Housing loan is indeed a boon for us, as it allows affording our desired property very early in life. But, in some ways, it ties up our hands too. As an example, selling a house, with an outstanding home loan attached to it, is quite a troublesome task. Because of the existence of a financial institution as a third party, sellers find it complicated at times, to execute the process of sale and transfer.
Here we will discuss various approaches that may be considered by sellers of properties with running loan.
Before the seller looks for prospective buyers
If you are a seller of such a property with an outstanding home loan, all the original documents related to your property will be at the disposal of the lender. You need to make sure that you have copies of enough papers submitted with the lender, in your possession, so that your ownership may be proven to the potential buyers. These documents may include copies of loan-related documents, sale deed, property tax receipts, electricity bills etc.
Also, the bank should be informed of the fact that you would like to initiate the sale of the concerned property. You should receive a letter from the bank, with details of your outstanding liabilities. This will also add to the list of your documents of ownership of the property.
After the seller finds a buyer
It is imperative that the seller informs the buyer about his loan liability at the initial stage of the negotiation itself.
Three scenarios may exist now.
Scenario 1: If the buyer does not require a loan
- This will be the most ideal scenario for the seller as no bank is involved from the buyer’s end.
- Instead of making payments to the seller, the same can be deposited to his loan account to pre-pay the loan, based on the letter of outstanding liabilities from the bank.
- Thus, the loan gets paid fully and the bank will release the original property documents, as the liability of the seller has been cleared by now.
- The remaining amount of the deal may be settled between the seller and the buyer
- The seller can transfer the original property documents to the buyer and the property gets fully transferred into the buyer.
Scenario 2: If the buyer avails loan from the same lender as that of the seller
- It is convenient for all concerned as there will be minimal checks from the bank about the property. Time taken in processes like property evaluation can be saved.
- Only background check needed this time for the bank is related to the eligibility and financial standing of the new borrower, i.e, the buyer.
- The three parties involved enter into an agreement now.
- A part of the new loan sanctioned to the buyer will settle the outstanding loan amount of the seller.
- The remaining amount of the loan would be transferred to the seller.
Scenario 3: If the buyer avails loan from another lender
- The buyer needs to submit to his lender, the letter of outstanding liabilities provided by the lender of the seller and other related documents.
- After due diligence is done, the buyer’s lender issues a cheque to the seller’s bank, paying off the outstanding loan amount.
- The seller’s bank then releases the original property documents, which are submitted to the buyer’s bank.
- The remaining loan amount is released to the seller.
Now that you have come to know about how to sell your property with a running loan, leave your worries behind and just go for it. Hope you get a nice deal!