Advice Needed on Public Auction for Land to Cover Mortgage Arrears

J

Joe2012

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Hi Everyone,

I would be grateful if anyone has any advice or even better first hand experience on my current situation.

I have a 3 stroey detached house out in the country side in the south east of Ireland and 65 acres of land (10 acres of that is woodland). An ambitios 10 year short term mortage was agreed on the house which amounted to nearly €5, 000 per month. I am 2 years in arrears with the bank currently owing a toal of €652, 832.65 and in arrears of €152, 083.21. Interest accrued is €30, 935.06.

Obviously im in a very difficult situation however I have been in constant correspondence with my bank the entire time and through my solicitor we are coming to an agreement with the bank to put 50 acres of land in a public auction with a minimum reserve price of €400, 000 to help clear my outstanding liabilities.

Now in an idea world what I want my solicitor to communicate to the bank is that on the successful completion of the public auction; I would like to pay off the outstanding arrears in full (€152, 083.21) and then renegotiate a new short term mortgage repayment plan that would span for 15 years and should be in the region of €2, 500 per month or there abouts. Obviously my auctioneers used will get 1.5% of the final price the land was sold for and my solicitor would also be compensated.

The rest of the funds I would want to use for business interests and investments that will ultimately be conducive to me comfortably meeting the mortgage repayments every month and ensure Im never in a situation like this again.

But from my solicitor is is my understanding that with the current recession and in her opinion there is no way in hell the bank will let me have the rest of the money to conduct a business. They would want the full amount so ie if the land sells for €400, 000 they would want all of that after the expenses of the auctioneers and soclitor fees has been paid. She advised me that from the banks point of view they would not be willing to take a risk so would want all the money.

But in my view simple logic would dictate that I would end up in square one again as I would be unable to meet the mortage repayments. im currently unemployed. So I would be in a desperate situation where I would evnetually be forced to sell the house to clear the remainder of the mortgage.

Surely common ground can be established with the bank? I thought all they would want is for the arrears to be cleared and me being able to meet the mortgage repayments. My solicitor still advised me it would be best to put my proposition to my bank in writing which I will do. By the way I have a business plan I can show to the bank to show that my proposed business would be viable. The land I have is valuable as in that land I also have 3 sites that have planning permission until 2017.

So does anyone have any advice? I know the bank own the assets but is there a way of ensuring not all that money can go to them?
 
An ambitios 10 year short term mortage was agreed on the house which amounted to nearly €5, 000 per month.
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That was an odd mortgage to take out. Under the circumstances, the bank may not be as confident as you in your financial projections for your business.

If you could write a cheque today for €152k, the bank wouldn't be putting you under any pressure.

I thought all they would want is for the arrears to be cleared and me being able to meet the mortgage repayments.
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No. After you sell the 50 acres, the property on 15 acres will be worth €400k less, so their security is dramatically reduced. You will still owe €500k. Unless the remaining property is worth a lot more than this, the bank is unlikely to agree to see their security reduced.

It's a tough one. A lot depends on the quality of your solicitor. If your solicitor is not making the arguments strongly enough, then you should look for an accountant who could talk about your business plan to the bank and try to negotiate a better deal. However, your solicitor may well have got the best possible deal for you already.
 
Hi Brendan Burgess thanks for your reply. Yes it was an odd mortgage to take out however it was my late step father that opeted with that plan.

I suppose looking at it from anothe rpoint of view is that potentially if the public auction goes well I could be left with a mortgage of around €302, 000 which obviously is a significant reduction. My current market value on my house is €600, 000 however I have no intention of selling my house.

I feel with my solicitor that she's more acting as a mediator as she seems to have mine and my banks interest but obviously I feel she shoul dbe supporting me 100%. I will be getting a second opinion from another solicitor and have already contacted a mortage arrears explaining my situation. I would be rather naive to write a letter to my bank stating my proposition without first getting as much information I can get.

Yes thats an interesting one to get my accountant to examine my business plan and communicate that with the bank, particularly the finance section. I suppose from the banks point of view my proposed business would be too high risk and in the event that it doesn't work out I would be back to square one again.
 
my proposed business would be too high risk and in the event that it doesn't work out I would be back to square one again.
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From the bank's point of view, they are a lot further back than Square 1. Their security has been dramatically reduced.

