Equity Release - vendors want more than house is worth to pay it off

Davesnave

ProDave said:

This must show what a very bad idea equity release is.  It could leave your children (or whoever) with a worthless asset or one even with a negative value.

Depends on how much is released and the exact details of the scheme. My father was felt to be a good bet by the company he took an annuity from, but he lived to 95 and received more than I had to pay back.

The inheritor's circumstances are important too. A punitive interest rate was applied to the debt from the date of death, but within a week or so I was able to extend my mortgage at normal rates and pay it off. It would have been awkward for someone without that facility.

Mickey666

Thrugelmir said:

ProDave said:

This must show what a very bad idea equity release is.  It could leave your children (or whoever) with a worthless asset or one even with a negative value.

The intention was obviously not to leave an inheritance. 

Indeed.  It could be that the deceased has 'played a blinder' by apparently getting more out of the house value than it was worth.  I'm surprised any equity release lender would allow themselves to getting anywhere near such a situation.  Perhaps the deceased live to 100+ and the loan interest just kept racking up.  I just hope they enjoyed the money

steve866

Offer them £115k and another £5k in a brown envelope
In all seriousness, are there lots of identical houses in the area? I'm wondering how you got to the specific valuation of £120k - £123k? If someone else pays them the £128k, does it make it 'worth' £128?

purplebutterfly

Thanks everyone.  In terms of valuation, it is a 3 bed semi and the average sale price for similar sized houses in the area is £116K.   A couple of extended 4 bedroom semis the next road over, sold last year for £130K.  They were with fully refurbed with all modern decor and fancy integrated kitchen appliances plus utility rooms and large gardens.    Not a single 3 bedroom semi has sold in the same area for over £125K in the last 4 years and the £125K house was all new inside.   

The one we are looking at is absolutely fine for us but the estate agent has described it as somewhere that couldn't be immediately moved into by most people as they would want to update the old kitchen and bathroom.  They did phone around some people locally who were looking for this kind of house and they all turned it down without viewing it as the said it needed too much cosmetic work.  It is very much an elderly person's home.

I genuinely didn't think that an estate could be left with debt from an equity release scheme but I don't know how long ago it was taken out and whether it was with a reputable agency or not 

Grumpy_chap

Offer them £120k, which is above the average and generous given the condition of the property.  Put a time-limit on accepting that offer and exchange, then say for every week later on exchange the offer reduces by £1k until you reach the average £115k.

frogglet

It maybe there is no other money and they don't want to be out of pocket sorting out other things in the estate..

MovingForwards

If the house is the only asset and the executors keep getting offers around what you have made, they will need to revert back to the ER company and ask if they will accept a lower price to release the debt.
That normally happens when the property has been on the market for 6+ months.

davidmcn

It sounds a bit vague as to whether the estate is actually insolvent (i.e. the house and any other assets are worth less than the equity release plus any other debts), or if the executors just don't like the idea of selling the house for less than the debt secured against it (and in fact they could cover the shortfall from whatever else is in the estate).

Thrugelmir

Offer what you believe the property is worth and stick to it. Meanwhile keep viewing other properties. No point in concerning yourself with the vendors business. They either want to strike a deal or they don't. 

DairyQueen

Thrugelmir said:

Offer what you believe the property is worth and stick to it. Meanwhile keep viewing other properties. No point in concerning yourself with the vendors business. They either want to strike a deal or they don't. 

This ^^

The circumstances of the vendor are immaterial to a property's value.  It may be worth £130k to someone but that someone may not be you. 

You have done your research and it appears that it is overvalued compared to the market. So, are you prepared to pay more than you think it's worth? Or would you prefer to wait for a property that represents fair value to you?

I have only overpaid once for a property. I had to do so in order to secure it in a buoyant market. Big mistake. Never again. There is always another property.