If you are selling your house to a buyer who is purchasing the property using a home loan, you may be concerned if the buyer tells you:
“You need to register the property in my name and hand over the original property documents to the bank. The bank will release your payment after two days.”
Should you trust this process?
In a properly coordinated home-loan property transaction, the seller generally does not need to wait for two days after registration to receive the final sale consideration, provided the bank has completed its loan formalities and the final settlement instrument is ready for disbursement.
The exact procedure may vary depending on the bank, but the transaction should be coordinated between the seller, buyer, bank representative, and the parties' advocates before the sale deed is registered.
Below is a systematic process that can be followed when a buyer is purchasing the property using a home loan.
Step 1: Seller and Buyer Sign the Sale Agreement
The seller and buyer first enter into a Sale Agreement containing the agreed sale consideration, advance payment, balance payment terms, registration timeline, and other conditions.
At the time of signing the Sale Agreement, the seller may receive an advance payment from the buyer through:
- Cheque
- Demand Draft (DD)
- Online bank transfer
The advance payment may be agreed between the parties and can be a substantial portion of the sale consideration, depending on the terms of the transaction.
Step 2: Buyer Applies for a Home Loan
After signing the Sale Agreement, the buyer submits the required documents to the bank and applies for a home loan.
The bank conducts its legal and technical verification of the property and assesses the buyer's loan eligibility.
Step 3: Bank Approves the Loan and Arranges the Final Settlement
Once the bank completes its verification and approves the home loan, it prepares the final settlement amount payable to the seller, subject to completion of the bank's disbursement conditions.
The bank's representative informs the buyer when the final settlement instrument, such as a Demand Draft or cheque, is ready.
The buyer should then inform the seller that the bank's final settlement is ready.
Seller should verify the payment instrument
Before proceeding with registration, the seller may independently verify the final settlement details with the bank.
For example, the seller can:
- Visit the bank and verify the payment instrument; or
- Request confirmation from the bank representative; or
- Request the bank to share an appropriate copy/image of the cheque or DD through an official communication channel.
This is an important precaution because the seller should clearly understand how and when the balance sale consideration will be paid before signing the Sale Deed.
Step 4: Seller Confirms the Registration Date
Once the seller is satisfied with the payment arrangements and the buyer has completed the required loan formalities, the seller and buyer mutually agree on the date for Sale Deed registration at the Sub-Registrar Office.
Step 5: Sale Deed Draft Is Prepared and Verified
The buyer generally prepares the Sale Deed draft and shares it with the seller for verification.
The draft may be exchanged electronically through email or a messaging application for review.
The seller should carefully verify important details, including:
- Names and addresses of the parties
- Property description
- Sale consideration
- Advance payment already received
- Balance sale consideration
- Mode of payment
- Bank details/payment instrument details
- Possession clause
- Original document handover clause
- Other terms and conditions
If the bank is issuing a cheque or Demand Draft for the balance sale consideration, the relevant payment instrument details should be correctly reflected in the Sale Deed, wherever applicable.
The final draft should be reviewed and mutually approved by the seller, buyer, bank and the respective advocates, wherever required, before proceeding with registration.
Step 6: Documents to Be Carried for Registration
Seller's Documents
The seller should generally carry the documents required for registration, such as:
- Sale Deed
- Encumbrance Certificate (EC)
- Latest property tax paid receipt
- e-Khata/property records, as applicable
- PAN
- Aadhaar or other applicable identity proof
The exact documents may vary depending on the property and registration requirements.
Buyer's Documents
The buyer should generally carry:
- Kaveri Online Services application summary
- Sale Deed
- Challan/payment details for stamp duty and registration charges
- Aadhaar or other applicable identity proof
- PAN
- Home-loan-related documents required by the bank
Bank Representative's Documents
The bank representative may carry:
- Final settlement cheque/DD, as applicable
- Checklist for collection of original property documents
- Other bank-authorised documents required for disbursement and collection of title documents
The seller should confirm the exact requirements with the concerned bank before the registration date.
Step 7: Sale Deed Is Registered
The seller, buyer and other required parties appear before the Sub-Registrar and complete the Sale Deed registration process.
The parties provide their identification, biometric authentication and signatures as required by the registration process.
Once the Sale Deed is successfully registered, the ownership transfer is completed subject to the terms of the registered document and applicable law.
Step 8: Bank Collects the Original Property Documents and Seller Receives the Balance Payment
After registration, the bank representative may collect the original title/property documents from the seller in accordance with the bank's documentation and loan-disbursement process.
At the same time, the seller receives the balance sale consideration through the payment instrument arranged by the bank, such as a Demand Draft or cheque, as applicable.
Therefore, the seller generally should not agree to an arrangement where the property is registered and the original documents are handed over with an open-ended promise that the payment will be made after two days.
The payment mechanism and timing should be confirmed with the bank before registration.
Step 9: Buyer Creates a Mortgage in Favour of the Bank
After purchasing the property using the home loan, the buyer completes the bank's mortgage-related formalities.
Depending on the bank and the applicable procedure, this may involve registration/execution of a Memorandum of Deposit of Title Deeds (MODT) or other mortgage documentation.
The bank then retains the original property documents as security for the home loan, subject to its loan terms and applicable procedure.
Conclusion
If you are selling a property to a buyer who is taking a home loan, do not blindly accept a proposal to register the property and hand over the original documents today with a promise that the payment will arrive after two days.
Instead, coordinate the transaction in advance with the buyer, bank representative and advocates.
Ideally, before registration, you should have confirmation from the bank regarding the final settlement amount, payment instrument and disbursement conditions.
After successful registration, the bank's authorised representative can collect the original property documents as part of the loan process, and the seller should receive the balance sale consideration according to the agreed bank disbursement arrangement.
The key principle is simple: complete the registration only after you are satisfied that the payment and original-document handover process has been properly coordinated and confirmed.
Need Assistance With Property Sale Registration?
PGN Property provides end-to-end assistance for property sellers, including:
- Sale Deed drafting
- Sale registration assistance
- Home-loan property transactions
- Document verification
- EC and e-Khata assistance
- Coordination with buyers, banks and advocates
- Registration support at the Sub-Registrar Office
For assistance, contact us:
PGN Property
Email: pgnproperties@gmail.com
WhatsApp: +91 97424 79020