Vendor's Mortgagee wont sell the property to me

[TuLaLiT]

Hi guys,

To cut story short I had my offer accepted last week on this property I quite like. The contract has been signed by me and the vendor, I put the usual conditions such as finance, LIM and builders report but vendor didnt.

The following day the real estate agent I was dealing with rang me up and and said that the vendor mortgagee will not provide a discharge of the mortgage because my offer apparently is insufficient to clear their mortgage.

So I went to ASB and talked to my personal banker regarding this situation and he told me that if theres a signed contract for a property the have to be released to the buyer and if the amount of sale does not clear the whole existing mortgage the remaining of the balance will be an unsecured loan against the seller.

So I rang up my solicitor and told him what my personal banker told be but he disagreed. He said, " The mortgagee is only obliged to release the mortgage when they are repaid in full. If they are not to be repaid in full then their agreement to release the mortgage and provide a discharge of that mortgage would be by negotiation. There is no obligation on the mortgagee to take personal loans to cover any outstanding debt".

I really dont want to re-negotiate on the purchase price since I dont think its my problem that the vendor accepted my offer and did not aware of the amount still owing to the bank.

So guys where do I exactly stand at the moment and say if the vendor's mortgagee still will not provide a discharge of the mortgage can I take the vendor to court and ask for conpensation since they have been wasting my time ?


Looking forward to hear back from you guys

Thanks

Ronny T

[Dean@Massiveaction]

I think the Personal banker is quite wrong. Generally Bank holds all the cards. I guess you could sue the vendor but I wouldn't waste my time.
No doubt a lawyer on the forum will give you a professional opinion in due course, but I am 99% certain the bank can make it your problem.

[Davo36]

I was in this position 2 years ago. With a commercial property, but same deal, the vendors signed a deal with me for a price worth less than the mortgage on it. It was done through and agent too. It was an unconditional agreement.

The mortgagee refused to clear the mortgage. I took legal advice and basically found out there was nothing I could do. The agents (Bayleys on the North Shore) were very pushy about getting their deposit. I didn't pay it to them because I knew that if it didn't settle, the agents would try and keep their commission - despite them saying they wouldn't. The agreement stated the deposit would be paid on settlement. The agents didn't like it but got it signed up anyway.

The mortgagee was Trustees Executors Limited. And they basically said they would not crystallise losses on mortgages in NZ. So despite the agents trying and me trying, they refused to release the mortgage and wanted me to pay more.

Meantime the vendor, an overseas guy, dishonest as they come was going around negotiating different things with the tenants....

So I walked away. Cost me $1500 in solicitors costs to get out of it. Took around 3 months of mucking around too.

So TuLaLit, my advice is to just cancel the agreement, and walk away. Find another deal. If the vendor is up for mortgagee sale (or close to it) then they don't have any money and there's no use pursuing them.

[CJ]

I guess you could sue the vendor but I wouldn't waste my time.

Agree. You could sue but lets face it, they are in a negative equity situation on their house so probably have no money.

Get them to talk to their bank to see how much more they need. It maybe worth paying more (if it is only a few grand), getting them to take out a personal loan for the balance, a combo of both, or just decide to walk away.

[AvatarX]

Your solicitor is correct. The bank doesn't have to release the mortgage in this scenario, especially if after they have assessed the vendor's financial situation and don't believe the vendor can afford the required loan.

You can pursue the vendor for damage, but really it's probably not worth it and won't do much good besides making the vendors' situation even more miserable.

[TuLaLiT]

Thanks for the quick replies guys,

I should've gone into details a little bit more on my first post. A few days after the agent rang me up and told me that the mortgagee wont release the property, he managed to contact the vendor which is living in overseas and asked for the letter/email from the bank that stated the bank will not provide a discharge of the mortgage to be forwarded to my solicitor, the vendor changed their story again and said after they've done their calculation they said that my offer should be more than enough to repay all the amount still outstanding.

My solicitor has contacted the vendor's solicitor asking for the formal confirmation from the bank regarding this situation. They were given 5 working days to sort this out and this past Friday was the fifth day and they still havent heard anything back from the vendor's bank.

So I'm kinda p****d off getting muck around with this deal.

Thanks guys


Ronny

[TuLaLiT]

Oh just a quick note the vendor purchased the property for $142,000 10 years ago and I offered them $315,000 for it, so I dont see how the heck my offer wouldn't cover the whole mortgage and also they property has been rented for years.

[eri]

imho

it sounds as if the seller has had 2nd thoughts and thinks they can get more, either from you or someone else

you have 2 choices

1. start legal action on the basis of the signed contract...expensive and not guaranteed of successful outcome

2. tell the seller you are very unhappy, tell the agent's boss you are very unhappy and will avoid his company in the future over their crappy client....and walk away from the deal making it clear that you are doing so due to their breaking of the contract....then find another property

[revdev]

Oh just a quick note the vendor purchased the property for $142,000 10 years ago and I offered them $315,000 for it, so I dont see how the heck my offer wouldn't cover the whole mortgage and also they property has been rented for years.

This property may well be cross collaterised or be security for a revolving credit etc, so it might not be that simple.

[Winston001]

(Echo) Your solicitor is correct. Do not expect bank staff to give legal advice. To be fair your banker should know a lot better - ASB wouldn't throw away a mortgage either.

[TheLiberalLeft]

This story backs up the idea that banks in NZ are holding up prices by allowing only a minority of mortgagee sales to hit the market (or hit the fan depending on your circumstances) at any one time. This is distorting the true picture of the property market in NZ and is keeping prices artificially high. Again, depending on your position, this could be a good thing.

[Ivan McIntosh]

As Winston and others have said, the bank doesn't have to release.

The vendor is in default for failing to settle, and will end up liable for penalty interest. However, if they're trying to sell a property that doesn't cover their bank loan there might be nothing to extract from them. Don't take that as gospel because they may have other properties that, when sold, will yield some equity. Could be worth running a few searches in Landonline and the Companies Office.

There is also the possibility that they are trying to get you to cancel so they can sell elsewhere. Might be a good idea to get a caveat on the title if you haven't already. Definitely continue to pin them down on the lawyer, and charge them all you can get if they hold up settlement.

[Xav]

From your second post it sounds a lot like the vendor changed their mind and was/is trying to find an excuse not to settle.

[spaceman]

The whole 10 year thing make it sound like you're getting played to me..... you're paying well over double the price they paid for it and they can't cover the mortgage.... I call BS.

Yes they may have other issues regarding collateralisation and security and stuff..... but those are their problems not yours.

OTY what to do.... dive in boots and all or just walk away ..... depending on the deal I be tempted to just walk... OTOH it can be fun fighting back and making the playa' pay

Cheers
Spaceman

[TheLiberalLeft]

I'd be inclined to walk too, but might just push the next step a bit more and see what happens. Defer you final decision to then.