Pulling out of new apartment or stick with it?

Clone

Hi,

Two friends of mine put down a deposit on an apartment (10k) a couple of months ago.

Now one of the friends (friend A) wants to back out of the deal thinking that the market is going to crash.

They have also generally been unsure about it, where friend B has always been committed to buying and moving into the apartment.

Their plan now is to go ahead with the deal (closing end of 2008) then sell the apartment as friend B cant afford to maintain the mortgage on his own.

I have been trying to suggest options so that friend B wouldn't be left high and dry by friend A.

These are the options they have:

Stick with the deal and sell the apartment once its complete.
But will they incur capital gains tax as they're selling straight away?
Will they both lose their first time buyer status meaning that when either buy a second hand place they'll have to pay the stamp duty?

Or

Pull out of the deal with friend A paying for friend B's share of the deposit as they were the ones who wanted pull out.
Can the developer take them to court for pulling out or is the loss of the deposit enough to allow them to exit the contract?

Or

Friend B tries to get an investor to invest in some of the apartment and share in the rental income or even try and get the apartment themselves and rent out the 2 spare rooms to make up for the mortgage but they will never be able to get the full mortgage by themselves.

It's a horrible mess and a sad end to a friendship as this is not the only thing they have pulled out of leaving friend B stuck again.

Any comments or input would be much appreciated

Sorry for the rant but it really annoys me that someone can commit to something as big as buying property and then pull out of it ruining the plans of a friend and possible long term future.

patrickolee

Clone wrote:

Stick with the deal and sell the apartment once its complete.
But will they incur capital gains tax as they're selling straight away?
Will they both lose their first time buyer status meaning that when either buy a second hand place they'll have to pay the stamp duty?

They will not incur capital gains tax unless they make a profit, in which case i imagine they won't be too worried.
They will both lose their FTB status, so yes they will have to pay stamp duty in the future.

Clone wrote:

Pull out of the deal with friend A paying for friend B's share of the deposit as they were the ones who wanted pull out.
Can the developer take them to court for pulling out or is the loss of the deposit enough to allow them to exit the contract?

Make friend A pay for Bs deposit? That's a bit harsh I'd think?
There was a question on here about the developer bringing someone to court for pulling out. If memory serves me, someone posted to say that yes they could... but probably wouldn't if they could arrange to sell to someone else, but in a falling market that could be harder.

Clone wrote:

Friend B tries to get an investor to invest in some of the apartment and share in the rental income or even try and get the apartment themselves and rent out the 2 spare rooms to make up for the mortgage but they will never be able to get the full mortgage by themselves.

Fairly unlikely I would think. More likely to get Friend C, to step in? Pretty awful situation anyway, no obvious easy way out.

Clone

Thanks for the reply.

It is an awful situation alright, would be great if a friend c could step into the breach, I would do it but I'm about to move into a new house myself thankfully I'm married to the person I'm buying with.

They're going to wait it out and stay in the deal anyway, who knows maybe by the time it comes around to closing friend A might want to move in after all.

Dalfiatach

Why is friend B so determined to push ahead with the purchase of an overpriced asset that he can't afford, over a year after the peak of the market and when the slide downward is rapidly gathering pace? Madness. Friend A is quite right, better to take the hit of losing the deposit than to end up with a worthless shoebox that you can't sell - but still have to pay the bank huge sums for every month for the next 35 years.

This is the human downside of a property bubble. There'll be a flood of threads like this - and much worse than this - on boards.ie over the next 18 months.

mikemac

Not sure about the best option OP, but skip the third option of finding an investor or a friend c.
Unlikely and very messy.

Clone

thanks for the replies

Why is friend B so determined to push ahead with the purchase of an overpriced asset that he can't afford, over a year after the peak of the market and when the slide downward is rapidly gathering pace? Madness. Friend A is quite right, better to take the hit of losing the deposit than to end up with a worthless shoebox that you can't sell - but still have to pay the bank huge sums for every month for the next 35 years.

Just to clarify first of all both A and B are still going ahead with the purchase and plan to sell it immediately. Friend B would like to live in it but wouldn't be able to maintain the mortgage that would've been between them.

