The mortgages are usually long-term – sometimes up to 30 years. Except that a lot can happen in a person’s life at that time, and it is not uncommon to need to sell the property in that period, either because of something unforeseen, or to make other investments. But how to finance a property not paid?
Many buyers, sellers and even realtors have this doubt. Some, even, think that this procedure is not possible and that the only option is for the buyer to pay in cash and settle the debt of the financing.
However, the truth is that there is a way to finance an unpaid property. In this post, we will see in what conditions this is possible and how to do the process safely. Check out!
What is active mortgage financing?
First, let’s clarify what a property with active real estate financing is. It is a property purchased by the current owner through real estate financing, which is still in progress.
In other words, in an active real estate financing, all installments have not yet been paid, with an outstanding balance owed to the financial institution that granted the financing.
What is a Quitting Intervener (IQ)?
There is a procedure done between banks for the purchase of a property with active real estate financing called Interveniente Quitante , also known as IQ by professionals in the area. It is a very common procedure, but with details to be observed.
How does IQ work?
The buyer must inform the financial institution for which he is asking for real estate financing that the property is already a guarantee of other financing. The institution will request some information, such as the property’s debit balance. The buyer must request this information from the seller of the property, who will be responsible for obtaining it from the institution through which the property is financed.
After the delivery of the documentation, the financial institution that the buyer has chosen analyzes the information. If the analysis passes, it pays off the previous financing and makes a new one for the buyer. Remember that this is not a transfer of funding. In fact, part of the credit obtained by the buyer will be used to pay off the seller’s financing.
So far, it is worth pointing out two points. The first is that the buyer is taking out new financing, and all the usual rules for granting credit will apply normally. The financial institution will analyze the buyer’s ability to pay that financing and the property’s documentation. Thus, credit will only be granted if the prerequisites are met.
The second point is a consequence of the previous one. As it is a new financing, for another person, the value of the installments of the property will not be what the seller paid and, most likely, it will be considerably higher. This is because the benefits are decreasing. Thus, if the seller had already paid this financing for a few years, the value has been decreasing in that period. The buyer will start with a higher initial value.
What are the rules of IQ?
The debit balance must be less than the amount financed by the buyer, since, to issue the contract, the bank that is granting the new financing is responsible for the settlement with the other institution.
If this balance is higher, when receiving the signal in the purchase and sale commitment, the seller must be responsible for settling this difference, always leaving a margin for the adjustments that will occur until the date of the effective settlement.
The seller, as an active financing contractor, must be willing to interact with his bank to provide the information and documents necessary to make the settlement feasible. Some banks make this information available directly to the other financial agent, but this does not always happen and varies from one branch to another. Therefore, the seller must be aware that this is his responsibility.
Do all banks do the IQ procedure?
It is important to note that currently not all banks do the IQ when the property is financed by another institution. Most banks only discharge if the balance due is a credit granted by themselves. Therefore, it is necessary for the buyer to pay attention to this detail.
What precautions should be taken?
The Quoting Intervener is the only legal way to finance an unpaid property. It is important to highlight this because it is relatively common to carry out so-called “drawer contracts” in these cases.
The “drawer contract” is an informal agreement in which the financing continues on behalf of the seller, while the installments are to be paid by the buyer. This agreement has no legal value and can cause numerous problems for both parties, so it is not recommended at all.
For those who decide to make the Quoting Intervener, the recommended care is the same as for any normal negotiation. The buyer must evaluate the property well, check for possible structural problems and seek to know the seller’s situation.
An advantage of financing for the purchase of the property is that the financial institution checks all the documentation involved . This ensures that the buyer will only get financing if the property is perfectly legalized.
Is the transaction reliable?
As long as you do not make a “drawer contract”, as we mentioned in the previous topic, the transaction is very reliable. The most important thing is that the step by step requested by the financial institution is followed. This is because, in the case of informal negotiations, the institution is not responsible for any illegalities.
Taking this care is essential, as it protects all parties involved in the business from fraud. We also reinforce that the financial institutions will only authorize the transfer in view of the proof of income of the new buyer, ensuring that he is able to assume the debt.
What are the steps in the process?
As we have seen, it is possible to finance a property that has not yet been settled through the legal procedure called Interveniente Quitante (IQ). Among the stages of this process, the analysis of the conditions foreseen in the first purchase contract stands out, considering mainly the maturity date of the installments, the interest rate and the forecast of the fees involved in the transfer.
Then, a specialized financial agent evaluates the profile of the new buyer to ensure that he is able to afford the deal. After the credit approval made by the responsible financial institution, the new owner signs an updated contract with the new conditions regarding the remaining amounts of the first financing.
At that time, the contract must pass through the Real Estate Registry Office in which the property is registered, in addition to the Tax on Transmission of Intermediate Real Estate (ITBI). The registration with the change of ownership of the property must also be paid by notary. Once this procedure is done, the contract with the updated registration will be taken to the financial institution and, then, the new installments will begin to be paid by the buyer.
What are the advantages of financing an unpaid property?
This type of negotiation is beneficial to both parties involved. For the first owner, the advantage is that he can obtain immediate financial resources with the new financing of the property. Often, due to unforeseen circumstances or new interests, the owner needs to dispose of the house before even paying it off, with the Quitting Intervener process being a legal option to transfer the property and to be able to invest in the needs that have arisen.
For those who financed the property that was not yet paid, the biggest advantage is not having to give up the good of their interest for the simple fact that the property is already with an active financing. If the procedure is done within the limits of the Law, the transaction is safe and reliable. When it comes to real estate financing – a transaction that involves large sums of money – you can’t even act on impulse to take risks during the process, right?
With the help of specialized financial agents intermediating the business, it is possible to obtain conditions that are easy to afford the financing in a comfortable way, with the best interest rates and excellent repayment terms. Therefore, we emphasize the importance of having a recognized company to mediate the transaction. Thus, it is guaranteed that you will be able to finance a property not paid with total security, agility and tranquility!