Affordable housing clawback

sunnydelight

Hi
I apologise if this question has been asked before.

I purchased a property through theAffordable housing scheme, which i am delighted with, I have no intension of selling or buying the council out In the near future. But I do have a question, the council priced the property at 350k “claw back 36%”.
Just say I was to sell the apt or buy the council out, my property is no longer worth 350k. what happens
If I sell it and only get lets say 270k do the council take 36% of that price, same applies for buying the claw back from
The council out. or do the council expect me to get 350k for it?

The_Conductor

In a falling market- the 36% is reduced on a sliding scale until such time as the realisable sale price equals the price you actually paid, at which time the 36% no longer exists, but you are then liable for any further depreciation in the value of the property.

I.e. the 36% clawback is up to year 10- where the property is being sold for the same price or higher than it originally cost. Even prior to year 10- in a falling market the 36% falls by the actual value of the fall in price of the property- until the fall in value is greater than the original discount- at which point you shoulder any futher falls yourself.

Hope this helps,

Shane

sunnydelight

Thank you Shane for your reply. i understand now, cheers

Emerald Lass

in a falling market, should you be able to, you should try to buy out the council when the claw back amount you would pay is 0%.
my friends just got their AH valued, and it is now valued at what they paid for it 3 years ago. They has applied for a bank mortgage and legal valuation, as if they buy it from the council now, they will have no clawback to pay them, and will own the house outright. Now, the price may further go down, so if they wanted to risk waiting they could, but there is no point as the council aren't going to compensate them for the loss, so now is as good a time as any for them to buy out.
In the current market you should keep an eye on this, as it means you may be able to buy your AH from the council with little or no clawback

Stephen P

Sorry to hijack the thread OP but I have a quick question about the clawback...

If I owed the council 250K (including mortgage + clawback), the property is valued at 255K, the best offer I get is 245K, if I take this offer would I then owe the council 5K or would they alter the clawback? I have a feeling I would owe them...kinda makes sense I would, since when do the council do you any favours??

Ste.phen

Stephen P wrote: »

since when do the council do you any favours??

When ya got the house in the first place?

Stephen P

When I bought it?? I don't think so!! They over valued it by about 60k. I work in the council but still think they won't do you any favours

The_Conductor

Emerald Lass wrote: »

in a falling market, should you be able to, you should try to buy out the council when the claw back amount you would pay is 0%.
my friends just got their AH valued, and it is now valued at what they paid for it 3 years ago. They has applied for a bank mortgage and legal valuation, as if they buy it from the council now, they will have no clawback to pay them, and will own the house outright. Now, the price may further go down, so if they wanted to risk waiting they could, but there is no point as the council aren't going to compensate them for the loss, so now is as good a time as any for them to buy out.
In the current market you should keep an eye on this, as it means you may be able to buy your AH from the council with little or no clawback

Its not in the Councils interests to divest themselves of their investments in AH- simply because the market has fallen- and unlike the shared purchase scheme, there is not a mechanism in place to 'buy out the council' when the price falls as you put it. The purpose of the scheme is to house people who are unable to afford to house themselves- not allow people to make a quick buck. There is no equity stake in the property on the part of the council- there is a legal financial interest in the property. It may very well be that they may decide to revisit the terms of the AH scheme in the future (though given the current financial constraints I don't see it imminently). If people purchased under the AH scheme with the intention of living there longterm (which should be the case)- just let the agreement run its course- and it won't cost you anything anyway.......

If you do manage to persuade the council to divest itself of your commitment, its irrelevant in the current market- and incredibly difficult to set a price on properties sold under the scheme, given the illiquid market. If you want to go down this road- set yourself a timeframe on which to act- probably 2011/2012- when the housing market may have set a foundation based on sound principles, on which it is possible to price assets......

Emerald Lass

smccarrik - I appreciate your points, but my friends have a house originally bought via AH. Their mortgage is via Fingal. They are hoping in a couple of years to travel to Australia for a year, and if the house is still AH they cannot rent it out. because of the current prices they got a valuation, and it was the same as what they paid for the house under the AH scheme. They approached the council and asked if they could get a mortgage via a private lender and 'buy out' (for want of a better term) their AH agreement. The council agreed. They have to pay the council zip and their only costs are those involved in getting the valuation and changing the mortgage. The house is no theirs with no obligations under the AH scheme - i.e they can rent it out if they want. Their mortgage is only €50 per month more than it was via Fingal. I think you can see the benefit of this to them? and Fingal readily agreed.