Friend B is looking to move out of their parents house and is looking for somewhere to live rather than a money making investment, This particular place was chosen as it was close for Friend A to get public transport to work and had an extra room available for rental IF the market took a bad downturn; Some of the split mortgage would be paid for by rental income.

The apartment isn't quite a shoebox either 3 reasonable size bedrooms, 1 en suite, 1 main bathroom, Living area, dining are, kitchen and a Large Balcony(enough room for a 6 seater dining table).

Dalfiatach do you rent or do you have your own place?

I'd rather be paying my mortgage off and have my own place than paying some landlords mortgage so they can get richer of my back.

If you can find somewhere else other than a bank to lend you large sums of money and not charge you for I would be all for that as I hate dealing with banks or any financial institute as they are all setup to find the best ways to get your hard earned cash from you.

Dalfiatach

Ah well. I see that even at this stage of the bubble there's still loads of people in this country utterly obsessed with property.

Take a look at the inventory stats on daftwatch, from daft.ie. Take a look at the IrishPropertyWatch asking price stats which are drawn from myhome.ie.

Even the rubbish ESRI report (based purely on valuations, and about 3 months behind the curve) is now showing yoy declines, soaring inventory, and a collapse in volumes.

The "Rent is dead money" mantra has been drummed into an entire generation. But mortgage interest is dead money too. And when mortgage repayments on a 35-40 year interest-only mortgage are more than twice the monthly rent, then buying is financial suicide. Personally I rent because I'm not going to chain myself to a bank for 40 years while having my monthly housing costs nearly triple. That makes no sense to me.

Only landlords who bought 4 or more years ago are anywhere close to having their mortgage payments covered by the rent. Fact. And ECB interest rates are extremely unlikely to ever go below 3.5% again in our lifetimes.

Ah well, nothing I can do. The information is all out there in the public domain, not my fault if you refuse to see it.

BobbyD10

Dalfiatach wrote:

The "Rent is dead money" mantra has been drummed into an entire generation. But mortgage interest is dead money too. And when mortgage repayments on a 35-40 year interest-only mortgage are more than twice the monthly rent, then buying is financial suicide. Personally I rent because I'm not going to chain myself to a bank for 40 years while having my monthly housing costs nearly triple. That makes no sense to me.

This is very true, I was told, reliably of course, that if I took a mortgage for 450k out, I would pay back nearly 850k over the life of the mortgage, so there is indeed plenty of dead money being distributed.

astrofool

Seems a bit crazy that they are giving up their FTB status to buy this place rather than forego their deposit, unless they'll make a large immediate profit out of it that covers more than what stamp duty would be on another home?

antoinolachtnai

Your friend needs to get proper advice. I really think what he is planning to do could be a bad idea.

First of all, he needs to establish whether they stand to lose 10k, or whether they are going to be sued if they don't complete.

After that, this is all about doing the sums. If all they stand to lose is 10k then why buy it? It will cost more than 10k to buy it, pay 3 months interest on it, and pay an agent for selling it again. They might have to sell it for less than they paid.

A better alternative would be to try to 'assign' their interest in the property to someone else, such as an investor, who would then follow through on the contract. They might have to pay the investor to take the assignment, but at least they wouldn't lose their first time buyer status [nb - check with solicitor on this].

Let me say it again, it's time for your friend to take professional advice.

Rent is not dead money. It's payment for a service. Interest is not dead money. It's payment for a service. The question is which is better value, given your circumstances, over the course of your life. Rents will go up a lot faster than mortgage payments.

Victor

The €10,000 deposit is often refundable, it is mostly there to keep away time wasters.

They might not have to buy it at all.

antoinolachtnai

Victor wrote:

The €10,000 deposit is often refundable, it is mostly there to keep away time wasters.

I was going to say something unkind, but I will let it go.

The day of the refundable deposit for off-the-plan is over, I fear. Time for professional advice for the OP's friend. (Is that the third time I mentioned that?)

