How to sell property when home loan is outstanding In 2024

Selling property is not easy as selling any product, we have to follow many processes, documentation etc. to sell the property properly and fairly without any failures and deficiencies. When it comes to selling a property with the outstanding home loan amount it becomes more stressful for sellers.

Sellers get so confused about how to sell the property when it is mortgaged for the loan amount, so the question comes that can we sell the property with an outstanding home loan? If yes, what is the procedure for the same and if no, then why? and what can we do

So the answer is yes, a property owner can sell his property with an outstanding home loan to a suitable buyer by completing all the documents and procedures required for the same. In this article, we will focus on the process and all the points of interest when wanting to sell a property with an outstanding home loan.

How to sell property when home loan is outstanding In 2024
How to sell property when home loan is outstanding In 2024

How to approach a prospective buyer When selling property with outstanding home loan Before selling the property, the seller must inform the buyer about the outstanding amount of home loan. This should be communicated before the final price is decided and negotiated. There are several different ways to contact the buyer depending on the buyer’s capabilities, such as:

  • If the buyer decides to make the payment from his own funds.
  • The buyer decides to take a home loan from another lender to pay the amount for the property.
  • The buyer decides to apply for a home loan from the lender bank of the seller.

Documents Required for Selling Mortgaged Property

When there is an outstanding amount of home loan at the time of sale of the property; Since the original documents will be with the lender or the bank or some institution, it is necessary to have copies of the original documents which are given to the lender to mortgage the property for a home loan. Basically it is necessary to have all the relevant photocopies of the original documents like:

Burden Certificate

An Encumbrance Certificate (EC) is a piece of documentary evidence to prove that the said asset is free from any monetary and legal liabilities. This serves as proof that this type of property can be sold with a free title and that the buyer will not have any encumbrances attached to the property. This document can be obtained from the office of Registration Authority.

This provides assurance to the buyer that the property he is going to purchase is clear or free of any legal dues and has marketable title.

It is a reference to any liabilities that arise from a mortgaged property which has not been cleared by the owner/seller.

This certificate is normally valid only for the particular transactions in that period and considers only those transactions.

Procedure for obtaining Encumbrance Certificate (EC)

EC is provided by the Sub Registrar officer where the property has been registered to trace any transaction related to the property, the following procedure should be followed:

  • To obtain EC, first of all the application has to be made in the Sub-Registrar Office, to obtain the certificate address proof, description of the property, copy of title should be given along with applicable fees.
  • The inspection of the information list (index list) will be completed by the officer within the prescribed period.
  • EC is released within 15-30 days from the date of application.
  • The format of application and certificate is given as per the rules or provisions of the Registration Act as per the respective states.

Frequently, an application is made under Form No. 22, and the EC is issued in Form No. 15. Copy of Sale Deed is a document that certifies the title and eligibility of a person over the said property. This is one of the most important documents while a property is in the process of getting sold. It specifies details that are important to the buyer of a property.

Copy of Sale Deed

A copy of the sale deed can be obtained in case the original document gets lost or displaced. The property owner/seller can obtain a copy of the sale deed after executing the indemnity bond.

A sale deed is also used to secure loan for purchase of property, so in the absence of the original sale deed the bank, or the lender can ask for a copy of the sale deed, affidavit etc.

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Process for obtaining copy of sale deed

  • FIR should be lodged at the nearest police station with proper information of the document like registration number, ownership details to address the loss of the original document.
  • When the police are not successful in locating the original document a non-traceable certificate will be issued to the owner/seller to apply for a copy of the sale deed.
  • After that, the person is required to publish an advertisement of the loss of the document in two newspapers, including an invitation for a claim on the property and if no claim comes within the specified period from a lawyer then takeover for the same. Should be (acquired).
  • If the original document is not available, an affidavit will have to be filed on stamp paper; That the affidavit should indicate the marks of the missing or incorrect sale deed and other related documents, the undertaking should be handed over and verified with a public notary along with the FIR document, copy of the advertisement in the newspapers, an affidavit.
  • After all the above documents are submitted along with the application requesting a copy of the sale deed, it can be obtained from the concerned Sub-Registrar.
  • All documents must be supported with the prescribed fee, which may vary from place to place.

The process of selling property with outstanding loans

To sell property with outstanding home loan, the following procedure must be followed:

  • The seller has to obtain the loan dues letter by requesting it from the bank or lender.
  • The seller has to obtain prior or substantive approval from the lender.
  • In this approval, a part of the sale consideration (amount) has to be paid directly to the lender or bank and the rest of the amount (if any) may go to the seller or the property owner himself.
  • After the process mentioned above, the loan gets paid off and the liability is extinguished.
  • Then the bank or lender can issue the property documents.
  • Now the seller can transfer the ownership and title to another asset in the name of the buyer.
  • If any amount is still left, it can be settled between the seller and the buyer.

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