Shortfall Issue

[TYC]

Hello - I'll try and keep this as succinct as possible, which isn't very succinct having read it back.

 

I have a BTL mortgage on a property in which I used to live.

The mortgage originally was a repayment mortgage.

 

Due to work relocation I moved out and changed to a BTL mortgage in 2014.

became a classic 'reluctant landlord'.

 

The property was let to tenants 2014-early 2017.

I decided to sell the property earlier this year via estate agents.

 

There were two offers on the property,

over a period of around six months,

each about 3 months apart,

both of which were accepted.

Unfortunately both potential buyers pulled out.

 

Had the second sale completed it would have left a shortfall,

but not an unmanageable amount.

 

Apparently both pulled out as potential lenders wouldn't provide a mortgage on the property.

effectively the property appears to be un-mortageable.

I don't know exactly why, but I'm guessing it must be some sort of structural issue, subsidence, etc.

 

The final resort, before 'voluntary repossession', is selling at auction.

 

I have set a reserve price which will leave a more significant shortfall,

one which I can't meet,

nevertheless at a price which may sell.

 

potentially mitigating any shortfall,

where the maximum in the event of not selling,

is obviously the full outstanding mortgage amount.

 

However, in order to allow any sale to go through,

my solicitor has advised I obtain consent from the lender,

which effectively is the lenders agreement to discharge the mortgage on the property in the event it sells at least the reserve price,

just to allow respective solicitors to complete a sale.

 

For the purpose of this auction sale exercise,

I'm not requesting immediate discharge of any shortfall.

 

In the absence of any consent,

the solicitor has advised me not to sell at auction.

The lender has verbally refused to agree to this.

 

in my view this forces me into a 'voluntary repossession' situation.

Effectively I am trying to demonstrate I have done all I can to try and sell the property.

 

by effectively placing me into a 'voluntary reposession' situation,

I guess the lender will have to attempt to sell at auction anyway at some stage.

 

Anyone else ever been in similar situation or have any advice?

[unclebulgaria67]

Presumably you are in arrears on the mortgage ? If so, how far in arrears are you ?

 

Is keeping the property and renting it out an option ?

 

If there is a structural or subsidence issue, how did you manage to get a mortgage on it ? There woukd have been at least a basic survey on the house. When you bought the house, the seller would have completed a form which required them to disclose anything they knew about the house.

 

I think you need to find out exactly what issue there is with the house and why it will sell for less than it should do ?

 

Accepting a voluntary repossession might just make matters worse. The mortage company will sell it as quickly as possible and any shortfall debt will be increased by the various costs incurred. They won't chase for the debt straightaway and will leave it awhile. Limitation act is 12 years for mortgage capitol and 6 years for interest, so quite a long time to try to enforce the debt on you.

 

Suggest you really drill down on all options, before you make a rash decision.

[TYC]

Thanks for the response.

 

No I am not in any arrears.

I will be in due course if I can not sell the property at auction.

 

I don't know why my lender provided a mortgage on the property when apparently other lenders won't provide a mortgage.

It may have been a desktop based decision making process.

 

I don't know if my lender carried out any sort of survey.

At that time it was effectively a switch from repayment to BTL.

 

The BTL lender is not the same lender which provided a repayment mortgage on the property when I originally purchased the property.

I obviously no longer have a contract or potential debt with the original lender.

 

The potential debt accrual will sit against the current BTL provider.

Effectively the BTL lender discharged the outstanding mortgage with the repayment lender.

 

Re potential 'issues' with the property,

I have no evidence but apparently the issue may be subsidence, according to potential buyers survey reports.

I haven't seen these, but just going off verbal feedback from the estate agent.

[unclebulgaria67]

I have dealt with a lot of these situations when dealing with Insurances for a mortgage company. You would be amazed at the amount of times, mortgage company underwriting staff totally misread surveyors reports. A basic surveyors reports is mostly a tick box form and surveyors being cautious will note cracks in walls they see. They might not have thought there was a subsidence issues, but they cover their backsides by effectively not ruling it out, sometimes suggesting a structural survey.