JupiterKid

The Irish addiction to property ownership at any cost is truly breathtaking. The bubble has now burst, it burst almost a year ago. I would say do not go ahead with the purchase as you'll be saddled with an "asset" which will lose its value for years to come - AND your "Friend B" can't really afford to keep up the mortgage payments anyway, which will only get higher with the interest rate cycle.

Your friends in short should pull out from the purchase.

jdivision

antoinolachtnai wrote:

I was going to say something unkind, but I will let it go.

The day of the refundable deposit for off-the-plan is over, I fear. Time for professional advice for the OP's friend. (Is that the third time I mentioned that?)

Victor is usually very well informed tbh

Victor

But Antoin has skillz too.

the_syco

OP, are they prepared to sell it at 75% of it's original cost? If not, pull out, because if the prices keep going down the way they are (people are losing up to €100,000 off new houses), you may loose more.

Chevy RV

Dalfiatach wrote:

Ah well. I see that even at this stage of the bubble there's still loads of people in this country utterly obsessed with property.

Take a look at the inventory stats on daftwatch, from daft.ie. Take a look at the IrishPropertyWatch asking price stats which are drawn from myhome.ie.

Even the rubbish ESRI report (based purely on valuations, and about 3 months behind the curve) is now showing yoy declines, soaring inventory, and a collapse in volumes.

The "Rent is dead money" mantra has been drummed into an entire generation. But mortgage interest is dead money too. And when mortgage repayments on a 35-40 year interest-only mortgage are more than twice the monthly rent, then buying is financial suicide. Personally I rent because I'm not going to chain myself to a bank for 40 years while having my monthly housing costs nearly triple. That makes no sense to me.

Only landlords who bought 4 or more years ago are anywhere close to having their mortgage payments covered by the rent. Fact. And ECB interest rates are extremely unlikely to ever go below 3.5% again in our lifetimes.

Ah well, nothing I can do. The information is all out there in the public domain, not my fault if you refuse to see it.

With the current market situation of possible

1. Interest Rate Rise
2. Rising Inflation
3. Falling House Prices
4. Loss of FTB status which may be needed in future
5. Jobs Uncertainty

why not stick to the old adage of "first loss is best loss".

I have lived through the UK experience of the late 80's - the 3- 4 For Sale signs outside the same houses as the flood of people with inability to repay headed for the exit. Not a pretty sight. The human carnage was everywhere.

Do the sums carefully and remember "First loss is often best Loss"

Regards,

Chevy RV;)

DublinDilbert

antoinolachtnai wrote:

I was going to say something unkind, but I will let it go.

The day of the refundable deposit for off-the-plan is over, I fear. Time for professional advice for the OP's friend. (Is that the third time I mentioned that?)

Yea have seen this a bit.... when things were booming the developers would give people back their deposits if they changed their mind, cause they knew another person would come along in a month, who they could potentially sell the place to for more money!

This practice also encourage people to put down deposits on the spur of the moment ( as they knew it was refundable ), then they had a few weeks to get used to the idea.. during these few weeks people would start to feel better about the purchase as the vested interests talked up the market, eg prices will increase by 15% this year etc...

Now developers will not hand back a deposit as they know they might be waiting months for another buyer, if they can even find one...

Getting back to the toppic, what is their logic for proceeding with a sale, then selling the apartment when its finished? do they hope to make money? or is it so as not to loose the 10K? I think they need some good independent professional advice... if i was them i might try cut a deal with the developer and split their losses, say leave the developer with €5K. the developer knows if things get legal the laywers won't be long using up €5k!!

patrickolee

Emmmm, cause if they pulled out of the sale, they could lose a lot more than 10K?

iguana

There is an option D - gazundering .

I've heard anecdotal evidence of people who've paid deposits on off-plan properties which they no longer consider good value telling the vendor they can no longer get mortgage approval for the property. They then negotiate a new lower price.

The developer may do this for a number of reasons. He may have loans which need to be paid back fast and needs a quick sale. It is better to sell at the reduced price quietly rather than lose this sale and have to re-price publicly in a few months. It will be harder to sell apartments in a mostly empty building.

So it might be possible to negotiate a price that friend A feels is good value. Of course it's possible that the apartment may still lose value over the next few years but it might be worth a shot and seeing how low the developer may be willing to negotiate before pulling out. I'm not saying this is the best option but it is an option.

