What is the ruling of Islamic law regarding a dispute between a creditor and a debtor, where the creditor demands the value of a house equivalent to 160% of the original debt, while the debtor wishes to repay only the original debt?

Offer and acceptance are the two pillars of a legitimate contract. What the questioner referred to as a "verbal agreement" is a new contract that dissolves the first contract (the loan) and replaces it with the second contract (the sale of the house for the loan amount), because in this scenario, reconciliation has the ruling of a sale, as stated in "Al-Iqna" from the books of the Hanbalis. Thus, the house became the right of the creditor from the day he relinquished his debt in exchange for the house. The questioner must fulfill his obligation to provide him with the house or satisfy him with what they both agree upon, along with repenting to Allah, because disposing of another's property by selling it without their permission is not permissible.