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Voluntary surrender v's repossession

  • 17-04-2013 7:12pm
    #1
    nino1
    Registered Users, Registered Users 2 Posts: 829 ✭✭✭


    My understanding of a voluntary surrender is that the bank will sell your house, (often below market value) and persue the owner for the shortfall plus legal and other fees.
    Does the same apply in a repossession situation?

    And what methods do the bank use to persue the mortgage holder for the balance owed?


Comments

  • #2
    khards
    Registered Users, Registered Users 2 Posts: 214 ✭✭khards


    Can't see much of a difference as the bank gets back their house which was security against the money borrowed and as there is a shortfall in each case the debtor will be left with an unsecured loan.
    If the outstanding balance is large then bankruptcy in the UK is still the best option to clear that debt quickly and get back on the road again.


  • #3
    Peregrinus
    Registered Users, Registered Users 2 Posts: 26,998 ✭✭✭✭Peregrinus


    nino1 wrote: »
    My understanding of a voluntary surrender is that the bank will sell your house, (often below market value) and persue the owner for the shortfall plus legal and other fees.
    Does the same apply in a repossession situation?
    Yes. But they don't sell the house "below market value"; they sell it for as much as they can get, which pretty much defines market value. The problem is that the market has an aversion to paying for foreclosed/surrendered houses, so the market value of such a house is less than the value of a similar house sold by a willing seller.
    nino1 wrote: »
    And what methods do the bank use to persue the mortgage holder for the balance owed?
    Depends entirely on how they fancy their prospects of actually recovering anything. They don't like to throw good money after bad.

    At a minimum, they'll register a judgment against you, which will turn up on any credit search and cause you continuing problems with banking and credit.

    If they believe you have other resources that are worth pursuing - e.g. other assets over which they don't hold mortgage security - they can chase those.

    If you have a steady they can look for instalment orders directing you to pay a certain amount periodically towards reducing the debt. But my (not very extensive, and mostly anecdotal) knowledge suggests that they don't go as far as that in very many cases. Others with better knowledge may be along to clarify soon.


  • #4
    khards
    Registered Users, Registered Users 2 Posts: 214 ✭✭khards


    Peregrinus wrote: »
    The problem is that the market has an aversion to paying for foreclosed/surrendered houses, so the market value of such a house is less than the value of a similar house sold by a willing seller.

    It is not that the market had an aversion to paying for foreclosed/surrendered houses, they require more nibey to bve spent on them.

    1, They often require maintenance as the previous owners could not afford to undertake basic repairs.
    2, The grounds would not have been kept as it is likely that the house will have been empty for 12+ months.
    3, They will need to pay to get ESB re connected.

    All of these things add up and chip away at how much deposit people have to place down, thus affecting the vaue of the property.

    I guess that if you agree with the bank to sell the house when it is still being occupied then you will get a marginally more for it, ultimately if you are going to walkaway owing a huge amount which will never paid back then it makes no difference the seller.


  • #5
    Peregrinus
    Registered Users, Registered Users 2 Posts: 26,998 ✭✭✭✭Peregrinus


    khards wrote: »
    It is not that the market had an aversion to paying for foreclosed/surrendered houses, they require more nibey to bve spent on them.

    1, They often require maintenance as the previous owners could not afford to undertake basic repairs.
    2, The grounds would not have been kept as it is likely that the house will have been empty for 12+ months.
    3, They will need to pay to get ESB re connected.

    All of these things add up and chip away at how much deposit people have to place down, thus affecting the vaue of the property.
    Good point.
    khards wrote: »
    I guess that if you agree with the bank to sell the house when it is still being occupied then you will get a marginally more for it, ultimately if you are going to walkaway owing a huge amount which will never paid back then it makes no difference the seller.
    It's the lender who has the strongest interest in seeing the house sold as advantageously as possible, since in nine cases out of ten the proceeds are most likely all he will ever get in settlement of what is due to him.


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