Need sum help for a friend in trouble.
If the bank took you to court to sell your house to cover your mortgage would you get any equity in the house or would that go to the bank?
For example if the amount owed to the bank was $300,000 but the house was worth $600,000, if the bank sold the house for $600,000 and took the $300,000 to cover the loan would the home owner get the $300,000 profit or the bank?
would like to help her
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15-03-2014 17:52 #1Junior Member
- Join Date
- Mar 2013
Mortgage question - re losing your house
15-03-2014 18:17 #2
You get any extra over the amount you owe the bank BUT as they are only interested in covering their debt they don't care if it sells under market value - in this booming market you will be fine but in a tough market I've seen banks sell way under market value as they don't care - it's always best to sell it before the bank takes over as the fees and expenses and legal fees they charge are enormous plus as mentioned you lose all control
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15-03-2014 18:17 #3
Sorry I don't know, but if it's got to the point where she is going to have her house taken by the bank I would imagine it's probably better if she sells it first before they do - that way she has complete control on how the property is sold. And I would think it would look better for her credit rating as well, I think having the bank repossess your house would go on your credit record.
15-03-2014 18:18 #4
Warrant of seizure and sale
If the creditor knows that you own land, they might issue a warrant of seizure and sale in order to try and force the sale of this land to pay out the judgment debt. A creditor who has obtained a judgment for a debt can apply to the Supreme Court or the County Court for a Warrant of Seizure and Sale, which directs the sheriff to seize and sell the debtor’s real estate (land or house) so that the debt can be paid.
Real estate can be taken only if the warrant has been issued out of the Supreme Court or the County Court. If the warrant was issued out of the Magistrates’ Court, it must be transferred to the Supreme Court before real estate can be seized.
It is important that you get advice quickly if you are threatened with a warrant of seizure and sale for your house or land.
The sheriff will serve you with a warrant to seize and sell your real estate, and advise you of the time line for the sale of your property if you do not pay the debt. This time line will be the same as detailed at “Home loan default”, above. The sheriff will then put the real estate up for sale by auction with a reserve price, based on a valuation of the property.
The sheriff can sell only the debtor’s interest in the property. If the property is jointly owned, the sheriff can only sell the share owned by the debtor. The interest of the debtor is the value of the land less any mortgages and outstanding rates. Because of this, a warrant of seizure and sale is not a common form of enforcement. If you own an interest in land, it might be more likely for a creditor to commence bankruptcy proceedings against you (see Chapter 8.3: Bankruptcy).
If the property does not sell for the reserve price, the sheriff or the creditor may obtain an order from the Supreme Court to sell the property without a reserve price. However, the sheriff must obtain a fair price (even with such an order) and, if the sheriff breaches their duty and sells the property at an unfair price, the following consequences may follow:
the sale may be set aside; or
if the sale is not set aside and you have sustained loss and damage, the sheriff may be liable to pay you damages at common law (see Zhou v Kousal).
In Zhou v Kousal  VSC 187, the Supreme Court of Victoria set aside the purported sale of a residential property by the sheriff for $1,000 where the property had a market value of approximately $630,000 and the debtor’s financial interest in the property was approximately $165,000.
There are also time limits to a warrant of seizure and sale, as it is valid for only three months. If the property has not been sold within that period, the creditor is required to re-register the warrant with the Titles Office.
At any time up to the sale of the property, you can seek an instalment order, but you will be liable to pay the legal costs of the warrant, therefore these costs should be included in the amount payable under the proposed instalment order (see “Instalment orders”, above). Obtaining an instalment order stops any further action by the sheriff or the creditor in relation to that debt. Advice should be sought from a financial counsellor (see Chapter 8.2).
After the sale
The proceeds of the sale are paid to the creditor to pay off the judgment debt and any costs and interest that have accrued since the date of judgment. Any money remaining will be paid to you.
I found this online in the law handbook, looks like she may get something depending on how much they sell at auction. When selling at auction they will sell for whatever they can get regardless of the actual value.
Hope this helps
15-03-2014 18:44 #5
Banks dont care what the house is worth all they want is what they are owed they will be happy to sell house for $300 000 and dont have to sell at a higher rate so your friend gets money. They auction off the homes though so all depends on the day. Your friend is better to sell off on their own terms if they know they need to sell now.
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15-03-2014 18:59 #6
16-03-2014 16:04 #7Senior Member
- Join Date
- Nov 2013
I work in insolvency and some of the information given here is incorrect. As a secured creditor the bank will obviously look to recover the amount owing to it however it also has an obligation to sell the property at around its own bank valuation ( usually slightly less than a real estates estimate as valuers working for banks are more conservative). If the property sells below market value and the bank is taken to court it must provide a explanation of why it sold under its valuation.
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16-03-2014 19:56 #8
It has happened to a good friend and neighbour recently...well now as under offer sticker has gone up. The bank recovers all there costs, such as mortgage, court costs , sherriff costs, repairs , cleaning etc to get home up to scratch for sale.....remember when it is repossessed they must leave when locks are changed so no chance to " pretty it up" the bank has to ask reasonable price ( this one was approx 30k less than last valuation but about 15k below expected value). House under offer in a week. In the end my friends will get what is left over after sale minus money owed to bank, lawyers, agent and other costs. I'm no expert but just watching it happen.....very sad.
16-03-2014 22:24 #9
if they have substantial equity int he property, they are much better off trying to refinance the property rather than anything.
But I agree with everyone else - if the bank is going to sell it, they are FAR better off selling it themselves on their own terms.
While it is true that a bank has a duty to get as much as they can, in reality someone who has had their house repossessed isnt going to be in any position to take action against a bank who has not behaved ethically.
In addition, as someone else mentions above, if the bank sells it, they do not put any effort into cleaning it up, painting or doing the garden or presenting it. That will also make a HUGE difference in the sale price.
17-03-2014 12:47 #10Junior Member
- Join Date
- Mar 2013
Thanks, I will show her this, I think she should sell but she is working with the bank and they are trying to help her catch up on payments. She wants to stay for the kids. At least she'd get sumthing if they sold it.
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