What is the procedure to buy a resale flat in Bangalore when seller has not cleared the loan yet?

When you buy a resale flat from a seller who has existing home loan, you can choose following options to proceed on this deal

Option 1: Ask the seller to clear the existing home loan and then you can proceed with purchase

Option 2: If you also taking home loan to buy a flat, you can apply loan transfer from seller bank to your bank

Option 3: If you self-fund without home loan , you can sign “Agreement of Sale” with seller and make the down payment to the value of seller’s outstanding loan amount. Seller can use your down payment to clear outstanding loan and proceed with purchase

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One of my client had a similar situation that he wants to buy a resale flat but the seller had the existing home loan. Sharing my experience and this may help you to deal on this type of transaction

Context:

• The flat locate in Bangalore. Seller quoted the price of Rs.33,75,000 against the government guidance value of around Rs. 25,00,000
• Seller has the existing home loan of Rs, 23,49,820 with HDFC bank. The loan type is the equitable mortgage, it means that seller has not registered the mortgage, he just deposited the title documents with bank.
• Buyer also taking home loan from ICICI to finance his purchase, we decided to transfer the seller’s outstanding loan of Rs, 23,49,820 to buyer loan account, transferring loan from HDFC bank to ICICI Bank

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We collected softcopy of following title documents from seller for verification:

• Sale Deed (of how seller acquired the property)
• Property tax receipt
• Khata
• Aadhaar and PAN

Based on the sale deed provided by seller, we extracted the certified copy of sale deed and encumbrance certificate on Kaveri Online Service to confirm the genuinity of document.

(Few buyers demand the encumbrance certificate from seller but I request the buyers to do your home work by extracting the latest encumbrance certificate & Sale Deed certified copy on Kaveri Online Services  by yourself, this helps you to avoid fake deals and fake documents)

Based on my lawyer verification, we found that title documents are clear and free from any kind encumbrance.

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LOD:

The abbreviation of LOD is “List of Document”.

At the time of taking home loan, bank acquires all the original documents of the property including sale deed. While paying the EMIs, borrower need to pay the LOD charge of around Rs 500 to get a photocopy of original documents from bank. Also bank issued a LOD letter with seal & sign,

Seller obtained latest LOD from HDFC and shared with buyer. Refer to below image

Buyer approached the ICICI bank to check feasibility of opening home loan account and we explained our situation that seller has an existing loan of Rs. 23,49,820 with HDFC bank. Upon understanding our requirement, the bank staff demanded LOD from HDFC and following documents to process home loan application

• Sale deed (of how seller acquired the property)
• Tax receipt
• Khata
• last three months bank statement of borrower
• ID proof of borrower
• Agreement of Sale (between seller and buyer to be done)

We shared the softcopy of above documents to ICICI bank through email. please note, we didn’t take printout and handover the hardcopy, just the softcopy through email is suffice.

As per the ICICI bank, we need to execute “Agreement of Sale” between seller & buyer. Adjudicate the agreement with 0.1% of buying price. We followed below steps to execute “Agreement of Sale”.

Step 1 : Drafted the Agreement of Sale in word document

Step 2: Printed on A4 size paper

Step 3: Seller, buyer and two witnesses signed the “Agreement of Sale”.

Step 4: As mentioned in above context, our buying price is Rs.33,75,000. We adjudicate 0.1% of buying price that is Rs. 33,75,000 * 0.1% = 3,375 in sub-registrar office in Bangalore.

Below is the image of our “Agreement of Sale” and Adjudication certificate

Buyer shared the softcopy of above agreement with bank through email.

We got our loan sanction within 10 working days from the day of sharing above “Agreement of Sale”. Our sanction loan amount is Rs. 26,94,100/-

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Below is our monetary transaction plan to seller (Buying price of Rs. 33,75,000/-)

• Rs. 6,80,900 paid via online account transfer at the time of “Agreement of Sale” signing
• Rs. 23,49,820 loan transfer from seller account to buyer account via ICICI bank’s cheque
• The final payment of Rs, 3,44,280 via ICICI bank’s cheque immediately after the deposit of title documents in ICICI bank

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We have softcopy of title documents, we uploaded the softcopy on Kaveri Online Services and succeeded the document verification within 2 days of submitting the application.

If you refer to our above “Agreement of Sale”, we already paid Rs. 3,375 for adjudication, we deducted this cost and paid the remaining government fee of Rs. 2,19,870 for Sale Deed registration. The total government fee including adjudication, stamp duty, registration, cess are 6.6% of buying price.

Refer to below transaction receipt for Sale Deed Registration

Immediately after the above payment, we booked the registration slot and we got the slot confirmation on same day. We carried the following documents to Sub-registrar office

• Printed Sale Deed (to be registered now)
• Application summary report from Kaveri Online Service

In around 10 min, we completed our registration and below is our registered sale deed:

Since the implementation Kaveri 2.0 in Karnataka, documents are verified online on Kaveri Online service, it means that physical verification of document at sub-registrar office is not applicable.

We completed above sale deed registration without presenting any original title documents in sub-registrar office. Our original title documents are in HDFC bank at the time of registering above sale deed

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Immediately after the deed registration, seller took the original sale deed to ICICI bank. He handed over the sale deed and collected the loan transfer cheque.

If you refer to below cheque image, the cheque is addresses to HDFC bank with seller’s loan account number, we highlighted the same in below image

Seller handed over above cheque in HDFC bank and collect back his original title documents

Seller handed over original title documents in ICICI bank and collected the final settlement cheque of Rs. 3,44,280. The cheque address to seller’s name, refer to below image

Both HDFC and ICICI banks are very supportive in the entire process of loan transfer. I must say that loan transfer is the safe and convenient option for this kind of deal.

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Notes:-

• In loan transfer, the “Agreement of Sale” must be a tri-party agreement between seller, buyer and ICICI bank. But in our case, we execute two party agreement between seller and buyer, however the ICICI bank has accepted our two party agreement, considering that buyer has existing saving account in ICICI bank with decent balance and good credit score
• My client was in presumption that stamp duty is 3.06% for the property value between 20 to 45 lakh. Our property value is Rs. 33,75,000

As per my knowledge, Stamp Duty for resale flat is 5.1% of buying price irrespective of property value. The 3.06% is applicable only if we buy new flat from builder. Since we are buying a resale flat, we clarified this misconception to my client and we made him to pay the stamp duty of 5.1%

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Thank you for reading and have a great day!