Bank wont release title due to low sale price

stringsmk2

My sister bless her is working as a real estate agent in NZ.
And she said she has come across a few cases where the bank will not release the title because the sale price is too low.

In these cases, the bank will not release the title to the new buyers because the sale price does not cover the outstanding mortgage amount.

She said that unless, the person was bunkrupt, and the bank repo'd the house, the existing owner had no choice but too stay there, or sell at a higher price to cover the outstanding mortgage.

You can therefore see, the banks wil prevent at all costs a big crash in HP, maybe this will be the same in the UK

Loughton_Monkey

This is absolute common sense.

The bank has a debt 'secured' on the house. The minute they discharge this debt for a lower figure, they now would have a (smaller) unsecured asset (loan).

I do not know a single bank in UK who would give up the deeds in circumstances like this, either today, a year ago, or 5 years ago. No bank simply does this.

If you have a loan of, say, £100,000, and you are selling for £95,000, all the bank can 'see' is a £5K shortfall. The minute you pay £5,000 into the mortgage account, they will release the deeds perfectly happily.

AndyGuil

The perils of negative equity. When rates rise this will cause bigger issues.

Ian_W

stringsmk2 wrote: »

You can therefore see, the banks wil prevent at all costs a big crash in HP, maybe this will be the same in the UK

It IS and AFAIK ALWAYS HAS been the case in the UK as LM confirms. Nothing new, the lender has granted a loan secured against the property, unless the loan is repaid the property can't be sold - nothing to stop the seller from selling for less than the value of the mortgage IF they can repay the loan from their own money.

That's what negative equity refers to, generally if you owe more than than the property is worth you can't sell or remortgage but it becomes even more problematic if you can't keep up your repayments. That can lead to the house being repo'ed and sold by the lender for the best price possible but the owners can still be chased for any outstanding balance.

Anyone who doesn't understand that shouldn't be allowed to buy a property with a mortgage. After all there are numerous "HEALTH WARNINGS" to this effect on the paperwork.

pop_gun

This ties in with why mervyn king won't raise rates. they will stay below 1% until the majority of homeowners have equity in their property
and the banks don't lose their stake in these homes.