How to sell a property with a loan? The real estate market is extremely volatile and without a good knowledge of the laws governing it, we can very easily sell real estate for much cheaper than we should, especially if we come across a knowledgeable buyer and we have an outstanding loan on our minds. That is why it is so important to prepare properly. Sometimes it may turn out that a much more advantageous solution for us is to sell the property later than we initially assumed, in order to avoid additional costs.
Sale of real estate – tax
The real estate market is one thing, but outside of it, we should also remember about taxes. For example, if we bought a house in a given city, but after some time it turned out that we received a great job offer, but in a completely different region of the country, we can move and sell the house. However, if we sell a house we have lived in for less than five years, IRS will charge us with tax on the transaction. Only five years after purchasing the property will we avoid this additional burden. This is one of the arguments not to rush to sell a plot, house or apartment.
The short period between the purchase and sale of real estate is treated by the Tax Office as real estate trade. And in this matter, we do not have the opportunity to explain our situation in the office. The fact that this may be our first sale does not help us. In this case, we are simply treated as a novice real estate trader.
A good solution to this problem is to rent the property until we can sell it. It is also possible to discuss the situation with a potential buyer and define the terms of renting and then selling.
Sale of real estate – loan in Polish currency
If we want to sell the property that we are still paying back, we can use the money obtained to pay off the loan in a faster time. However, it is worth noting that this is not the best solution. Depending on the general loan agreement, the bank may impose a penalty on us for too quick repayment (which resulted in losing potential interest). And even if our loan agreement is favorable and early repayment does not involve additional costs, such a quick repayment can damage our credit history and make us have a problem with taking a loan for another property. Therefore, it is worth considering in advance whether you really want to sell the property at this point.
If we finally decide to sell the property together with the loan, we are obliged to immediately inform the bank about our intentions. It involves additional formalities. The bank should provide us with a certificate of the amount remaining until the full repayment of the loan and information such as: the amount of financing, date of granting the loan, balance and commission for early repayment . All this information is needed for the seller to find the best price for the property.
The transaction looks like this: part of the amount for the property goes to the bank and the surplus to the seller’s account. Therefore, it is worth calculating all costs carefully so as not to accidentally sell the property cheaper.
The bank should also issue a promise (valid for 30 days), i.e. a declaration that after receiving the transfer from the buyer, consent will be issued to delete the entry from the land and mortgage register regarding the real estate. This is very important, because without correcting the entry in the land and mortgage register, the legal situation of the real estate will remain unregulated, and this may have unpleasant consequences in the future.
After the promise is issued, the seller and the buyer should start drawing up the preliminary contract. It is worth drawing up the contract with the accompaniment of a notary, although it is not required. The presence of a notary public is an additional guarantee of security for both the seller and the buyer.
After completing the formalities and receiving the payment, the seller should go to the bank to receive a certificate of debt settlement and consent to remove the mortgage, which should be handed over to the buyer.
Sale of real estate – foreign currency loan
When selling a flat with a loan in a foreign currency, e.g. in francs or euros, there are slightly more problems than in the case of a loan in PLN. The main disadvantage is that the bank always follows the current exchange rate of the foreign currency.
The bank converts the debt of the property seller using the current exchange rate of a given currency. If the current exchange rate is much higher than when you took out the loan, you may find that the value of the property is less than the loan amount. In this case, it is worth considering seriously whether it is profitable to get rid of the property or whether we should wait until the rate is more favorable for us. This is a difficult decision and it is possible that the best solution is to talk to a financial specialist to help us choose the right strategy.