Sale price not enough to clear charges

Summerdream

Hi,

I am in the process of buying a house and on the property information form the vendors have answered no to the following question

14.3 Does the sale price exceed the amount necessary to repay all mortgages and charges secured on the property

I will be asking my solicitor on Monday what needs to be done about this is anything, but wondered if anyone out there knew or had this before?

Thanks in advance

davidmcn

It means they're in negative equity, so (unless they have funds from elsewhere) they'll need to agree with their lenders that some of the outstanding amount is converted to an unsecured loan (or written off) before they can proceed with the sale. Presumably they're confident they can do this, otherwise they wouldn't have bothered trying to sell. Nothing for you to do really, other than be aware of the risk that they have to pull out, or that there's a delay while they sort it out.

booksurr

the debt remains on the property therefore your solicitor should not allow you to exchange unless confirmation is obtained from your vendors that they will be paying off the debt. That is why the question is asked in the first place, to protect you.
as stated there could be a delay whilst funding is being confirmed

G_M

You (or your solicitors) will need to be sure that the seller either

a) has savings with which the Charge will be paid off and/or
b) the mortgage lender has agreed to write off the outstanding Charge

If you are DIYing the conveyancing, stop.

If you have a solicitor, double-check he is on the case and deals with this.

rosie383

It is also possible that they didn't understand the question. Just another possibility to bear in mind.
Vendors on a property we were going to buy in summer put some very odd answers on the property info form and F&F, just purely because their English wasn't brilliant and when we made some queries, they genuinely hadn't understood some of the questions.

Summerdream

Thanks for the replies

I had thought the same about them misreading the question which is what I am hoping as we are 7 weeks into the process, with searches etc done. These forms were only just forwarded to my solicitor despite me chasing.

I will discus it with my solicitor first thing tomorrow to ensure she's following it up

penguingirl

Do you know when they bought it? Or why they are moving? Might help you make a guess as to whether negative equity makes sense. So for example, if they've been there less than 5 or more than 10 years it is more unlikely (imo), and it is very unlikely if they are upsizing. Things that would make it seem more plausible to me would be if it is currently rented, they are splitting up, they are downsizing or going into rented.

Obviously all of those things are just guesses, and you won't know for sure until your solicitor speaks to theirs.

Summerdream

They bought it in 2007 and they have done a fair amount of work to modernise it but my offer would more than cover that. Therefore, I think the mortgage would be paid off but obviously I don't know if they have other loans secured to the property.

I've been told they are moving to relocate but at present they are not making an onward purchase as they haven't found anywhere suitable

vivster

rosie383 wrote: »

It is also possible that they didn't understand the question. Just another possibility to bear in mind.
Vendors on a property we were going to buy in summer put some very odd answers on the property info form and F&F, just purely because their English wasn't brilliant and when we made some queries, they genuinely hadn't understood some of the questions.

We had exactly this. They answered 'No' to the very same question, but they just hadn't read or understood the question properly (native English speakers and she was a teacher, so no excuses really), and we knew there was no way they could be in negative equity, but we still double and triple checked through the solicitors.

davidmcn

vivster wrote: »

We had exactly this. They answered 'No' to the very same question, but they just hadn't read or understood the question properly (native English speakers and she was a teacher, so no excuses really), and we knew there was no way they could be in negative equity, but we still double and triple checked through the solicitors.

I'm not sure what the purpose of the question is - surely this is something for the sellers' solicitors to sort out directly with their client, and advise the buyers if there is an issue? Answering "no", even if it's an accurate answer, isn't particularly helpful unless some additional explanation is compulsory!

Obviously the solicitors need to make sure all the existing charges are removed, but that's the case whether or not there are enough funds from the sale price.

vivster

I'm sure you're right. We (and I guess all buyers) just wanted to be sure that we were only buying a house and not a debt.