Clawback calculation now that prices and values have dropped???

tatli_lokma

Hi everyone, hoping someone might be able to help.

I'm trying to work out what the possible clawback would be on our affordable housing house.
We bought at €163k 5 yrs ago, and at that time the value was given at €240k.
We are now thinking of moving and have heard of a good house coming to the market soon. We would not have to our current mortgage, provided the clawback was not too much.

Looking on the council website and at my info booklet I got when we bought, the info is:

The clawback percentages vary from property to property. These are setbythe Council prior to closing the sale of the property and are based on the sale price and the market value price of the property.


Example

House sold after five years for €300,000
Outstanding mortgage (estimated) €125,000
Clawback (30% of €300,000 to be repaid to Council) € 90,000
Amount owning to Bank €125,000
Balance €85,000

but there is absolutely no way we will make a profit - we will be happy if we break even.
We paid €163k and if we get €165-170k we would be able to make the move provided the clawback doesn't kill us.

From my reading of the above example it does not take into account the difference between the sale price and the price paid. here they calculate on the total sale price - if this was indeed the case we would be paying €49500 when we made no profit! our mortgage is a good bit less than the price we paid as we had saved a good deposit - does that make a difference?

Does anyone know if you sell for the price you paid do you still have to pay them anything?

Is it always as high as 30% - they say above that it varies. This isn't very helpful to estimate your costs and charges when you are trying to work out what you can afford! :rolleyes:

I rang the council twice last week and they said that they would get someone to calculate the clawback and call me back, but as of yet I have had no reply. :rolleyes:

As a final question - our other worry is that the bank will not let us transfer our mortgage from the council to them (even though we would not be increasing it). If this is so then our whole plan is scuppered (and I will continue to clock up 1000 miles and 15-18 hours travelling a week!). If you have a mortgage with fingal, does anyone know if it is possible to transfer it to another council (i.e DCC?) or is there any possibility of keeping the mortgage with fingal, just living elsewhere (I know this is a stupid question even as I type it, but then again, where councils etc are concerned, nothing would surprise me! lol)?

thanks in advance for your time - I would appreciate any advise or info offered!

The_Conductor

Purchased @ 163k when open market price was 240k = 32% discount to market value. Max clawback on associated scheme = 30% With subsequent fall in market value- sale price now = 160k Potential clawback = a maximum of 30% of the gross sale price, subject to a time related habitual residence deduction. Max clawback = 48k, actual clawback depends on how long you've lived in the property- potentially 0 after a 20 year period.

tatli_lokma

thanks for the reply, although that is what I was afraid of!

have the house 5 years, so doubt that would make a lot of difference to the price.
Its very confusing, because although I know I got a 30% discount at time of purchase, when I bought it was explained to me that this was to prevent people buying and flipping at a time when the market was strong. I was also told by the coco that the less the profit, the less the clawback - not the case from the example above.

If this is indeed the case, I feel rightly screwed, as I will have made no profit but will still have a clawback of €48k. I know I am not alone in that, so not meaning to sound like a whinger when others are also in negative equity, but the whole point of AH is that it is social housing - how a social housing initiative can request a huge clawback when the purchaser made no profit is IMO way off the mark.
If the clawback is indeed this, then we are scuppered - no way we can move, and the reason for moving is due to the coco. They built another AH estate right across the road, which I knew about when I bought and didn't have an issue, however now they cannot sell them as AH and have given almost 80% away as rentals and they do not seemt to care about the behaviour of the residents. There is a strong indication it will become a bit of a ghetto and black spot - it hasn't happened, but the writing is on the wall (almost literally!) so now would be the time to sell before our houses get dragged down because of the close proximity. We want to start a family, and between the area and the travel time to work, it would no longer be feasible in this house (I had been working close by, but was let go and now my job is in the south city!)

One fingal employee told me it would be clawback on the profit, then said, oh iiat maybe its clawback on the full amount IF you make a profit - said she would check and call me back.
The other one said if I made no profit then I would pay no clawback.
Seems the staff are also confused, as obviously no one ever thought that they would be in the position so soon that their houses would not make a profit.
both were to confirm and call me back - that was Wednesday and I'm still waiting!
I'll let you know exactly when I do eventually hear from them!

The_Conductor

Do let us know- different county councils appear to be applying the Department of the Environment guidelines in different manners.......

Re: scuppered- the idea of the affordable housing scheme is to provide longterm accommodation for people- totally aside from the clawback aspect of the scheme. It was never intended to be a shortterm method of putting a roof over your head, until such time as you found somewhere better. Unfortunately a lot of people bought unsuitable property during the boom years with the intention of trading up to more appropriate accommodation down the road- to bring up children or whatever. This was in no way a feature of the AH scheme- it was across the board. How many of the 300,000 odd apartment dwellers in the country imagined they would be there long term- very few I hazard.

