• Seller as guarantor for buyers loan till documents are handed over

Hi All,

I am selling my unregistered flat in Bangalore to a buyer. My property already has a loan and buyer is also taking up a loan from a different bank. We are past the initial formalities and at the stage where buyer is getting his loan sanctioned. Buyer's bank (SBI) wants me to be Guarantor for his loan for until I submit the original documents at the time of registration, post which they will provide me with a Gurantor release letter. I am worried for a few reasons : 

1) Is this common practice for unregistered property, where seller becomes Gurantor untill documents are handed over ?

2.) I already see that there is a credit query on my CIBIL from SBI, and they intend to make me Gurantor on CIBIL also, will this not affect my borrowing capacity and credit score ?

3.) While SBI will give me Gurantor release letter, will they be removing the record from my CIBIL ?

4.) In the event of an unfortunate mishap with the buyer during the time I am a Gurantor - How am I protected ?

5.) what is the alternative here that is safe for both buyer and seller ? 

Thank you for your response in advance.
Asked 7 days ago in Property Law
Religion: Hindu

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7 Answers

It is not common practice 

 

2) refuse to be guarantor 

 

3) it would affect your credit score and borrowing capacity 

 

4) as guarantor you are liable for repayment of loan 

 

5) ask buyer to take loan from your bank only so that loan can be transferred to him 

Ajay Sethi
Advocate, Mumbai
83174 Answers
5337 Consultations

5.0 on 5.0

1.  It is not an usual practice, you can give an assurance in writing that you will handover the original documents at the time of registering the proeprty  to the buyer's name.

2. The CIBIL score will be impact only if you had defaulted any loan repayment, that has nothing to do with this.

3.. The CIBIL need not be involved for making you as a guarantor to the loan to be borrowed by the purchaser unless and until the borrower fails to repay the loan and becomes a willful defaulter.  

4. That depends on the circumstances. If have such fears in your mind, yo may better do not agree for this condition, because there is no necessity for you to be a guarantor to the buyer's loan, even if it is a temporary arrangement.

5. You may advise the buyer to approach any other financial institution/bank for loan if the SBI is very rigid on such conditions which are actually not heard of . 

T Kalaiselvan
Advocate, Vellore
73275 Answers
1146 Consultations

5.0 on 5.0

1. If the said property is not registered in your name then how you can transfer in the name of others, it means that till date the said property is in the name of seller and not you even the bank has sanctioned the loan on the basis of triplicate agreement. 

- However , you can enter into an assignment agreement with the seller to execute sale deed directly in the name of purchaser. 

- Guarantor means , equally liable to refund the loan amount if case the principal defaults in payments. 

2. CIBIL having not relation with the term of Guarantor.

3. In case the purchaser defaults in payment /emi , then bank will never issue release letter. 

4. Reply as above

5. As above

Mohammed Shahzad
Advocate, Delhi
7410 Answers
78 Consultations

5.0 on 5.0

Hi, you will become guarantor till SBI will get original documents and thereafter you will be released from the guarantor, so don't bother too much.

Pradeep Bharathipura
Advocate, Bangalore
5050 Answers
277 Consultations

4.5 on 5.0

Dear Sir

1. This is not a very common practice and you have no obligation to do it.

2. Your CIBIL Score could be impacted in case the loan is defaulted.

3. You will be released as a guarantor unless, the person who has taken the loan defaults.

4. You have a liability to repay the loan if you are made a guarantor.

5. Ask the buyer to find another guarantor or another bank if SBI insists on you being the guarantor. 

Thank you

Anik Miu
Advocate, Bangalore
1884 Answers
22 Consultations

4.9 on 5.0

1.& 2.  No. This is not the common practice at all. I am empaneled lawyer of multiple banks and what we do is that we handover the loan amount through DD at the time of registration of the deed of conveyance to the buyer and collect the original deed of conveyance at the Office of the Registrar itself.

 

3. & 4. No Bank can compel you to be the guarantor of the loan it is providing. In the instant case you are the seller only and the lending Bank can not make you liable in case the borrower defaults in repaying his loan.

 

5. Ask the Bank to pay the amount at the office of the Registrar and collect the original deed towards mortgage of the property and in that case the question of your being the Guarantor does not arise at all.

Krishna Kishore Ganguly
Advocate, Kolkata
25841 Answers
726 Consultations

5.0 on 5.0

1. No

2. It will affect. 

3. You will need noc also

4. If he defaults you are not protected

5. Mutual agreement

Prashant Nayak
Advocate, Mumbai
23518 Answers
49 Consultations

4.4 on 5.0

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