(their house is in a private estate, but bought via AH, so perhaps this makes valuing it easier as you have properties all around selling privately. It may well be different in estates built purposely for the AH scheme).

I bought my house out from Fingal, as I also needed to move abroad for work and needed to rent the house out. My only options were, break the agreement rules and rent it out anyway (too much of a scardy cat to to this, I would be worried stiff I'd get caught!), fund the mortgage myself (too lavish an option - I justify paying for a house I don't live in) and finally to pay the clawback and buy out my AH agreement so that I can rent it out. I chose to pay the clawback. They had no problem agreeing and the clawback wasn't all that big, as I also found out they had initially overvalued the property. Fair enough I had a slightly bigger mortgage, but it was low enough that a fair rent paid for it (no profit but the mortgage is covered), and I could rest easy knowing that I wasn't going to get into trouble.

smccarrick wrote:

The purpose of the scheme is to house people who are unable to afford to house themselves- not allow people to make a quick buck

clearly this is not the case if you work for the council or know the right people. In my estate 8 houses - all the biggest style and nicest ones - were not available. We were told they were already allocated, even though the estate had not been launched until that day!?! They are 4 bed, and it appeared that they were all owned by single people????!!!! Three of the 8 were sold on within 6 mths of them being bought. I later found out from a friend who works in the council that these houses were earmarked for council employees and friends, most of whom were single, and the claw back amounts had been 'negotiated' for them. Since then 6 of the original 8 have been sold on - all before last year when prices were good. So it appears that if you know the right people it is possible to buy an AH house purely for profit. one house in particular sold for over €300,000. My friend (who I trust with the validity of this information) said that they were bought for €177,000 and the claw back on them was negotiated at around €30,000. So one indivual alone made €93,000 profit!

My mate even said to me later - 'God I wish I'd known you were looking for a house in that estate, I could have arranged something for you!' I wish I had known too!

One rule for one, one rule for others - typical council behaviour.

like I said in a differnt thread, don't count on the council to do the 'right' thing.

The_Conductor

Sigh....
It really does make you question your faith in humanity......
While I don't doubt a word you're saying- none of that is allowed for in the circulars from the Department of the Environment.
It makes me angry to hear of things like that happening- you really begin to question why we, as taxpayers, even bother.......

Emerald Lass

smccarrick wrote: »

Sigh....
It makes me angry to hear of things like that happening

I assume you mean the friends of council members gtting a cushy deal? (not the fact that me or my friends paid their clawback?) And if it makes you angry imagine how I feel knowing that certain people, by virtue of who they know paid the same for a 4 bed that I paid for a 3 bed, and then got to walk away with a nice big profit. mad my blood boil!

it is because of goings on like this that I said in a similar thread that there is no point in complaining to the council. On another thread a poster was quite irrate that someone who bought AH was renting it out - while I agree that is not fair, thing like that don't bother so much - I can live with that as many of us recently found out that in fact we did not get an AH but an overvalued house, and the council did us no favours. renting out I can live with (to an extent) but when you hear that people who know the right people are making big fat profits??? well, thats a different story....

I mentioned this to a TD who came to my door - he said he would look into it and came back and said I was misinformed and that never happened - funny though that in the first 18 mths the ONLY houses sold on in our estate were in that group of 8???? no one else who had bought as AH sold on so soon - to me that says more than the TD's claims that all was above board.

While I am glad that I did the right thing and paid my clawback before renting out, I do wish I had done it a year later when prices were lower so my clawback was lower. And also my friend told me they probably would have turned a blind eye if I had rented it out. He had offered last year to help with reducing my clawback, but I politely refused. I am probaby stupid to have done that, as I would have saved maybe €5000, but it doesn't sit right with me - and I'm an unlucky sort of person, if i did something like that I would be the very one to get caught!

The other thing is my friend doesn't even work in housing in Fingal - but he knows people who do and he knows that there are a lot of 'fiddles' of one sort or another and a lot of favours being done.

Brown envelope anyone?????