What to Do If You Bought an Apartment on Mortgage but Must Sell It?

Selling a mortgaged apartment before the loan is fully paid off can be challenging but possible. Especially if you follow a step-by-step guide developed by experts at "Metrium Group".

Natalia Kruglova is an expert and general director of "Metrium Group", a real estate agency and consulting company operating in the Moscow region's residential property market.

Estimate the Apartment's Value

You can do this using an online calculator or by contacting a real estate agency. Then, check with the bank for the remaining balance on your current loan.

Important: If there is a possibility to fully repay the debt to the bank and remove the encumbrance from the apartment, it is worth taking advantage of this. Usually, mortgaged property is listed for sale with a 10–15% discount. Removing the encumbrance from the apartment, even at the cost of a more expensive consumer loan, can significantly increase its market value.

Find a Buyer

According to analysts from "Metrium Group", the average exposure time on the secondary market is currently 100 days. To find a buyer faster, you may need to offer a discount from the market price, especially if you were unable to remove the encumbrance. Once a buyer is found, you can proceed with preparing the deal.

Important: There are two schemes for selling an apartment with encumbrance on the market. Conducting such a deal without the involvement of a specialist (real estate agent or property documentation expert) is practically impossible.

Schema 1. A Less Risky Path

The transaction takes place within the bank's premises using two deposit cells. The first one contains funds required to pay off the loan, and the second one holds the remaining portion of the apartment’s value. The bank must agree to conduct the sale transaction.

The parties sign the contract and submit it for registration in the Rosreestr. After registration, the buyer assumes the mortgage obligation, and the seller takes money from the first cell to repay the loan.

The bank issues the buyer a released mortgage note. Presenting this document, the new owner of the apartment receives an extract from the EGRN showing that there are no encumbrances. After this, the seller gains access to the second cell containing the remaining funds.

Schema 2. Risky for the Buyer

The bank may refuse the borrower’s request to sell the mortgaged apartment. For such cases, a second scheme has been developed. The buyer pays off the loan on behalf of the apartment owner. This is reflected in the sale contract as an advance or deposit. Upon receiving the funds, the bank submits a statement to remove the encumbrance from the apartment and gives consent for the deal. The parties sign the contract, and after registration, the seller receives the remaining sum.

Important: This scheme is convenient for both the bank and the owner, but slightly risky for the buyer. After removing the encumbrance from the mortgaged property, the seller may change their mind and refuse to proceed with the deal. In such a case, the buyer will have to demand the sale through court proceedings. Nevertheless, this scheme continues to be used when selling mortgaged property, mostly without harm to either party.

On the cover: Design project by Natalia Yanson.

Read also:

• How and Why to Insure Real Estate
  
• 3 Questions You Should Ask Yourself Before Buying an Apartment
  
• What to Do If Neighbors Flooded You: Step-by-Step Guide