New apartment valuation

ivorytowers

Hi all.

Myself and my husband bought a new apartment last April (07) from plans. We have not moved in yet, but are about 5 weeks away from closing. The apartment has now been valued for 55k less than what we agreed to buy it for, so now our mortage company will only give us 92% of the lesser figure. We dont have the additional amount to put towards to mortgage so we will not be able to close the deal. Our solicitor has told us the builder will probably drop the cost as nobody will be able to buy at the original price now.

Anyone any advise or experience with this?

Thanks!!

The_Conductor

Unfortunately you could very well find yourself in the situation where not only will the builder not drop the price of the apartment, but if you have signed contracts (other than a booking deposit) they may actually pursue you for the original sale amount agreed (unless you are able to show that they have breached the contract in a manner sufficient to nullify it).

Be very very careful. It is possible that they may agree to a slight deduction- but they are under no obligations to do so whatsoever. Your reduced borrowing capacity is unfortunately not their prime concern.

westcoast66

ivorytowers wrote: »

Our solicitor has told us the builder will probably drop the cost as nobody will be able to buy at the original price now.

Are you sure that your solicitor said these exact words ie that nobody will be able to buy at the original prices??

I'd say its more of a case that most people are unwilling to pay the original price given recent market changes. Not everybody gets a 92% mortgage you know.

The_Conductor

westcoast66 wrote: »

Not everybody gets a 92% mortgage you know.

Most mortgage providors have dropped it to 80-85% across the board (there was another spate of revisions last week). 90-92% would normally be reserved for civil servants/accountants/doctors or other professions considered rock solid.......

ivorytowers

How can they force us to close if we simply do not have the funds to do so? Will they sue us? If so, for what we have no other assests as we are first time buyers still living at home.

Our solicitor said that any other first time buyers in our block will be in the same situation, I dont know a lot of first time buyers who would have the extra funds.

Thanks for your replies!

jetski

he wont pursue you for the original amount. that approach would simply cause caos for him and everyone else in the chain.... get what you were told from the mortage provider and show them, he might suggest you try other providers, but i dont think he will pursue

The_Conductor

Ultimately they could sue you, yes. Increasingly pressure is being put on developers to go down the legal route by their banks- as they need the equity. Banks are trying to prop up the market as much as possible- its not in their interests for their loan portfolios to be in free-fall, that said, they don't have as much control over the situation as they might like to.

There are a lot of first time buyers in a similar situation to you- they have entered contracts on the understanding that they could access X funds without any difficulty and are learning a few months down the road that the mortgage providors have vastly changed their lending criterion and they simply cannot offer the same level of loans.

Ultimately if you do not have the money- you don't have it. You could negotiate with the developer- he/she may be inclined to talk. If you do pull-out of the sale- they would legally be entitled to pursue you for the difference between the contract price that they agreed with you, and whatever the property ultimately sells for (along with any legal and financing costs incurred in the interim).

It is a mess- you do need proper legal and financial advice on this. Your solicitor is not being very helpful in all honesty- you need someone to take a pro-active approach on your behalf.

S.

westcoast66

ivorytowers wrote: »

How can they force us to close if we simply do not have the funds to do so? Will they sue us? If so, for what we have no other assests as we are first time buyers still living at home.

Worst case : You could be forced to close for the amount of loan you are eligible for and a court order made for you to pay the difference to the developer over a period of time based on your income.

jetski

smccarrick wrote: »

Ultimately they could sue you, yes. Increasingly pressure is being put on developers to go down the legal route by their banks- as they need the equity. Banks are trying to prop up the market as much as possible- its not in their interests for their loan portfolios to be in free-fall, that said, they don't have as much control over the situation as they might like to.

But sure the bank agreed to lend them the money to buy it in the first place. so its them thats causing the problem..... the likley outcome from this is the builder will agree to absorb the difference.

Its like a dog chasing its own tail really...

The_Conductor

jetski wrote: »

the likley outcome from this is the builder will agree to absorb the difference.

With all due respect I beg to differ.
Its not in the banks interest to depreciate the assets on which their loans are collatoralised- it is in their interests to assist the developers in actively pursuing those to whom legal contractual arrangements exist. The OPs best bet would in fact to be to find some loophole in the contract, or some manner in which the developer themselves are in breach of the contract, and use this to try to force the issue with the developer.

