Purchase cancelled as vendor in negative equity

Abydos

This is a minor tale of woe, as a mark of warning to others, that has left me with a £1,500+ hole in my pocket.

I agreed to purchase a property with the Estate Agent etc. and even received the letter from the estate agent agreeing all the details (price etc). The agreed price was FULL ASKING PRICE.

I then confirmed and paid my BTL mortgage with HSBC (the one with a £1,500 fee) on a BOE+% basis.

Valuations done and paid.

Solicitor engaged, paid.

Reached 'contracts ready' stage, and suddenly a letter from the agent stating that the vendor must withdraw as their bank has indicated that they have insufficient capital in the property to proceed at the sale price (i.e. negative equity).

I understand the law etc. and know that a deal is not a deal until it is complete. But !!!!!!!

1) What the heck are the Estate Agents doing marketing a property that cannot sell (in negative equity)?
2) Why does this come up at the 11th hour after I have paid all my fees etc.?

It would seem reasonable that I should have some recourse as this property was falsely marketed at a price making it impossible to sell.

(HSBC could not offer a refund on the mortgage fee of £1,500 but said it was portable to an alternate property within 6 months. The solicitor gave some refund for those elements not actually completed. The valuation fees etc. remain a sunk cost).

I expect no recourse, but this is just a warning to others.....

kingstreet

Estate Agent would have absolutely no knowledge of the vendor's mortgage position and that would also not be apparent to vendor's solicitor until a redemption statement is ordered from the lender and checked against the sale price.

Your gripe is 100% with the vendor, I'm afraid.

pjread

That would mightily annoy me too, but sadly I doubt there's much you can do other than try to buy before that 6 months is up to avoid paying £1500 for nothing...

I think many people lose on aborted deals, I know I spent survey fees on one property that couldn't be proceeded on. Luckily the mortgage was fee-free but that still irked me.

martinsurrey

Abydos wrote: »

It would seem reasonable that I should have some recourse as this property was falsely marketed at a price making it impossible to sell.

Problem is that until the mortage company have been told all of the sale figures, there is no way the vendor would know how they would play it, they could refuse to sell unless the vendor pays the full negative equity on completion, or they may allow him a payment plan, and that could change his ability to sell.

its a massive pain for you, but also the vendor, who is obviously broke and has lost out on the fees he's paid...

Abydos

martinsurrey wrote: »

its a massive pain for you, but also the vendor, who is obviously broke and has lost out on the fees he's paid...

The vendor obviously knew that they owed more to their mortgage company than what they were trying to sell the property for.

I believe that it is simply amoral that they attempt to sell at below their mortgage debt, as ANY purchaser coming along would ultimately fail, after racking up many fees, time and effort! Even a cash purchaser would have lost out on survey and solicitor fees.

(again to reiterate, I know I have no claim in English law, but this is a warning to others. The vendor of your house may be in negative equity and you won't find out until it is too late).

martinsurrey

Abydos wrote: »

as ANY purchaser coming along would ultimately fail, after racking up many fees, time and effort! Even a cash purchaser would have lost out on survey and solicitor fees.

you see its the words ANY that is wrong, the vendor of the house I am now living in WAS in negative equity, but the sale went through as they agreed a payment plan with him (although he had to scramble around on completion day to get the increased solicitors fees and agents fees out on time as payment for them upfront was a condition of completion).

I know its frustrating and it is a good heads up for everyone else, but dont blame the vendor too much, I'm sure he didnt want to waste both yours and his time and money!

Let_Us_See

Whilst I have every sympathy with the OP it might not be so straight forward as it appears when looking from the vendor's viewpoint. Whilst the lender will have a first charge over a property, they certainly do not own it, and by blocking a potential sale with a current known amount of negative equity (debt), there is a risk that this could increase resulting in greater debt for the vendor. Is this treating the customer fairly and could it lead to a future claim against the lender?

If the sale proceeded then the vendor would still be liable and pursuable for any difference between mortgage redemption balance and selling price and they could at least get on with their lives.

I cannot see any real benefit for a lender to block this sale as it appears a "no win" situation for all concerned.

Dave_the_Ginger_Cat

Absolute sympathy to you

The vendor should have reached out to their lender way before it got to this stage, and either got agreement to go ahead with a shortfall, or withdrawn.

Without knowing any circumstances surrounding the seller, I think it's unwise to pass judgement on their lender's approach to the shortfall. There are many factors we lenders take into account when deciding yes or no. If the seller did not ask permission to do this, and it arose in the last week, that will have put increased pressure on the process - the outcome should still be the same. In terms of TCF, we'd need to know more, but I am sure that the lender concerned stands by its position.

English law is a pain on this - vendors can pull out for many reasons (including a last minute whim) and there is currently no recourse

Like I say - sympathy to you, and hope you find a replacement house which is more successful