Hello Ted34,

Could you just confirm that a mortgage valuation was used to establish the value of the home for the purposes of the Trust Deed?

Who was it that carried out the valuation?

Did you actually remortgage at the time?

The valuation was done roughly 1-2 years before the ptd. I went to an advisor to get a re-mortgage at the time. He said in order to get a re-mortgage the house would have to be valued at 110,000 and it would be in the best interest of the person doing the valuation for it to be valued at this. ie it would go through therefore he would get paid. I think, though not certain, the person doing the valuation would have been connected to the lender somehow.
To give you an idea we live in an end terrace. 2 double bedrooms and a little boxroom where you could get a child's bed in it. We have a livingroom, kitchen/dinningroom. Based on similiar property being sold in the area, we would be lucky to get 95000 for it max. The trustee said at the time someone would drive past the house to confirm that valuation.

I would have thought that the Trustee would have done a further valuation at the start of the Trust Deed Ted34 rather than relying on an out of date mortgage valuation.

I might be wrong but perhaps you could check this with your Trust Deed company?

They did. It was a drive-by valuation. No-one came into our house. I raised my concerns about the inflated valuation with the trustee only to be told it was in our best interest for there to be equity in our house in order for the creditors to accept the td. So they were happy withn that valuation. In hindsight we should have entered into the td instead of re-mortgaging- just prolonging the inevitable.
So what happens when there isn't enough equity to pay off the creditors at the end?

So my understanding is that the Trustee's drive-by valuation came up with a similar figure to the prior mortgage valuation.

If the equity to raise the required sum does not exist in a years time you will need to contact your Trustee to discuss options.

Given the circumstances there may be potential for a reduced sum to be paid but this is going to be at the discretion of your Trustee.

Thank you for your replies. I know this is all hypothetical but I need to be prepared for every eventual outcome. You say 'there may be potential for a reduced sum to be paid...'. What happens if that is not acceptable? What if they want the full amount but cannot achieve this by selling my house, or release the equity, ie not enough equity to satisfy? How could they get it and does the ptd go on if they don't get the full amount?

If your house were sold then there shouldn't be any further payment required from you for equity - there is no requirement to make up any shortfall on what was estimated at the start of the trust deed.

Can I challenge the original valuation, as I know it was overvalued, ie get a new valuation done at the end of the td? We obviously want to stay in our home. If we did get a valuation and it was short of the original, would the trustee force us to sell in case they may get more for it by selling, or accept the current valuation and that is what we would need to find to pay it off?

Hello Ted34,

An answer from Kevin (Mark & Julie are away this week) would be useful I think.

My interpretation of Kevin's comments are that as the sale of the property to produce an amount of equity (even if less than the amount originally envisaged) would bring the Trust Deed to an end, there is little reason why a payment in lieu of the amount of equity (that would be generated by such a sale) could not be paid over instead.

This would also bring the benefit of no costs of sale and also reduced work for the IP; i.e. the creditors benefit by receiving more than they would from a sale.

I guess in short what I am thinking is that I cannot see why anyone would want to sell the property, just for the sake of it, so long as the full amount of equity that really exists is paid into the Trust Deed one way or another.

Hopefully Kevin will have chance to check into the forum soon and add his thoughts.

Hi Ted34

I see no reason why you can't discuss the original valuation with your Trustee and have another 'walk through' valuation carried out and valued retrospectively to the date of signing.

My concern would be the 'best interest' comment. Equity is equity and should not be 'valued' for the purpose of having a Trust Deed accepted.

Mark

The equity position at the start of the trust deed is what the basis of the proposals were made on and should really be honoured otherwise you may risk being sequestrated and/or your house sold. Having said that, there may be soom room for negotiation if you are unable to raise the required amount - as trust deed assistant says, it wouldn't really make sense for your house to be sold if the current equity can be raised another way.

Thank you for your input Kevin and I understand what you're saying. My point is how can I raise something that may not exist next year? ie. If the valuation next year falls short of the desired equity, what amount am I liable for in order to keep my house? Either the original figure or the potentially new projected one?

It is a difficult position you are in Ted34, and the reason why anybody thinking about entering into a trust deed on the basis of remortgaging at the end to raise significant equity should be very cautious - it really should be a last resort option in my opinion.

I imagine your trustee will seek the full amount of the equity agreed at the start of the trust deed, but if this is not possible may accept a lower amount given the change in market conditions. They may seek the agreement of your creditors first before making such a compromise.

They may also seek to extend your trust deed over a longer period in order to collect further contributions and compensate for some of the reduction in equity available.