Irish bankruptcy laws are antiquidated in comparison with most developed countries- its very easy for a company or a financial institution to pursue forever after and purloin your salary or indeed social welfare payments, in satisfaction of registered debts. This is a vastly different situation from in the US, or even in the UK.

Climate Expert

Buying from plans is risky and now you will have to pay for taking that risk.

uberwolf

I know first hand of instances where builders have accepted lower amounts in instances like this.

They're under pressure from the bank, and would struggle to find a buyer at all if they reject your offer.

arctictree

I'd love to know what the outcome of these events are. OP - Any update?!

ivorytowers

Still in limbo at the moment.

Have spoken to the developer and they are speaking with the builders to see what, if anything, we can do.

Will let you all know what happens, thanks for all the replies.

helimachoptor

Op please do keep us updated.

I have a friend in a similar position, first time buyers both with good jobs, bought a house for 600k off the plans. both work in financial services and my friends partner lost her job and the house has no been valued at 500k and they are worried sick.

Gareth37

My God, these type of threads frighten me. people buying property and not knowing its true value or what the market will be like in a year or 3.

I think the 55K is a small reduction relative to whats ahead, just my opinion though. I worry for you both but good luck.

username123

Gareth37 wrote: »

My God, these type of threads frighten me. people buying property and not knowing its true value or what the market will be like in a year or 3.

Nobody EVER knows what the market value will be in a year or 3 - people are not fortune tellers.
There are plenty of people around Ireland now who bought under massive pressure - BUY BUY BUY, ULL MISS THE BOAT, BUY NOW, THE PRICES ARE ONLY GONNA KEEP GOING UP - whipped up into a frenzy by the media, their friends, internet forums etc... That bubble has burst now. The builders will be trying to salvage what they can in a falling market and will hopefully drop the price for the OP.

In the current climate Id say the builder will drop the price, it would cost them too much to chase everyone for money, plus theyd still be left with empty unsold apartments.

Climate Expert

There are plenty of people around Ireland now who bought under massive pressure - BUY BUY BUY, ULL MISS THE BOAT, BUY NOW, THE PRICES ARE ONLY GONNA KEEP GOING UP

Well they are idiots if they bought into this pressure and deserve whatever financial ruination that comes there way.

When you decide to spend 600K you'd want to have your figures straight.

Gareth37

Climate Expert wrote: »

Well they are idiots if they bought into this pressure and deserve whatever financial ruination that comes there way.

When you decide to spend 600K you'd want to have your figures straight.

I agree 100% with that.

Its obvious from what the OP says she doesn't and 99% of people buying don't. The OP seems happy to pay the 55K if she could get a loan for that, its so wrong its funny. Its as if a loan is free and you never have to pay it back. Funny and scary

DublinDilbert

helimachoptor wrote: »

Op please do keep us updated.

I have a friend in a similar position, first time buyers both with good jobs, bought a house for 600k off the plans. both work in financial services and my friends partner lost her job and the house has no been valued at 500k and they are worried sick.

It real amazing me how many people think working in "financial services" is a great secure job... i guess its the whole the "service sector is our future" line that was sold by the government.

http://www.rte.ie/business/2008/0805/economy.html

helimachoptor

DublinDilbert wrote: »

It real amazing me how many people think working in "financial services" is a great secure job... i guess its the whole the "service sector is our future" line that was sold by the government.

http://www.rte.ie/business/2008/0805/economy.html

Twas a secure job til the credit crunch hit

My friends partner has a few interviews lined up so hopefully she'll get a new job soon enough

davidoco

uberwolf wrote: »

I know first hand of instances where builders have accepted lower amounts in instances like this.

They're under pressure from the bank, and would struggle to find a buyer at all if they reject your offer.

Agree with the above. While you are not in an ideal position with contracts signed (if signed).

Developers owe money and need sales to close. There is a chance they will snap your hand off for the original price less 50k instead of waiting 12 months of court proceedings to get an order to force you to close which (from your post) you will unable to do at the higher price. Unless of course buyers are queuing up to buy in the development.