How to sell a home with an outstanding loan

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Very often, people invest in an extra property with an eye on rental income. They also end up taking home loans to finance this purchase. However, in times of financial constraints, this extra home with an outstanding loan is the first option to be knocked off the investment portfolio. Given the size of the loan, most often the seller is under duress as to how to go about selling such a property. Following are some options that can be considered:

OPTION 1: IF BUYER PAYS FROM HIS OWN SAVINGS

  • The process is simple as there is no bank involved by way of loan from the buyer’s end
  • The seller can request the bank to provide a loan outstanding letter
  • Instead of paying to the seller, down payment can be directly made to the seller’s loan account
  • In this process, the loan gets paid and with the liability cleared, bank releases the property documents
  • Thereafter, the seller can transfer the property in the name of the buyer
  • The remaining amount, if any, can be settled directly between the buyers and the seller


OPTION 2: BUYER TAKES LOAN FROM SELLER’S LENDER

  • Buyer, seller and bank enters into a tripartite account
  • This is easier for all the parties involved as the number of checks required are minimal
  • The only background check required is that of the buyer as to check his eligibility for a home loan
  • From the loan sanctioned to the buyer, the amount required to settle the loan of the seller is taken care of
  • The residual amount will be handed over to the seller


OPTION 3: BUYER TAKES LOAN FROM A DIFFERENT LENDER

  • Here too, the seller requests the bank to provide a loan outstanding letter along with the list of property-related documents maintained with the bank
  • Once all the papers are provided, buyer approaches his bank and pays the required fees
  • Thereafter, if the applicant is eligible, the buyer’s bank issues a cheque in favour of seller’s bank bearing the outstanding loan amount
  • When the loan amount is fully settled, bank releases property documents, which is then handed over to buyer’s bank
  • It is only then that the remaining loan amount is released

DOCUMENTS TO BE MAINTAINED

  • Mother deed
  • Sale deed
  • Documents pertaining to home loan sanctioned
  • Housing society share certificate
  • Society NOC
  • Encumbrance certificate
  • Property tax receipts

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