Remaining mortgage after auction

Hillman_Minx

Considering a house at auction but the seller (not a repo) has answered "Don't Know" to the question "Will the proceeds of the sale cover the outstanding (Lloyds) mortgage"
There is only the main mortgage.
Would I become liable for the outstanding balance remaining and not be able to remove the charge if I win the property for less than the outstanding mortgage?

randalf72

This is generally why you need to get a solicitor involved and the seller really needs to clarify that.

But as it stands if there is an outstanding mortgage and the seller doesn't clear that mortgage, irrespective of whether you pay enough for them to do so, the mortgage remains secured against the property and you are relying upon the seller keeping up the payments or settling the debt.

Generally auctions are used to sell houses where rapid payment is needed for whatever reasons and I would be wondering if a private individual who felt the best option was an auction wasn't hiding something.

That said if the price was low enough it might've worth a punt.

Hillman_Minx

Thanks Randalf The situation seems to be a seller who bought it as a buy to let 4 years back and had nightmare tenants who trashed the place. There is a damp patch but you can see that it is defective flashing round the chimney. I was under the impression that if the price covered the mortgage that solicitors automatically paid that of as part of the process but there's my naivety

princeofpounds

If the proceeds of the sale do not cover the mortgage, then the mortgage company may not release their charge on the property and the sale may not go through.

What this means for you as the buyer, I don't know unfortunately.

eddddy

Hi Hillman Minx

A 'standard' auction works like this:

When the hammer goes down - that is effectively exchange of contracts. Typically, completion occurs 28 days later.

In order to complete, the seller must agree with his mortgage company how the mortgage will be cleared.

If the seller is really stupid, and has not agreed this with the mortgage co, they will not allow completion to occur.

If completion doesn't occur, the seller will be in breach of contract and you can claim all your costs (and consequential losses) back from the seller.

(But the seller will have a solicitor who's done all the pre-auction legal stuff - so I would be amazed if this really did happen.)

kingstreet

Aye. The vendor's solicitor has to be in a position to offer "unencumbered title" to the purchaser's solicitor, otherwise completion cannot take place.

The meaning of "unencumbered title" is that all charges over the property have been, or will be cleared, with the completion proceeds.

AdrianC

Hillman_Minx wrote: »

Considering a house at auction but the seller (not a repo) has answered "Don't Know" to the question "Will the proceeds of the sale cover the outstanding (Lloyds) mortgage"

Since the vendor has no way of knowing, before the auction, what the proceeds of the sale will be, I don't really see what other answer they could be expected to give.

Annisele

eddddy wrote: »

If completion doesn't occur, the seller will be in breach of contract and you can claim all your costs (and consequential losses) back from the seller.

That's true - but you'd be claiming from a seller who couldn't afford to pay off his mortgage. There's a reasonable chance that he wouldn't be able to pay his debt to you either.

G_M

Hillman_Minx wrote: »

Considering a house at auction but the seller (not a repo) has answered "Don't Know" to the question "Will the proceeds of the sale cover the outstanding (Lloyds) mortgage"

The seller does not know what price the property will sell for. It's an auction!

This question was designed for pre-Exchange queries on a standard property sale, not an auction sale.

The important aspect for you is whether the property is being sold free of all Charges (mortgages etc). If it is, it is the seller's problem where he finds the money.

Hillman_Minx

G_M wrote: »

The seller does not know what price the property will sell for. It's an auction!

This question was designed for pre-Exchange queries on a standard property sale, not an auction sale.

The important aspect for you is whether the property is being sold free of all Charges (mortgages etc). If it is, it is the seller's problem where he finds the money.

And auctions have reserves, He should set the reserve at the minimum he needs to clear the mortgage. He may of course have other funds to bridge the gap.