How to buy or sell a flat which has a loan on it

It is often seen that flats which one wants to buy or sell have a pending loan on them. In such cases, it becomes confusing as to what the exact steps are to conclude the deal successfully. Most people think that they need to settle the loan before selling it. For that they either pressurize the owner to settle the loan and get a no-dues certificate from the bank or they lend money to the owner to settle the loan and then hope to adjust that amount in the purchase price.
However, there is a better, easier and safer way.

The steps are outlined below…

If the buyer is buying without taking a loan

• The owner of the flat contacts the bank and asks for a ‘loan outstanding letter’ which lists the amount outstanding. A list of documents mortgaged with it is also listed in the letter.
• The owner of the flat gives these along with a xerox copy of all the documents mortgaged with the bank along with any supporting papers that purchasers bank may require.
• After verification of the documents with the bank, the buyer pays a token to the seller and enters into an ‘agreement to sell’ with him. This agreement is registered with the registration office.
• On receiving the full outstanding amount and request letter for closure of the loan,the bank initiates the closure of the loan.
• The bank releases the original documents of the property and gives them to the owner of the flat along with the ‘no dues’ letter.

Note: The buyer may give enough money, so that the seller can close the loan with his bank if he doesnt have money of his own. This can be recorded in the agreement to sale.

If the buyer is taking a loan for the purchase

• The owner of the flat contacts the bank and asks for a \’loan outstanding letter\’ which lists the amount outstanding. A list of documents mortgaged with it is also listed in the letter.
• The owner of the flat gives these along with a xerox copy of all the documents mortgaged with the bank along with any supporting papers that purchasers bank may require.
• Buyer submits these documents to his bank along with his income proof, processing fees, income tax returns etc.
• The bank assesses the documents and the value of the property and sanctions the loan.
• Buyers bank disburses the outstanding loan amount to the sellers bank and this closes the loan.
• After closing the loan, the bank hands over the original documents to the buyers bank.
• After getting the documents, the buyers bank releases the rest of the amount to the seller of the flat.