really don't see how the EA is to blame. Surely she used a solicitor to sell? Surely s/he would have told her there'd be money owing at the end and asked her where this would come from? I'm also very confused. How could she think the debt would be written off? Why would the EA have even been discussing her debt with her? It's basic maths, isn't it... as said above. It seems she was aware of the term 'negative equity'. Did she believe that people with negative equity just sold and the debt was written off? Hasn't she read anything that suggests negative equity is indeed an issue in falling markets and that people are left with debt? Isn't that the whole thing with negative equity? Sorry, but I can't believe she thought everyone in negative equity - for whatever sum - just sold their properties and whatever amount of debt was wiped off the slate. Also, maybe the EA was right in telling her to sell. The negative equity would probably only have got worse over the next year or so... doesn't look as if prices are going to increase dramatically any time soon. Would she really have wanted to hang onto a house that's going down in value even further? Ah, maybe she thought that would be a good thing as more negative equity would have been paid off for her. Sorry but it makes no sense. She can't possibly be that 'naive', surely.

Jx

Jowo_2

This is a topic that would benefit from being in the Debt Free wanabee board on MSE where the experts there will advise her where to seek expert advice on her debts and potential strategies for dealing with it.

DVardysShadow

silvercar wrote: »

The solicitor handling the legal work on the sale would have had to get the lenders agreement to sell. At which point the lender would have agreed to the sale subject to the negative equity being paid off or cleared by a loan or some other arrangement. What did her solicitor tell her would happen?

This really goes to the nub of it. Whatever the Estate Agent said, did or didn't, the solicitor should have explained the consequences.

Karmacazee, by all means point your friend to this site. But don't expect to be able to sort this out yourself. What we hear from you is second hand - and it will depend on the exact detail of what went on as to whether the solicitor was negligent and misled your friend or whether your friend was actually cloth eared and sold with negative equity, despite being told the consequences.

One question however - was the solicitor arranged through the estate agent?