# Selling house with neg equity, legal procedure for paying balance outstanding?



## ipad (15 Oct 2010)

Hi, would be grateful for opinions, especially from anyone involved in conveyancing.
Am in process of selling a house in negative equity and while I have enough cash to pay off the balance outstanding on the mortgage after the sale, I'm a bit reluctant about how this is done from a legal point of view. Will I have to lodge the balance with my solicitor? Given all the dodgy dealings with client funds over the years I'm not entirely confident of doing that so wondering if anyone has done it any other way ie paying balance outstanding direct to bank after sale goes through. (It;s a sort of delicate conversation to bring up with my solicitor which is why I'm asking here!)


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## niceoneted (15 Oct 2010)

Could you not pay off a lump sum from the outstanding mortgage balance now while it is for sale. You may pay less interest too while waiting to sell.


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## ipad (15 Oct 2010)

Don't want to do that in case sale falls through and I have to take it off market. Is at very good tracker so would prefer to keep use of cash.


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## BazFitz (15 Oct 2010)

Are the bank aware that you have the funds to repay the mortgage?  If they're not, there may be some merit in trying to negotiate a deal with the bank whereby they take some of the pain.


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## CashAdv (15 Oct 2010)

don't sell then, especially if you're on a tracker. Use savings to make some overpayments every month (this reduces principal capital - big saving on interest).

also I would never give money to a solicitor for property to be sold. (what if there is unknown charges or judgements again the property?)


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## Ann1 (15 Oct 2010)

If the bank hold a charge over the property i.e. they hold the deeds they will not let the settlement of sale go through until all the money owing to them is paid in full first.


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## Time (16 Oct 2010)

Unless you negotiate a settlement first.


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## Ann1 (16 Oct 2010)

Yes Time the OP could negotiate a settlement figure on the amount still outstanding on the mortgage with the bank but to answer the original query....it will have to be done before the bank will allow the sale to go through.


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## ipad (16 Oct 2010)

The house is currently sale agreed and the sale should go through within the next week or so, so unfortunatley the bank know we have the cash so the negotiating a settlement is a non-runner. I was hoping that someone who'd gone through the same process might know the legal procedure or sequence of events.  It's quite a substantial sum so I really don't want to pay off anything until I'm certain the sale will go through.


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## BazFitz (16 Oct 2010)

ipad said:


> The house is currently sale agreed and the sale should go through within the next week or so, so unfortunatley the bank know we have the cash so the negotiating a settlement is a non-runner. I was hoping that someone who'd gone through the same process might know the legal procedure or sequence of events. It's quite a substantial sum so I really don't want to pay off anything until I'm certain the sale will go through.


 
Then why didn't you try and negotiate a settlement?  You could have saved yourself a substantial sum.


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## Brendan Burgess (16 Oct 2010)

ipad said:


> Hi, would be grateful for opinions, especially from anyone involved in conveyancing.
> Am in process of selling a house in negative equity and while I have enough cash to pay off the balance outstanding on the mortgage after the sale, I'm a bit reluctant about how this is done from a legal point of view. Will I have to lodge the balance with my solicitor? Given all the dodgy dealings with client funds over the years I'm not entirely confident of doing that so wondering if anyone has done it any other way ie paying balance outstanding direct to bank after sale goes through. (It;s a sort of delicate conversation to bring up with my solicitor which is why I'm asking here!)



I think that you are worrying unnecessarily here. 

There have been some spectacular frauds by solicitors but the vast majority of house purchase and sales transactions go through without any fraud. 

I presume that the solicitor must give the bank an undertaking that they will clear the mortgage with the proceeds of sale. 
I presume that you will have to lodge the shortfall with the solicitor as soon as the contracts are exchanged. 
When the sale is closed, the solicitor will pay over the proceeds and your money to the bank. 

The biggest risk to you is that the purchaser will walk away before contracts are exchanged. 
The next biggest risk is that they will exchange contracts, but not close the sale. You get to keep the deposit and have the right to sue them. 

The risk that the solicitor will defraud you is negligible. If it does happen, the Solicitors Compensation Fund will refund you.

Brendan


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## mf1 (16 Oct 2010)

ipad said:


> Hi, would be grateful for opinions, especially from anyone involved in conveyancing.
> Am in process of selling a house in negative equity and while I have enough cash to pay off the balance outstanding on the mortgage after the sale, I'm a bit reluctant about how this is done from a legal point of view. Will I have to lodge the balance with my solicitor? Given all the dodgy dealings with client funds over the years I'm not entirely confident of doing that so wondering if anyone has done it any other way ie paying balance outstanding direct to bank after sale goes through. (It;s a sort of delicate conversation to bring up with my solicitor which is why I'm asking here!)



