Buying out my partner - negative equity

G

GordonRamsey

Guest
Bought with a friend a few years back and now, myself and my wife want to buy them out. We agreed on a lump sum payment last year - for the friend - but the house has since plummeted in value. Where do we stand now regarding the lump sum agreed contract and the negative equity?

GR
 
Re: Buying negative equity

Your post is a bit vague.

Do you have signed contract? Or was it a verbal agreement? You should look at re-negotiating this to start off with.

You will need a new mortgage to buy your friend out. You and your wife will need to qualify for this based on current income versus your other debts. You will also only get at most 92% of the current value of the house, so if you are in negative equity you will not cover clearing the existing mortgage. You and your friend are liable to cover the outstanding amount.

I would be of the opinion that if you are in negative equity you should not be paying the friend anything! I am assuming in that that everything has been split 50/50 so far.
 
Re: Buying negative equity

If you reached an agreement with your friend on the price, you should stick to it, whatever the consequences. You would presumably not want to pay more if prices had risen in the meantime.

If it was a general agreement to buy at the market price, then you pay the price it is worth now.
 
Re: Buying negative equity

It was a signed contract with a solicitor. Wondering does it become null and void with negative equity having entered the equation or must I go ahead with the deal?
 
Re: Buying negative equity

I suggest you rename this thread to "Is it ok to screw over my friend"

You need to think long and hard how much you value this friendship.

Would you be asking this question if the prices had risen and you would be getting a great deal on the contract you signed?
 
Re: Buying negative equity

Negative equity is irrevelant.
You have a contract to honour, friendship or otherwise.
 
Re: Buying negative equity

So it would be fair to assume that if the house had gone up 50k in value since you signed the contract you would have been posting here asking a similar question? You would have asked can you get out of the contract and sign a new one so you can pay your friend more?
 
Re: Buying negative equity

GordonRamsey said:
It was a signed contract with a solicitor. Wondering does it become null and void with negative equity having entered the equation or must I go ahead with the deal?
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What happened to the price of the property after contract had been signed is irrelevant. You agreed with the T&Cs at the time.
 
Re: Buying negative equity

TwoWheels said:
I suggest you rename this thread to "Is it ok to screw over my friend"

You need to think long and hard how much you value this friendship.

Would you be asking this question if the prices had risen and you would be getting a great deal on the contract you signed?
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i dont agree if the house was bought as an investment then its business not friendship .loook at it the other way and your now paying your freind way over the odds , surely if he values your friendship enough then he /she could at least meet you half way , but im sure like all the other posters im glad the dilemma is not mine cheers donee
 
Re: Buying negative equity

bacchus said:
What happened to the price of the property after contract had been signed is irrelevant. You agreed with the T&Cs at the time.
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+1 agreed, unless there is some provision in the contract to allow for such contingencies.
 
Re: Buying negative equity

donee said:
i dont agree if the house was bought as an investment then its business not friendship .l
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I would hope that I would be as ethical in my business dealings as in my friendships.

Just because something is an investment, it does not mean that you don't have to be honest and ethical in your dealings.

Brendan
 
Re: Buying negative equity

Brendan said:
I would hope that I would be as ethical in my business dealings as in my friendships.

Just because something is an investment, it does not mean that you don't have to be honest and ethical in your dealings.

Brendan
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friendship, though ,dont you think is a two way street, maybe i did sound a bit harsh but surely a "friend" is not going to , as a previous poster said and screw a friend and therefore given todays market surely there should be some leeway from the friend and at least as i said earlier meet him half way
 
Adhering to a legally binding contract is not "screwing" a friend.

If you do financial transactions with your friends, you should conduct your business in an ethical manner. If you do business with people you don't know, you should also act ethically.
 
Brendan said:
Adhering to a legally binding contract is not "screwing" a friend.

If you do financial transactions with your friends, you should conduct your business in an ethical manner. If you do business with people you don't know, you should also act ethically.
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true
 
GordonRamsey said:
Bought with a friend a few years back and now, myself and my wife want to buy them out. We agreed on a lump sum payment last year - for the friend - but the house has since plummeted in value. Where do we stand now regarding the lump sum agreed contract and the negative equity?

GR
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Was there any agreement with the friend at the time of the purchase about how one or other partner could get out of the arrangement?
 
The bigger issue here is really where the money comes from. If the OP was intending to get a mortgage to buy out friend and clear existing mortgage then this may no longer be a possibility if the house is in negative equity.

It really depends on what the contract says, whether it requires friend to clear his share of the mortgage etc or whether the friend simply gets a specified sum.

I would suggest talking to your friend and discussing the situation before any further steps are supposed to be taken under the contract.
 
The contract is binding as it is a written contract.

However if you are unable to complete the contract because of changed circumstances it becomes a problem for your partner too, so maybe you can get a comprimise.

If you cannot complete the best your partner can get is a judgement mortgage on the property. This would be in second place behind the lenders mortgage. If you had to captulate, your partner would get substantially less, and in a downward market the situation for all would be deteriorating.

That senario should give you some leverage to get a settlement either through negotiation or mediation. An advisor to your partner would be recommending him to 'take what you can get now'.
 
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