 

Before you go down a route you really regret, i would suggest that you obtain your own surveyors report on the house. If there is a subsidence issue, then approach any Buildings Insurers you may have and get the work done. If there are any works to be done, then the house is not going to be repossesed. Work with the mortage company to deal with the situation, to avoid a debt for either party. Better to sell the house at a proper market value or be able to let it out to cover mortgage and other costs.

 

It would be a big mistake to believe there might be a problem with no real evidence you have seen. The house is sold at half market value at auction and the mortage company add thousands in costs. Later on an investor that buys it spends a few thousand tarting it up, finding no subsidence and makes tens of thousands profit.

[TYC]

Yes unfortunatey I no longer live in the country (I'm now in Ireland and have been for a few years now), am reliant on whatever info I've been passed by Estate Agent feedback.

 

I'm not in a position whereby I can instruct builders to carry out works which may or may not help.

I have a job and life elsewhere.

 

the crux of the issue is that a number of buyers have pulled out because apparently lenders wouldn't provide a mortgage against the property.

the lender is effectively preventing me from pursuing the auction route as the lender refuses to release a charge on the property in the event it sells at reserve price.

 

I was prepared to sell at a value less than the outstanding mortgage and then whatever shortfall is left becomes the focus of a discussion between me and the lender.

I fully recognise the risks which will likely arise in the event the lender sells at auction.

effectively I am not in a position to pursue any other avenue, given I no longer live or work in the region.

 

I was never a property developer or in the lettings game to make money.

It was a means to an end when I had to relocate.

 

The auctioneer feels that the property may not even sell at the reduced reserve price, based on some feedback from those viewing the property,

although to be fair I don't know to what extent the auctioneer is being truthful.

 

the option of increasing the reserve price to a level which would allow the shortfall to be manageable from my point of view appears to not be an option at all.

I may have to seek legal advice as I'm caught between a rock and a hard place with this one.

[unclebulgaria67]

As long as you realise that any UK debt can follow you to Ireland and be enforced there. This can include a court claim in Ireland, charge against any property in Ireland, bankruptcy etc.

 

Suggest that you obtain further debt advice, if you really feel that you are stuck. Perhaps there are ways to protect yourself a little, by having written communications with the mortgage company about the situation and looking at options. Does the mortgage company have a surveyor that can conduct a report on the current condition of the property ? Why not ask them, as you are seeking to minimise any debt incurred by the mortgage company and yourself. If the mortgage company then fail to take reasonable action, you have these written communication when they come after you to enforce the debt.

 

Worse thing you can do is just give up on the UK property, hand the keys back to the mortgage company and let them do what they want.

[TYC]

As long as you realise that any UK debt can follow you to Ireland and be enforced there. This can include a court claim in Ireland, charge against any property in Ireland, bankruptcy etc.

 

Suggest that you obtain further debt advice, if you really feel that you are stuck. Perhaps there are ways to protect yourself a little, by having written communications with the mortgage company about the situation and looking at options. Does the mortgage company have a surveyor that can conduct a report on the current condition of the property ? Why not ask them, as you are seeking to minimise any debt incurred by the mortgage company and yourself. If the mortgage company then fail to take reasonable action, you have these written communication when they come after you to enforce the debt.

 

Worse thing you can do is just give up on the UK property, hand the keys back to the mortgage company and let them do what they want.

 

Yes for whatever reason the lender appears to be unwilling to engage at all. Of course from their perspective there is no problem at the moment. I initially alerted the lender to the issue at the beginning of October. I have probably called around 8 times since. The standard response, 'we'll look into it and get back to you'. The lender has never come back to me via phone, letter or email. The only response appears to be via a rep is that the lender will not be willing to lift any charge on the property in the event it sells below the outstanding mortgage amount. But of course it doesn't appear possible to get in touch with any decision maker in this respect. I think I'll follow up with a recorded letter at this stage. I don't want to be at the stage where the mortgage company has 12 years to pursue any outstanding debt (debt potentially being on capital, not interest).