Have you told your solicitor that you are in negative equity? They should be rightly concerned if you have not - the consequences of you getting into a contract situation without resolving the matter in advance could be horrendous. Good that you have the money to discharge the balance of the mortgage. Bad that you don't understand the significance  of telling your solicitor. 


mf


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## ipad (16 Oct 2010)

Yes, the solicitor is aware of the negative equity, and has taken this into account. Didnt negotiate a settlement with the bank as stupidly had savings in same bank! My concern is that I pay the neg equity in advance and then either the sale falls through or the solicitor scarpers. Either way I'm not willing to commit 100k until I'm certain the sale of the house goes against the mortgage first, but wondering do I have a say in the matter.


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## Time (16 Oct 2010)

Easiest solution would be to deposit the money with your solicitor. When he receives funds from the sale he can forward it all to the bank, if the sale fails no money is paid to the bank.


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## ipad (16 Oct 2010)

Time said:


> Easiest solution would be to deposit the money with your solicitor. When he receives funds from the sale he can forward it all to the bank, if the sale fails no money is paid to the bank.


 
This makes the most sense but to me also carries some risk as I don't want to write a cheque to some guy in an office for 100k and then if it all goes belly-up have to wait years for the Law society to sort it out etc. Strange times these and in view of whats going on in this country, sad to say its hard to trust anyone.


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## Brendan Burgess (16 Oct 2010)

As I have already pointed out, the risk of default by a solicitor in a routine conveyancing transaction is extremely low. 

You might as well not cross the street in case there is an earthquake and you fall into the hole. 

Brendan


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## ipad (16 Oct 2010)

Ha, ha I know! But at least if that happens the wife gets to keep everything!


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## Brendan Burgess (16 Oct 2010)

You couldn't be sure of that. 

A solicitor may fake your will leaving everything to himself. 

Brendan


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## jambo (22 Oct 2010)

ipad said:


> The house is currently sale agreed and the sale should go through within the next week or so, so unfortunatley the bank know we have the cash so the negotiating a settlement is a non-runner. I was hoping that someone who'd gone through the same process might know the legal procedure or sequence of events.  It's quite a substantial sum so I really don't want to pay off anything until I'm certain the sale will go through.


Doesn't necessarily rule out a settlement. Call them and tell them you're thinking of buying a boat or even better a small plane and would like access to the funds shortly. They might be in the mood to negotiate then. You're under no obligation to repay the loan early using your capital but you're doing them a big favour by doing so. Especially seeing as you are on a tracker. Move your deposit if necessary.


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## ipad (22 Oct 2010)

jambo said:


> Doesn't necessarily rule out a settlement. Call them and tell them you're thinking of buying a boat or even better a small plane and would like access to the funds shortly. They might be in the mood to negotiate then. You're under no obligation to repay the loan early using your capital but you're doing them a big favour by doing so. Especially seeing as you are on a tracker. Move your deposit if necessary.


 
There'll actually now trying to force me to repay the neg equity BEFORE the sale completes (or buyers funds received), which leaves me in a very precarious position if the buyer pulls out! Am trying to get around doing this in case this happens but they're being extremely difficult about the repayment, let alone trying to negotiate a settlement!


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## mf1 (22 Oct 2010)

jambo said:


> Doesn't necessarily rule out a settlement. Call them and tell them you're thinking of buying a boat or even better a small plane and would like access to the funds shortly. They might be in the mood to negotiate then. You're under no obligation to repay the loan early using your capital but you're doing them a big favour by doing so. Especially seeing as you are on a tracker. Move your deposit if necessary.



This is nonsense. 

It is really simple. House will sell for (e.g.) 200K. Mortgage is (e.g.) 250K. Vendor/solicitor cannot close sale without the agreement of the lender on payment of the total sum outstanding. Otherwise, vendor's solicitor has a personal liability to the lender. Vendor has the money available to pay the difference. Vendor does not trust his own solicitor. 


Solution: close the transaction in the Bank. In one transaction, close sale,  hand over deeds, lodge all necessary funds to the mortgage account, walk away. 

End of. 

mf


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## jambo.ie (22 Oct 2010)

ipad said:


> There'll actually now trying to force me to repay the neg equity BEFORE the sale completes (or buyers funds received), which leaves me in a very precarious position if the buyer pulls out! Am trying to get around doing this in case this happens but they're being extremely difficult about the repayment, let alone trying to negotiate a settlement!


Hmmm. Without LTV covenants in the loan contract I'm not sure how they could be in a position to demand the capital. Unless the loan was secured against this capital you should be free to withdraw as you please. The sale complicates things as per your bargaining position but it sounds like they may be chancing their arm. It would not be the first time and it won't be the last.


mf1 said:


> Solution: close the transaction in the Bank. In one transaction, close sale,  hand over deeds, lodge all necessary funds to the mortgage account, walk away.


The capital is his/hers to do with what he/she pleases. Unless it's subject to terms in the loan contract. Nothing to stop him/her withdrawing it. If it's a tracker and the sale does not go through then the capital would be much better deployed elsewhere.


