Affordable housing clawback Q - urgent

Theboinkmaster

Hello

My friend wants an affordable home and just wondering if anybody knows the situation with clawback on affordable homes when there is a fall in house prices? All the examples the county council give are for the situation that prices go up and you basically split the sales proceeds based on the % discount you got on purchase. What happens when the price falls? Do the council split the loss with you? Or are you left with the full loss to bear and negative equity?

This is urgent as my friend is about to cancel a holiday this weekend based on maybe getting an affordable home however I've been advising her against it based on falling house prices.

My own view is that the council don't even know but I doubt they would cover the full loss would they? btw the places she may be offered are stepaside & sandford in Dublin which IMHO are very risky for falling prices.

For example:

Market value of apartment when she gets it next May is €400k

Council offer it to her for €200k and she gets a €200k mortgage

Then in 4 years time she wants to trade up to a house and sell the apartment which is now worth €300k

So what happens?

a) - council absorbs their share of the €100k loss = €50k and she takes a hit for her loss of €50k ie when sold she gets €150k cash but will have a €200k mortgage

b) - council absorbs full loss of €100k so when she sells she gets her €200k back

c) - she absorbs full loss of €100k so only gets €100k cash but has €200k mortage

Any thoughts at all would be greatly appreciated!

Afuera

b) is the answer here.

There is a provision that specifies if paying the clawback would cause a loss to the purchaser then the council will waive all or part of it.

Since the purchaser in your case got a 50% discount they should owe a clawback of 50% when they sell. This amounts to 150k of the 300k sale price but since paying it would cause them to lose 50k, the council would waive that part of it and only charge them a clawback of 100k instead.

The only point where the purchaser can actually lose money with AH is if the sale price went below their original mortgage price.

Victor

Make sure this is checked thoroughly, with a solicitor if necessary.

The_Conductor

Theboinkmaster- another factor that you have to consider, totally aside from what the situation is vis-a-vis the clawback in a falling market- is the valuation used by the council as a fair market value for the property from which the clawback (if any) would be calculated. If you have a look at other financial websites (askaboutmoney.com etc) you will see that groups of people who are availing of the Affordable Housing Scheme have successfully challenged several valuations that councils have placed on Affordable Houses on offer. Its equally as valid a concern as the situation in a falling market.

Regarding the clawback situation in a falling market- there appears to be confusion as to what is happening, different councils are responding to this in different manners- get any questions you have clarified in writing- DO NOT RELY ON ANY INFORMATION GIVEN OVER THE PHONE......

If the coucil do indeed absorb the entirety of the fall in value of a property in a falling market- I bet you the CIF will be advocating a massive increase in the Affordable Housing Scheme as a manner of underpinning the housing market- with the councils underwriting any possible price falls in the market. Hmmmm- its only a matter of time........