My gut feeling on this is that your solicitor may not have explained this properly to you. An accountant with experience of dealing with banks and mortgages may be better placed to deal with it. Of course, the solicitor is better at the legal aspects of whatever you agree

Brendan
 
Yea exactly that's a good point. I figured the bank will only consider releasing some of the money if you can prove you can use it wisely for a business. Im meeting with my accountant today to discuss this situation and also book an appointment with another solicitor just to get a second opinion so I can fully know my rights. There is no doubt in my mind that if im to go ahead with this my proposal to the bank must come from a solicitor and my business plan should be disccussed with my accountant to the bank as this holds much more credibility. At the end of the day worst they can do is refuse my proposal.
 
Joe2012 said:
I feel with my solicitor that she's more acting as a mediator as she seems to have mine and my banks interest but obviously I feel she shoul dbe supporting me 100%.
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Don't see this from what you've posted, seems your solicitor is telling you what she sees and advising you accordingly. She's advised you that the bank will most likely want all the money. In any case a solicitor is not generally a tax/business expert.

A few questions to understand your situations. These are tough questions but you are in a very sticky situation.

You say two years in arrears. But 152 / 5K is 30 months of arrears. Did you ever pay back 5K a month on this mortgage. Do you not have to pay back arrears of 152 plus 30K or is the 30K included in the 152?

The reserve on the 50 acres is 400K. Is your house plus the 15 acres worth 600K or is that the 50 acres, plus house and 15 acres?

Where are you getting the values from? Are the 3 sites with planning permission on the 15 acres. What value do you have on these.

It seems you want to have the sale proceeds less 152K(and costs) so about 350K. If you went to a bank this morning with your business plan, would a bank loan you 350K? That is the way to approach the business plan. Are you already a successful businessman? You mention also you'd make investments, what kind of investments. Do you have a guarantee that you'd be able to live and repay 2.5K a month from investing the 350K.

Would a bank loan you 350K based on a track record of not paying back a loan for a coulple of years or would they say hell no we'll take the full 400K. And the likelyhood is that they will come after the house and 15 acres next. You've got to think of it from the banks perspective.
 
Joe2012 said:
Yea exactly that's a good point. I figured the bank will only consider releasing some of the money if you can prove you can use it wisely for a business. Im meeting with my accountant today to discuss this situation and also book an appointment with another solicitor just to get a second opinion so I can fully know my rights. There is no doubt in my mind that if im to go ahead with this my proposal to the bank must come from a solicitor and my business plan should be disccussed with my accountant to the bank as this holds much more credibility. At the end of the day worst they can do is refuse my proposal.
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Looking at this from the perspective of the Bank I see absolutely zero chance of the Bank releasing any of these funds to you (no matter how attractive your business proposal is). You are currently in arrears and in that situation no bank decision maker will agree to release funds. Your solicitor should advise you to co-operate in the sale of the 50 acres, as the alternative will be for the Bank to put in a fixed aset receiver over this property, which will result in much higher costs and loss of control of the sale process.
 
Oh sorry didn't answer your other question fully.

Where are you getting the values from? Are the 3 sites with planning permission on the 15 acres. What value do you have on these.

The 3 sites are not on the 15 acre lot. The 3 sites are on the 50 acre lot. The 3 sites are valued at €75, 000 as they have full planning permission until 2017. Also They have gate entrances at each side which makes it much more attractive. Im keeping the 15 acre with my house as I know that adds more value to the house.

I am hoping that with the public auction my land sells for €450, 000 or possibly more rather than €400,000. Land value in Ireland at the moment is very stable where as property is still very poor.
 
44brendan said:
Looking at this from the perspective of the Bank I see absolutely zero chance of the Bank releasing any of these funds to you (no matter how attractive your business proposal is). You are currently in arrears and in that situation no bank decision maker will agree to release funds. Your solicitor should advise you to co-operate in the sale of the 50 acres, as the alternative will be for the Bank to put in a fixed aset receiver over this property, which will result in much higher costs and loss of control of the sale process.
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Yes she did and wa svery dismissive of the idea. But im still getting a 2nd opinion. I will conduct everything in a professional and courteous manner as the last thing I want to do is fight with my bank however if its possible I will present them with a business proposal and worst they can do is refuse it. In fact my solicitor told me the most realistic thing they will negotiate is the mortgage repayment. I would change it from a 10 years short term loan to a 20 year loan which obviously will significantly reduce the monthly mortgage repayments and the interest will still be fairly low asits still a short term loan.
 
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