CelloPoint

I'm not so sure there are many "friend Cs" (aka "greater fools") knocking around anymore...

Dalfiatach

patrickolee wrote:

Emmmm, cause if they pulled out of the sale, they could lose a lot more than 10K?

Huh? Wha?

You don't seriously think they're going to make a profit by trying to flip an apartment in the current market? Please tell me you don't think that :eek:

iguana

Dalfiatach wrote:

Huh? Wha?

You don't seriously think they're going to make a profit by trying to flip an apartment in the current market? Please tell me you don't think that :eek:

I'm pretty sure he is referring to the fact that the developer may sue them.

Dalfiatach

iguana wrote:

I'm pretty sure he is referring to the fact that the developer may sue them.

Ah, right. I don't think they really need to worry about that, the developer will probably have much bigger problems to be worrying about in the next few months...

There is bound to be a contract of some kind, is there not? An actual written piece of paper with terms and conditions? There's no point any of us speculating, what A & B need to do is take that contract along to a lawyer who knows what he is talking about in the property law area and get his professional opinion on whether or not they can be sued, and what the developer's chances of getting anything out of them really are. Then leave that lawyer, and take the contract along to Lawyer 2 for a second opinion. If both agree, A & B will know where they stand and can make an informed decision.

If Lawyers 1 & 2 disagree, take the contract to Lawyer 3 for a "best out of 3" opinion....or assume the position is legally murky and try to wing it

€200 on professional advice right now could save them literally tens of thousands down the track.

Clone

Hi All,

I've been away from an internet connection or on Holiday as some would say.

Thanks for all the replies it has certainly shed a bit more light on the possibilities.

After further discussions I was able to ge a bit more information out of them:

Neither party can back out of this as they both signed. According to their
solicitor it will be very difficult.

On the plus side though the first phase of this development has sold out completetly and the second phase is about to be launched and according to the buyers the price's for the second phase have increased not sure of the exact figure, As I'm taking it with a pinch of salt.

They are pressing their solicitor and the agent to get all the available options and consequence's.

The best thing they can do now is just watch where it goes and hope for the best unless the agent or solicitor can offer a better solution.

I'll keep ye posted

mathie

Victor wrote:

The €10,000 deposit is often refundable, it is mostly there to keep away time wasters.

They might not have to buy it at all.

True, I did this. Put a deposit of a few grand on a place off the plans and then decided on another place and got 100% of my money back.

There are two stages of deposit aren't there?
The booking deposit and then a '10% deposit?

anyone know for sure?
M

GinjaNinja

I was in a similar situation a couple of years back.

Basicallt We put a deposit on house A. 12 month later house A was still ono complete and 3-5 months off completion.

House B in a better location came available.

After hounding my solitor, who in turn hounded the developer. the solution was this.

If we found a buyer for the property, the developer would release us and we would get the 20k deposit from the new buyer. We wouldn't loose the FTB grant etc....

in the end it worked out after long night worrying and fretting. we got House B and lost 4k in fee for solitor and estate agents. Worth it in the end as House B is much better.

But in your case if friend B doesn't want to get out of it and Friend A does. your in a right pickle....

BC

The booking deposit is fully refundable, the contract deposit is not AFAIK.

Judging by the fact that these people have signed a contract i'm guessing they've already paid the 2nd part of the deposit.

GinjaNinja

BC wrote:

The booking deposit is fully refundable, the contract deposit is not AFAIK.

Judging by the fact that these people have signed a contract i'm guessing they've already paid the 2nd part of the deposit.

I had paid the full contract deposit and signed on the dotted line.
but as I said it took a lot of haggling with the developer to let go find another buyer to release us from the contract.

Victor

mathie wrote:

There are two stages of deposit aren't there? The booking deposit and then a '10% deposit? anyone know for sure?

Typically yes, but situations vary.

Clone

Since I first posted things have changed considerably, (as you are aware I'm sure)

First of all to clarify the original intention to purchase this apartment was as a first home, not for profit or as and investment.