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## mf1 (22 Oct 2010)

jambo.ie said:


> Hmmm. Without LTV covenants in the loan contract I'm not sure how they could be in a position to demand the capital. Unless the loan was secured against this capital you should be free to withdraw as you please. The sale complicates things as per your bargaining position but it sounds like they may be chancing their arm. It would not be the first time and it won't be the last.
> 
> The capital is his/hers to do with what he/she pleases. Unless it's subject to terms in the loan contract. Nothing to stop him/her withdrawing it. If it's a tracker and the sale does not go through then the capital would be much better deployed elsewhere.




Have you noted that the house sale is due to close? And that the sale cannot and will not close unless the mortgage is discharged - either in full or at a discount if that can be agreed. 

Of course OP can withdraw  his capital but the Bank know he has the money and there is no  earthly reason for them to agree to the closing , and they won't, unless the mortgage is discharged. The sale proceeds here will not cover the mortgage due. 

And who exactly is chancing their arm here? The Bank who are owed the money? 

mf


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## ipad (22 Oct 2010)

Not looking for a reduced settlement or chancing my arm about anything. I just want to make sure that I don't pay off the shortfall from the sale too early, so if the sale falls through I won't have access to the cash. Have asked if I could keep the money in my current account until I am certain the buyer's funds have come through and then transfer the balance then but they are insistent on getting this money before that. My solicitor is trying to work out a solution with them at the mo but they are digging their heels in. Is there any legal/procedural reason why I can't write cheque/pay the money on same day sale proceeds come through?


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## mf1 (22 Oct 2010)

ipad said:


> Not looking for a reduced settlement or chancing my arm about anything. I just want to make sure that I don't pay off the shortfall from the sale too early, so if the sale falls through I won't have access to the cash. Have asked if I could keep the money in my current account until I am certain the buyer's funds have come through and then transfer the balance then but they are insistent on getting this money before that. My solicitor is trying to work out a solution with them at the mo but they are digging their heels in. Is there any legal/procedural reason why I can't write cheque/pay the money on same day sale proceeds come through?



Solution: close the transaction in the Bank. In one transaction, close sale, hand over deeds, lodge all necessary funds to the mortgage account, walk away. 


mf


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## ipad (22 Oct 2010)

Do you mean physically walk into my branch with buyer's cheque, my own chequebook to pay balance and get the deeds into my hand from them there and then? Will they do this?


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## mf1 (22 Oct 2010)

ipad said:


> Do you mean physically walk into my branch with buyer's cheque, my own chequebook to pay balance and get the deeds into my hand from them there and then? Will they do this?



No. I mean the parties to the transaction do the transaction in the bank. You will not be given the buyers cheque. Your solicitor will be given  it and he will not just hand it to you. Your solicitor already has the deeds. He cannot hand over those deeds to your purchasers solicitor until he is in sufficient funds to discharge the whole of the mortgage. You don't trust your own solicitor therefore you need to be beside him during the transaction and you need to pay off the balance of the mortgage at precisely the same moment or earlier as the solicitor is discharging what he can with the proceeds of sale.  

You need to get your head around the parts of the transaction. You don't get any money from the sale - you owe money. The only way you can ever close this sale is by grasping that you are not in control - the bank is. 

I think you really need to talk to your own solicitor. Or get a solicitor that you do trust. 


mf


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## callybags (22 Oct 2010)

mf1 said:


> Or get a solicitor that you do trust.
> 
> 
> mf


 
Best piece of advice in this thread so far.


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## Brendan Burgess (22 Oct 2010)

ipad said:


> Do you mean physically walk into my branch with buyer's cheque, my own chequebook to pay balance and get the deeds into my hand from them there and then? Will they do this?



It would be very unlikely that your solicitor would accept a cheque from you which might bounce. I really think you should save yourself a lot of headaches and either reduce the mortgage balance now or else transfer the money now to your solicitor. 

Brendan


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## jambo (24 Oct 2010)

mf1 said:


> Have you noted that the house sale is due to close? And that the sale cannot and will not close unless the mortgage is discharged - either in full or at a discount if that can be agreed.


The vendor also mentioned that they do not wish to tie up the capital if the sale does not complete, your later suggestion regarding timing of the transactions is much more reasonable.


mf1 said:


> And who exactly is chancing their arm here? The Bank who are owed the money?


The bank contracted a loan term, it might be in their interests to get the money back early but they have no right to it. If the sale closes then the situation changes and the contract will indeed be terminating earlier than loan term.


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## TurboTim (29 Oct 2010)

can you not place your savings in a deposit account with your lending institution?

The closing instructions can be that on the closing date your deposit account is used to clear the deficit arising from the shortfall between 
the purchase price and the mortgage.

Instead of depositing with your solicitor you are depositing with the bank/Building society that is due to get the money. THey can only take it if the sale completes.


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## Draigean (31 Oct 2010)

I think you should discuss this matter with a professional financial advisor for his/her advice, rather than seek opinion here.
However, some of the opinions here may get some thoughts going for you or for others.


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