I need to sell my house to relocate due to my job.

I know I will not receive enough to cover the cost of my mortgage. A shortfall of about £6000 to £8000 is expected.

I need an answer to my question which is: If I sell my house at a loss will the mortgage company accept an offer for me to pay about 50% of the shortfall. Or will they just go straight into legal action?

I am very impressed with your site and the information it provides.

I have owned the property for 10 years. I fell into arreers in 1997 but paid of the arreers and have been paying on time with no problems at all for 3 years now. The reason the house has lost value is due to the location(rise in crime etc).

I am willing to accept some of the loss of the sale of my house but not all due to the expected amount. After reading about various people who after having there house repossed are able to negotiate a settlment of £3500 on a shortfall of £15000.

I do not want to go down the repossesion road. and feel that I do not have to. However staying in my present house is adversly affect my life, socially and professionally.

Any comments, advice or pointers to sources of onformation would be greatly received.

-- Justin Mallinson (justin.mallinson@mymail.co.uk), January 11, 2001

Answers

You should be able to sell provided you make clear, documented, attainable plans for repaying all of the expected shortfall. Which also means proving a genuine offer and intent to buy from your purchaser beforehand. You will probably need a solicitor to help you deal with the resistance your lender will put up. It may end with you having to hand in the keys anyway, in which case your documenting a genuine offer and your plans to pay all of the difference to the society will greatly help you fend off any subsequent shortfall claim the lender may try to impose on you.

Personally I can't support you in a decision not to absorb all of the shortfall in this case. You are effectively holding the lender responsible for some of the decline in price and this seems unfair to me given that the decline is due to rising crime, rather than, say, that the lender's valuer misvalued the property.

Lee

-- Lee (repossession@bigfoot.com), January 11, 2001.

I agree with Lee, but I would just add as a discussion point that there are some signs that lenders' valuations on properties were hopelessly optimistic in the past (even after the boom-bust of c1990) and did not take into account that all important factor, Location Location Location. Borrowers are usually in no position to sue for negligent valuations, because (a) they are skint and (b) the valuers are usually not direct employees of the lenders, and it all happened over six years ago so (ironically) the Limitation period has expired.

Are you at all in a position to take on another mortgage where you are moving to? I recall some lenders offer 'negative equity mortages', where the new mortgage absorbs the previous loss, but if you are moving, say, from the north to the south-east then you may not be able to afford a mortgage at all these days.

Whatever you do, document everything and keep every single piece of paper in a safe place. Show that you have made a genuine effort to resolve this with your lender.

-- Eleanor Scott (eleanor.scott@btinternet.com), January 12, 2001.

PS Been looking at some old threads and Sue Edwards (Social Policy officer with NACAB) mentioned the case law of Barrett v Halifax Building Society - a high court case in 1995, which I believe supported the right of a borrower to sell at a loss.

Since then there have been two pieces of conflicting caselaw: Cheltenham & Gloucester plc v Krausz (1996 Court of Appeal) and Polonski v Lloyds Bank plc (1997 High Court case).

She ends, 'You will need legal advice to proceed on this one.' But don't forget that you can get free advice at you local CAB (Citizens' Advice Bureau), and if you have Home Contents Insurance, or Trade Union membership, or even a credit card like Barclaycard, then you will get some free legal advice via these channels too. Though personally I find the internet (and this site in particular) the best mine of information.

Let me know if this is of interest. I think I have some relevant emails archived somewhere on the case law.

-- Eleanor Scott (eleanor.scott@btinternet.com), January 12, 2001.