Both parties involved now want to pull out of the apartment.
After trying to haggle on the price to no avail they have both decided to pull out and loose the deposit as it WILL save them allot more in the long run.

But aparently the builder won't let them pull out, even if they forgo their deposit.
According to the solicitor they would have to allow the builder to sell the apartment at whatever price they see fit while the buyers would have to make up the difference and loose their deposit, in the current market this could be allot of money :eek:

A clause in the contract like this seems a bit strange as it would negate the need for a deposit as the buyer would be tied to the outcome regardless.

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

Is there a quick way to end this now?

Paulw

Clone wrote: »

Is there a quick way to end this now?

Probably not. It's a nice complex situation, and I'm sure the solicitor knows all the facts and is the best person to give advice.

The developers currently want to squeeze as much out of the market as they can, and are not going to just let people out of signed contracts.

gurramok

This case just shows the lack of research by your friends into the biggest purchase of their life, after all its only a few hundred thousand euros.

Get them to find a buyer if they can as the builder has them locked in via contract and cut their losses.

latenia

There is always a way out but they're going to have to find a smart adversarial solicitor. (IE one who will actually make an effort to win rather than decide between himself and his mate from the Law Society on the other side who's going to win and what their fees are going to be.)
Go through the documentation again and there will be something on the builders side that breaks the contract. It might be some deadline missed, a change from the original plans, different materials used etc. Go back to the original planning permission application and start there. In fact, go back to the original rezoning decision and get some dirt if you can. If a single parking space is different then kick up a stink.
If you can't find a solicitor willing to get his hands dirty then do it yourselves. These guys lorded it over the general public when things were going well and now they want to force two young people to wreck their future to add to their bottom line-don't let them get away with it.

chump

latenia wrote: »

There is always a way out but they're going to have to find a smart adversarial solicitor. (IE one who will actually make an effort to win rather than decide between himself and his mate from the Law Society on the other side who's going to win and what their fees are going to be.)
Go through the documentation again and there will be something on the builders side that breaks the contract. It might be some deadline missed, a change from the original plans, different materials used etc. Go back to the original planning permission application and start there. In fact, go back to the original rezoning decision and get some dirt if you can. If a single parking space is different then kick up a stink.
If you can't find a solicitor willing to get his hands dirty then do it yourselves. These guys lorded it over the general public when things were going well and now they want to force two young people to wreck their future to add to their bottom line-don't let them get away with it.

Great post.
Good advice to the OP.
Sorry to hear about the troubles, that kind of grief is a real pain. It is a good lesson to everybody.

johnnyskeleton

chump wrote: »

Great post.
Good advice to the OP.
Sorry to hear about the troubles, that kind of grief is a real pain. It is a good lesson to everybody.

Not really. Most contracts don't have loopholes built in (and if they do they usually favour the vendor not the purchasor).

So while getting a solicitor who will fight the case regardless might seem like a good idea, it could ultimately end up where a few years down the line they are forced to complete at an even greater loss and have to foot the legal costs bill x2.

If a solicitor advises their client and that advice is bad then they can sue their solicitor. However, if the client goes against the solicitor's advice and continues to fight the case, on their own head be it.

What you want to get is a good solicitor, preferably one who you know and trust. If you want a second opinion you can ask for a barrister's advice or go to a second solicitor. Maybe the barrister or other solicitor will find a loophole, but advising to go with a solicitor who will fight it irrespective of the outcome is very bad advice.

pajos55

Clone wrote: »

According to the solicitor they would have to allow the builder to sell the apartment at whatever price they see fit while the buyers would have to make up the difference and loose their deposit, in the current market this could be allot of money :eek:

A clause in the contract like this seems a bit strange as it would negate the need for a deposit as the buyer would be tied to the outcome regardless.

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

Is there a quick way to end this now?

This is a standard condition in the Law Society contract. Once contracts have been signed the vendor can try to sell within a year after the original purchaser pulling out, and if the price they obtain represents a shortfall then the original purchaser can be forced to make up the difference.

latenia

johnnyskeleton wrote: »

Not really. Most contracts don't have loopholes built in (and if they do they usually favour the vendor not the purchasor).

