Don’t get caught out – make sure you can repay your debts when you sell!

Belinda and Maurice jointly owned an apartment as an investment property. They were beginning to struggle financially and decided to sell the apartment. They had not been able to keep up with payments to the Body Corporate, so owed about $2,000.00 in levies.

When settlement day approached, they were shocked when their solicitor forwarded them a statement from their bank showing the amount that needed to be repaid to discharge the mortgage. The sale proceeds, after deduction of the levies owing and the real estate agent’s fees, were not enough to repay the mortgage. They had to urgently try to find enough money to cover the amount outstanding to make sure the settlement went through and in the end, had to borrow from Maurice’s elderly parents.

When selling a property, it is important to remember that the following are paid out of sale proceeds:

1. Outstanding rates for the property;
2. Outstanding Body Corporate levies (for unit titled properties);
3. Any loans secured by the mortgage on the title;
4. The real estate agent’s commission.

It is also generally expected that legal fees will be paid on settlement. When selling your property, make sure you think carefully about whether you can cover any debts associated with the property, and its sale, so you have time to organise additional funds if required.