A flat valued at £100,000.The sellerís mortgage is £110,000.
The seller is keen to sell the flat quickly before it falls further in value and puts him in negative equity. But it is proving difficult to find a buyer who will pay £110,000.
If he could sell in the traditional way for £110,000 he would be able to pay of his mortgage and would then leave the property with no money or debt.
If he entered into a deferred completion agreement to sell for £110,000, the practical effects would be the same. As before, he would leave the property with no debt or equity and have no further involvement with the property or the mortgage. While legally his name would still be on the title deeds and mortgage for a few years, in practice he would have sold both immediately. The seller would therefore no longer have to pay the mortgage or service charges or be affected by further falls to property prices as the agreed sale price is fixed. We would pay the mortgage each month and after a agreed number of years (e.g. five) would pay off the remaining mortgage and the title deeds would then be transferred.
A house valued at £200,000. The seller has no mortgage.
The seller wants to sell his house, perhaps he intends to move in with someone else. Again he is finding it difficult to sell the house without accepting a large discount.
If he could sell in the traditional way for £200,000 he could put the money in a bank and earn a small income from the interest.
Alternatively he could enter into a deferred agreement with us at an agreed price of, for example, £210,000. Then depending on what he wanted to do he could choose to receive any amount up to 75% of the sale price immediately and then be owed the balance by us. We would pay him interest on the money owed at a higher interest rate than he could get from any bank. After an agreed number of years the remaining money would be paid.
Depending on the circumstances, completion of the sale may be deferred or completion may be immediate with the payment being deferred. In either case any money owed to him will be secured on the property, providing him with a guarantee that he will receive the money.
Advantages for you:
o Able to sell at a very good price
o It may be the only way to sell if in negative equity.
o Able to fix the sale price in a falling market.
o No chains to deal with or unreliable buyers pulling out.
o Freedom from debts, you will be able to get on with your life.
o Can still agree the sale and exchange contracts within days.
o Gives certainty, you can plan for the future.
o You can earn a higher income than from bank interest on money you don't need immediately.
o Any money owed to you is secured on the property.
o The guaranteed payment of the mortgage will have a positive effect on your credit rating if applying for credit or another mortgage during or after the deferral period.
o There are no fees to pay and no need to pay for a Home Information Pack.