So while getting a solicitor who will fight the case regardless might seem like a good idea, it could ultimately end up where a few years down the line they are forced to complete at an even greater loss and have to foot the legal costs bill x2.

If a solicitor advises their client and that advice is bad then they can sue their solicitor. However, if the client goes against the solicitor's advice and continues to fight the case, on their own head be it.

What you want to get is a good solicitor, preferably one who you know and trust. If you want a second opinion you can ask for a barrister's advice or go to a second solicitor. Maybe the barrister or other solicitor will find a loophole, but advising to go with a solicitor who will fight it irrespective of the outcome is very bad advice.

Johnny, I'm not talking about loopholes per se, I'm talking about something in the contract on the builder's side which hasn't been fulfilled which might make a case for the contract to be voided and the whole deal to be cancelled. After all, these things work both ways.

If, for example, the property has (or will) drop in value by 200k from what they agreed to pay, between interest on that amount over the term of the mortgage and the loss of FTB status they are looking at over half a million euros of a black hole in their finances as they're just starting out in life. That's probably 10 years of disposable income each gone down the drain.

Tell me that's not worth fighting over.

I don't know what the policy on giving 'morally dubious' advice here is but if they can't get out of this then maybe they should consider bailing to the UK or Europe for a few years.

miju

Clone wrote: »

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

Is there a quick way to end this now?

most contracts (if your solicitor is even half decent) will have the clause "Subject to mortgage approval" in them.

If someones been made redundant that mortgage approval is as good as gone (if they cant get employment )

antoinolachtnai

Sometimes people have stuff about mortgage approval at the early stages of placing a deposit. I'd be surprised if this particular contract had that.

Generally speaking though, your friends are liable to the builder for loss you cause him by failing to fulfill the contract.

Did your friends get legal advice as I suggested before? It is certainly worth talking to the solicitor in a fair bit of detail. There might be a way out. Maybe it is worth going to a barrister, and even a second solicitor and getting an opinion on paper. But it is all going to cost your friends more money.

It might be worth fighting over, but only if you are going to win.

Your friends could put the property on the market and see what price they can get for it themselves.

SimpleSam06

antoinolachtnai wrote: »

Rents will go up a lot faster than mortgage payments.

Hmm.

Clone wrote: »

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

This is a very ugly situation. If there is no option to negate the contract, and its quite likely that another buyer will not be found any time soon, from the builder's point of view he has completed works in good faith for an agreed price, and is fully entitled to seek payment or judgements in case of default. Basically they agreed to pay and now don't have the money.

One option would be to try to sell the apartment at well below market price and bite the bullet on the difference. They might end up paying 40-50k for absoloutely nothing, in fact less than nothing since they are losing FTB status, but thats a lot better than paying ten or twenty times as much OR declaring bankruptcy.

Could some sort of fancy footwork be brought to bear here, such as opening a limited company and selling that contract to the limited company, then declaring it bankrupt? Or possibly protecting some assets by moving them into the limited company?

Normally some sort of a deal could be negotiated with the person you owe money to, very few people like to hound others into bankruptcy, but builders aren't businessmen.

Clone

Thanks for all the replies.

As someone trying to offer advice and put pressure on them to get it sorted sooner rather than later; It has been very helpful to have some informed opinions.

The solicitor has been involved at every stage of dealing with the developer.

I think at this stage I'm going to have a look at their contract myself and try and get a second opinion.

Hopefully there will be something somwhere in the contract as latenia suggested.

I'll keep you posted.

Climate Expert

Rents will go up a lot faster than mortgage payments.

Really? My rent has fallen by about 10% in the last 4 years. Mortage repayments have gone up quite a bit in that same time.

seandoc

johnnyskeleton wrote: »

Not really. Most contracts don't have loopholes built in (and if they do they usually favour the vendor not the purchasor).

So while getting a solicitor who will fight the case regardless might seem like a good idea, it could ultimately end up where a few years down the line they are forced to complete at an even greater loss and have to foot the legal costs bill x2.

