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Bank wants the sale agreement; seller wants the money. Help!

There can be times when you are stuck in a deadlock. Bank wants the sale agreement; seller wants the money. What do you do?

Harsh Roongta

31 Aug 2009

That beautiful, old house, palatial by current realty standards, was something that Mr Desai had been eyeing for a while.

Everything was just about perfect. The house looked great and fit his budget. After paying the token amount, he started scouting for the lender. He approached a bank for a home loan which sanctioned him loan within the next 15-20 days.

But, that seemed like the end of good things in life. With everything just about right with the property papers, with the loan documents, one would expect a smooth sail. This was far from it. The bank insisted on the registration of the sale agreement before making the home loan disbursement. And, the seller flatly refused to sign the agreement till he received the amount towards the property.

He contemplated dropping the transaction. Neither was the bank ready to relent nor the seller.

Well, of course loosing a particular property may not be the end of the world. There are several solutions to this problem :

Try and convince the seller:

You can show the seller the sanction letter from the bank and pay your portion of the cost fully. The sale agreement is then is which acknowledges the part payment already received and mentions that the balance amount will be paid to the seller within a pre-set time limit (usually 30 days) and contains a clause that the agreement would be null and void in case of a failure of payment within the stipulated time and allows the seller to retain fully/partly the amount that has already been paid as a penalty in such a case. Based on such a registered agreement the bank will disburse the balance loan amount in the name of the seller. If this option is acceptable to the seller you should exercise some caution. Firstly you should submit photocopies of all the documents that you will be giving them after the agreement is signed and registered. Ensure you get at least an email from the bank/DSA acknowledging the documents submitted by you and providing the complete list of documents that will be needed to make the disbursement. Go through the list and make sure that you will be in a position to provide those documents. Frequently in such cases the lender may raise last minute requests in terms of documents that it had not apprised you about earlier. Remember delays in disbursements will cost you dearly in terms of loosing the property as well as penalties.

It may not be strange if the seller refuses the above proposed arrangement. In such cases, some banks may agree to send its representative with a pay order for the loan amount to the registrar's office so that the registration and handing over of the payment can be done simultaneously.

Find the arrangement clumsy? Yes, especially if you are going to buy the house of an individual. Usually, builders particularly the reputed ones have no problems with entering into and registering a partly-paid agreement. No wonder this is the reason we always insist on dealing with reputed builders.

Now Mr. Desai need not lose sleep over foregoing the property which he had always cherished.