# Wish to sell House in negative equity - KBC won't discuss payment options



## amgd28 (16 Jan 2014)

Had 2 mortgages with KBC, one PPR (variable) and one Buy-To-Let (Tracker).
In 2013, managed to sell PPR (we had moved out of it as we needed a bigger house - renting). Sold for less than mortgage (approx. 20k shortfall) but we had funds in place to clear balance when closing so no issues.
Now we wish to sell the Buy-To-Let as we are not suited to being landlords, and have little time to handle same. 
Current balance on mortgage is approx. 300k
Current estimated sale price (based on other houses in area): 180k (original purchase price was 379k).
house actually generates reasonable rent as it is a house with a 2-bed own-door annex which are let at 1000 and 500 respectively.
We have never had any problems paying mortgage and even if house is completely vacant we would still be okay with paying mortgage (obviously not desirable). Mortgage payment is approx. 1700 per month
*
The Issue*
I rang KBC about our options for the shortfall if we put it up for sale. They state that they will not discuss any options until I actually have a live bid. So they will not even discuss what scenarios might an option for the shortfall until I have a buyer ready-to-go

I find this a ludicrous approach. I am not asking for any favours necessarily, I just want to go into any sale process with my eyes wide open. In order to get to the stage where KBC would discuss options, I will need to close out the leases of the existing tenants, refurbish for sale and wait whatever time it takes for a bid to come in, with no idea whether I would be permitted by KBC to actually close the sale
The kind of thing I am looking to know before going through that process is 

might they agree to retain the rump of the mortgage over a 5-year payment horizon

might they agree to retain the rump of the mortgage over the balance of the term of the mortgage

Will they only consider allowing a sale if I have the cash on hand to make up the balance? (I don't, but with a lot of prep I could probably raise it)

Or any other options


I just think that for KBC not to even engage in a discussion is crazy. 

Is this unreasonable behaviour or is it typical? I suspect that if I was a "distressed" client they would have agreed to discuss options.


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## Brendan Burgess (16 Jan 2014)

Hi amgd

€300k@ 1.5% = €4,500 interest a year.

€1,500 x 12 = €18,000 a year.

So you are making a profit of €13,500 a year before costs. 

This is a very profitable investment.  In fact, it's more profitable than €13,500.

If you sell it, you will have a shortfall of €120,000 which they could try to charge 4.5% on or €5,000 a year. 

So you will convert a profit of almost €13,500 into a loss of €5,000. 

There is plenty of scope there for paying a letting agent to manage the property for you and take almost all the hassle away from you.


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## Brendan Burgess (16 Jan 2014)

Back to your question. 

They could refuse to allow you to sell the house. Then you could threaten a High Court action which would result in an order for sale. They will cave in well  before that. 
Can I force the bank to allow me to sell my home in negative equity? *
*

I don't believe that they are entitled to anything other than a repayment of the shortfall  over the original period of the mortgage at the existing tracker rate. 

When you go to the expense of a buyer, they will try to force you to agree to something different, threatening you with a refusal to allow you to sell the property. 

I don't think you should sell this great investment, but if you absolutely want to, then get your solicitor to write to them explaining Section 94 of the Conveyancing Act.


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## Brendan Burgess (16 Jan 2014)

I note you seem to have this conversation on the phone. 

You should write formally to the Bank in the first place. If they refuse, you should make a formal complaint to the FSO and also notify the Central Bank of this ridiculous practice.

Brendan


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## amgd28 (17 Jan 2014)

Hi Brendan,
Thanks your responses are very helpful.

I appreciate that the property may look profitable, but in the scheme of things I am much better spending my time and effort on building up my business.

I am also selling a small number of shares in my company this year, which would trigger a CGT liability. Selling the house would offset this as it will generate approx 230k in CGT losses...

Overall though the rationale for selling is that it causes anxiety for my wife and I'd prefer to remove that as much as I can.

I will take your advice and write to the bank. 



> I don't believe that they are entitled to anything other than a repayment of the shortfall over the original period of the mortgage at the existing tracker rate.



If I can establish this, then that would be an amazing result


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## Brendan Burgess (17 Jan 2014)

> Overall though the rationale for selling is that it causes anxiety for my wife and I'd prefer to remove that as much as I can.



Would it help if she understood the actual figures?  You are converting a profit of €13,500 into a loss of €5,000 by selling. This is actually a financial no brainer.  Get an agent to manage it and most of the hassle and time will be gone. 

Brendan


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## amgd28 (15 Sep 2014)

Just to give an update on this.
We put the house up for sale in July after doing some renovation work. Went up for sale @ 180k and within a couple of weeks was sale-agreed @211k
Dealing with KBC was a bit tricky as it seemed I spoke to a different person each time and they seem to have mislaid a lot of documentation sent to them by my solicitor giving details of bid, confirmation arms-length transaction etc.

So, we still haven't received consent to sale, but hope to receive in the next week or so. They will de-couple this from the discussion on dealing with the short-fall as they don't want us to lose the sale.

The default "deal with the shortfall" approach is to keep the mortgage repayments on par with the remaining term with the reduced balance.

Overall I would advise anyone contemplating selling a house in negative equity with KBC to do the following:


Complete an SFS (this is required for consent to sale - even if no write-down is being sought) + two month's payslips and 3 month's bank statements
Have a letter from the agent stating bid detail and confirmation that market value has been obtained
Other documentation from a solicitor used to dealing with these things (most sols at this stage should used to dealing with negative equity sales)

Once sale agreed, call in to KBC if it is feasible - it is amazing how much progress I made by just calling in to "drop off" the SFS

The approach by KBC appears to be pragmatic and realistic. By decoupling the consent to sale from the handling of the balance they are acknowledging the position that most sellers are in and are attempting to be accommodating.
Having said that, it appears that they are swamped with cases, so it may be a matter of who shouts loudest gets dealt with first. Hence the benefit of calling in..

Will give further updates as and when more information comes out


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## amgd28 (15 Sep 2014)

Brendan Burgess said:


> Would it help if she understood the actual figures?  You are converting a profit of €13,500 into a loss of €5,000 by selling. This is actually a financial no brainer.  Get an agent to manage it and most of the hassle and time will be gone.
> 
> Brendan



Brendan - the offset of CGT gains this year would have the effect of reducing my tax bill by over 50k.... So your comment on the actual numbers needs to take that into account.
Having taken it into account, the sale is going through..


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## Bronte (16 Sep 2014)

amgd28 said:


> Will give further updates as and when more information comes out


 
Excellent posts and information.  Well done on sorting this out.


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