If a solicitor advises their client and that advice is bad then they can sue their solicitor. However, if the client goes against the solicitor's advice and continues to fight the case, on their own head be it.

What you want to get is a good solicitor, preferably one who you know and trust. If you want a second opinion you can ask for a barrister's advice or go to a second solicitor. Maybe the barrister or other solicitor will find a loophole, but advising to go with a solicitor who will fight it irrespective of the outcome is very bad advice.

Must say that i a agree with the above post regarding this situation. I would be very surprised if the current solicitor hasnt checked the contracts to find a loophole. However what i would do is get a serious professional - preferably someone recommended to you - either architect, engineer or the like who is experienced with inspecting properties and get them to check the planning compliance, the construction quality and finish from top to bottom. Its should be possible to get someone to do this for a few hundred euros. I have seen inspection reports come in for 'completed' properties running to 20 or 30 pages long. I have seen reports with serious non-building regulation compliance issues that would have cost a fortune for the builder to rectify if pushed by the buyer. What has tended to happen though is that the 'take it or leave it' attitude from builders has prevailed and buyers have closed because they were afraid of losing the property. That situation has now completely changed. The least the above will do is buy some time. The key here is to make it as difficult and costly for the builder to close but at the same time not breaching your contract.

johnnyskeleton

latenia wrote: »

Johnny, I'm not talking about loopholes per se, I'm talking about something in the contract on the builder's side which hasn't been fulfilled which might make a case for the contract to be voided and the whole deal to be cancelled. After all, these things work both ways.

If, for example, the property has (or will) drop in value by 200k from what they agreed to pay, between interest on that amount over the term of the mortgage and the loss of FTB status they are looking at over half a million euros of a black hole in their finances as they're just starting out in life. That's probably 10 years of disposable income each gone down the drain.

I don't quite see how it goes from 200k to half a million. The advice they were given is that they could have to pay the builder the difference between the contract price and the price the builder sells it at. So we are talking about maybe 20-40k if there was a firesale now. If there was lengthy litigation with no chance of success, you could add another €10,000 in legal fees, and the price might drop another 10-20% during that time. I'm not saying they should fight it or not fight it, and you are right in that they do all they can to see if there is a way out of the contract, but I don't think that fighting it all the way is a good way to go. Unless there is a point to argue, there would be little benefit to fighting it.

latenia wrote: »

I don't know what the policy on giving 'morally dubious' advice here is but if they can't get out of this then maybe they should consider bailing to the UK or Europe for a few years.

The only problem is that you might find yourself lying on a beach in Spain and the builder sitting right beside you, both of you with distinctly hunted looks on your faces.

Jo King

DublinDilbert wrote: »

Yea have seen this a bit.... when things were booming the developers would give people back their deposits if they changed their mind, cause they knew another person would come along in a month, who they could potentially sell the place to for more money!


Now developers will not hand back a deposit as they know they might be waiting months for another buyer, if they can even find one...

!

Developers have no right to withhold a deposit if contracts have not been signed. See the Case of Howlin V Power High Court Unreported 5th May 1978 McWilliam J. The booking deposit is paid "subject to contract" and unless there is a signed contract the deposit can either be given back by the developer of his own volition and the property sold to someone else or taken back by the purchaser. If developers are not giving back deposits it is because they are willing to risk litigatation rather than damage their cash flow.

antoinolachtnai

Presumably this vendor and purchaser in this case have signed contracts though. It is not a case of a 'booking deposit'.

Clone

gurramok Thanks for your input, allot of research did go into it, I find it insulting that you suggest that people would throw away money frivolously, hindsight is a great thing, I don't think any amount of research could've anticipated the chain of events that led to this.

Are you a homeowner? Were you a savy purchaser when you bought your first place and made sure that the market wasn't going to change in the period after signing to the move in date, or that you would be made redundant from a company that you have worked your way up in?

It is an unfortunate situation that the market has changed dramatically not only in property but elsewhere, had they been kept on in their job, they would've gone ahead with the purchase anyway absorbing the loss in the knowledge that they would have a roof over their head they could happily call their own for the next decade at least.

Maybe had their solicitor made them more aware of the possible pitfalls this situation could've been averted, but the fact is they are here now and have to deal with it.

