Seller in Neg Equity

cripes_2

Hello,

After putting an offer in for a house, applying for a mortgage, doing a valuation and electrical survey and a roofing survey, spending money on completing the searches done by the solicitor I have now just found out that the seller is in negative equity,

ie, my accepted offer is below the redemption figure..Are people really that dense that they dont know a redemption figure before putting the house on the market?

does anyone know what can happen now...

I'm assuming if the bank doesnt agree to the shortfall, I lose all fees for valuation, surveys and sols fees...

Surely this shouldnt be allowed to happen??

ILW

Is it much?

The seller may have some cash to make up the shortfall.

cripes_2

I'm not sure, the estate agent wouldnt divulge, from what I can gather I doubt it...

I dont understand how its all just come to light now.. surely they must have known the redemption figure

mysk_girl

I've been through this, and I'm really sorry but it didn't end well. We lost our valuation fee and booking fee (about £600 total) - fortunately it came to light early on so solicitors didn't charge us anything as long as we went on to use them for the house we eventually bought.

The option they have is to ask the mortgage company to convert the shortfall to an unsecured loan, but the mortgage company may not agree, it depends how much the shortfall is as a proportion of the loan. Ours was an extreme case in that there was the mortgage, a second charge from Ocean Finance, and a registered interest from an insolvency practitioner. There was enough to pay the mortgage, but not the second charge, and Ocean Finance refused to release the charge, so we pulled out. They went bankrupt eventually and the house was sold as a repossession for £60k less than we had offered, we do feel we had a lucky escape to be honest!

Our solicitor said that he had seen these situations a few times, and it rarely ended well - he advised to keep going with it, but to start looking again. This was on the Friday, on the Monday we viewed another house that I had originally discounted in our search, we offered Tuesday and it was accepted, so we pulled out of the original house.

Hope it goes well for you, but all you can do is get the vendor to chase their mortgage company to agree the shortfall.

sockpuppet

Oh dear, we see this all the time!
In answer to your question - no, most people don't have a clue what a settlement figure is!!
Generally solicitors wont request these until they are virtually ready to complete so they wont pick it up until way down the line.
We always ask our clients to obtain these at the beginning so we can ensure the mortgage amount is sufficient to cover the outstanding balance (or at least alert them if it isnt!) but we very rarely get them - or we just get a copy of the last mortgage statement (no use at all!)

Your solicitor needs to be chasing this up as the Estate Agent either wont have a clue, or wont tell you anything anyway!
As the other reply stated, it could be that the vendor is aware and has other funds to cover it

Good luck & fingers crossed it turns out okay

cripes_2

Thanks mysk_girl, we stand to lose about the same amount, which is a nightmare as I dont have bucketfuls of £600 to waste..

Well I guess we will just have to hope that the lender agrees to some kind of short fall... Ironic thing is that they bought the house in 2005 for less than I offered...so the mortgage must have increased over the last 6 years, or they have a 2nd charge on it which doesnt bode well..
Thanks

cripes_2

Cheers Sockpuppet

cripes_2

Just found out the seller has a 2nd charge on the property in form of a secured loan,

The house does have equity in it but its the 2nd charge cannot be paid off with the sale,

Im assuming this doesnt actually change anything or are finance companies more flexible??

Dave_Ham

Depends upon the lender and your seller to be honest.

If the seller was my client, I would be calling up second charge and telling them you are paying full or near asking price and that if they do not sell will be looking at bankruptcy as an option and with a forced sale the 2nd charge lender will take even less.

If they can work out the difference and then speak to them about the repayment of this on a unsecured basis the 2nd charge lender may be more responsive.

If it is only 100's of pounds the Estate Agent may even sacrifice a bit of commission to make the deal happen. You just never know 75% of something is better than 100% of nothing...

Fingers crossed for you

mysk_girl

cripes wrote: »

Just found out the seller has a 2nd charge on the property in form of a secured loan,

The house does have equity in it but its the 2nd charge cannot be paid off with the sale,

Im assuming this doesnt actually change anything or are finance companies more flexible??

That was exactly our scenario, with Ocean Finance as the second charge. OF gambled that they could get more than we offered (think they were looking for about £5k more - we didn't feel house was worth it) and ended up losing £60k...

I hope it works out for you... I was 38 weeks pregnant when outs fell through, we ended up with inlaws until DS was 12 weeks old and we managed to get the subsequent purchase to go through...

GMS

cripes wrote: »

The house does have equity in it but its the 2nd charge cannot be paid off with the sale,

Therefore the house has no equity. All charges need to be repaid before clear title can be passed to the new owner/lender.

As has been said there is a very slim chance the loan could be part paid with the remainder unsecured.

I hipe you get a resolution to this