They are still looking for a new job, which is getting harder everyday as more and more people enter this market.
Even if they were to get a job tommorow, no bank is going to give you a mortgage until you've been working in a company for at least 6 months and even then they would frown on the gap in employment.

The buyers have initiated proceedings to get out of the contract.
They have to wait until the place is completed before anything will become of it.

With things going the way they are I'm not sure if they are still building.
The physical shell is there, The buyers were sent a letter informing them they will be called to snag in a month. Two months later there is no news.
This could be an opening as there is a final completion date in the contract (off course the builder covered themselves here and added a possible year to the actual date).

What would be the scenario if they went ahead with the purchase on the strength of a pre-approved mortgage, but when the valuer for the bank values the property at today's rates, Would they have to come up with the shortfall?

If they couldn't come up with the difference (as would be the case for most people) would they still be expected to purchase?
Even if they sold it now they'd still have to come up with the money.

Only time will tell now.

miju

Clone wrote: »

gurramok Thanks for your input, allot of research did go into it, I find it insulting that you suggest that people would throw away money frivolously, hindsight is a great thing, I don't think any amount of research could've anticipated the chain of events that led to this.

I and alot of others would beg to differ here for example there is thread I started here and another on boards.ie by mentalson which is here

Unfortunately, many people chose to put their heads in the sand.

Clone

miju thanks for you reply.

A dip and major drop in the property market was anticipated when the decision to buy this property was made.

This wasn't a major issue as the buyers never intended to buy the property for investment purposes, They were more interested in moving into their own property in an effort to take the next steps in life without wasting anymore time out of life.

They could've gone along with "lets wait and see what happens" school of thought like most people did. And loose a couple of years before they finnally decide that it's safe enough to purchase.

The main reason for this post was to determine a best course of action due to one of the parties wanting to drop out. This was since resolved as the builder wouldn't release them from the contract. So both parties still wanted to go ahead with the purchase.

The main problem came when one of them was made redundant.
Not a pleasant scenario when your expected to close on the deal 4 months later. When i refer to the chain of events in the market I'm not only talking about the crash in the property market which was always inevitable, I'm reffering to the sub-prime crash and then the general panic that spread as multinational companies started to move their operations out of Ireland and thousands lost their jobs.

We even bought just as things were beginining to drop, we were lucky to sell and move when we did. Like the people who are the subject of this topic we bought our house as a home and were well aware that we would loose out almost immediately and I'm sure we have but I look forward to many happy years on OUR house.

If we were smart we could've sold our previous house moved in with some relatives for a year or two while we speculate on the property market but I'm a firm believer in the fact that life is too short to get caught up in market speculation that is totally out of our control and dictated by the powerful financial institutions and unscrupulous governments that force an unfettered form of captialism on people around the world and when it all goes wrong it is the people who have to pay for it.

Sorry for the anti capitalist rant but it sickens me, A whole other thread is needed for this.

Jo King

Clone wrote: »

The buyers have initiated proceedings to get out of the contract.
They have to wait until the place is completed before anything will become of it.

With things going the way they are I'm not sure if they are still building.
The physical shell is there, The buyers were sent a letter informing them they will be called to snag in a month. Two months later there is no news.
This could be an opening as there is a final completion date in the contract (off course the builder covered themselves here and added a possible year to the actual date).

What would be the scenario if they went ahead with the purchase on the strength of a pre-approved mortgage, but when the valuer for the bank values the property at today's rates, Would they have to come up with the shortfall?

If they couldn't come up with the difference (as would be the case for most people) would they still be expected to purchase?
Even if they sold it now they'd still have to come up with the money.

Only time will tell now.

If, as they appear to have done, signed an unconditional contract and they cannot complete for any reason they can be sued for specific performance and or damages in lieu and there will be a judgment entered against them for the loss to the builder.
If there is no building going on the situation is hopeful. The builder may not be able to secure funding to complete the development. If the building is not complete on time it is the builder who will be in breach of contract. He can then be served with a 28 day notice to complete and then sued for the return of the deposit when he cannot do so.