If there is another AH estate which is largely privately let- this will further diminish the potential resale price of your property.

In general with AH properties-

If you sell within 10 years you have to pay back 30% of the gross sale price. This diminishes by 3% for each year thereafter- to year 20, when there is no clawback associated with the property.
The property has to remain your PPR (principal place of residence).
You can remortgage the property but you have to pay the Council the original 30% of the house purchase price, discounted at the outset (less any clawback reduction from year 10 onwards).

Let us know what they tell you- I am certain there are others in identical situations to you.

S.

hairy cake

I feel rightly screwed, as I will have made no profit

Sorry, but isn't this being a bit presumptuous? You were getting taxpayer's money for a home, not for an investment. And as the last post outlined, there were conditions on this money.

After all, you also say

when I bought it was explained to me that this was to prevent people buying and flipping at a time when the market was strong.

So this is in effect a five-year flip which hasn't worked out?

SkepticOne

OP, as a consolation at least you did not pay the full 240k. Those people who paid the full price are even more screwed as they now own properties that are worth, according to your figures, €165. Your clawback will gradually reduce over time.

Sarn

From Affordable home.ie

John and Mary buy an affordable home. The market value of this property is €280,000, and they buy it at an affordable price of €196,000. So, the market value discount to John and Mary, which is known as the clawback, is 30%.

If John and Mary sell their home and the market value has decreased from €280,000 to €260,000 then the clawback would be based on the lower market value of €260,000 less what they paid €196,000, which is €64,000. So they have to pay back €64,000 to the local authority when they sell in addition to any money owing on their mortgage.

This is how I thought the scheme worked in these cases, although the other approach appears more appropriate given the nature of the scheme. Let's not consider those who bought into affordable housing schemes where the quoted prices by the council were higher than the market value.

warrenaldo

It does vary from Council to Council. However, if you bought from 163k and sell for 170k - you then owe the Council 7k. The clawback is to prevent people from prefiteering. But it also helps to prevent people going into negative equity.

There are a lot of other threads about this. But I am fairly certain in the above situation you owe 7k.

The_Conductor

warrenaldo wrote: »

It does vary from Council to Council. However, if you bought from 163k and sell for 170k - you then owe the Council 7k. The clawback is to prevent people from prefiteering. But it also helps to prevent people going into negative equity.

There are a lot of other threads about this. But I am fairly certain in the above situation you owe 7k.

If this is the situation.
Prices have fallen by a lot more than 30% on average (we're already in the low 40%'s and its expected to top 50% before it bottoms out)- so you're probably in negative equity- even allowing for the 30% discount to market value at the outset.

You do need to clarify this though- some councils appear to be applying the clawback to the gross sale price, whereas others are setting the ceiling on the amount actually paid.

You have to remember that the whole intention of the scheme was to provide longterm accommodation for people- which is why it was designed to reduce the clawback on a flatline basis between years 10 and 20.......

S.

Money Shot

warrenaldo wrote: »

It does vary from Council to Council. However, if you bought from 163k and sell for 170k - you then owe the Council 7k. The clawback is to prevent people from prefiteering. But it also helps to prevent people going into negative equity.

There are a lot of other threads about this. But I am fairly certain in the above situation you owe 7k.

Well in that case it ensures peopel profiteer. If the market rises and you hang onto it you have huge equity in the house. If the market falls, you can sell and let the Council take the hit.

For the purposes of the scheme, would it not make more sense to lock in the claw back as mentioned, and then reduce it after ten years. The scheme was never intended for people to leave the property after five years, and if you do, you should be aware that you have agreed to pay the clawback. From the above though, you may have got very lucky.

billyhead

smccarrick wrote: »

If this is the situation.
Prices have fallen by a lot more than 30% on average (we're already in the low 40%'s and its expected to top 50% before it bottoms out)- so you're probably in negative equity- even allowing for the 30% discount to market value at the outset.

You do need to clarify this though- some councils appear to be applying the clawback to the gross sale price, whereas others are setting the ceiling on the amount actually paid.

You have to remember that the whole intention of the scheme was to provide longterm accommodation for people- which is why it was designed to reduce the clawback on a flatline basis between years 10 and 20.......

S.

Hi Sean,

I also have a query about the AH scheme. Is it possible to reduce the loan terms from say 20 years to 15 years. I would just like to pay off the council as quick as possible on the house I got with Fingal Co Co

tatli_lokma

Sarn wrote: »

From Affordable home.ie

John and Mary buy an affordable home. The market value of this property is €280,000, and they buy it at an affordable price of €196,000. So, the market value discount to John and Mary, which is known as the clawback, is 30%.

If John and Mary sell their home and the market value has decreased from €280,000 to €260,000 then the clawback would be based on the lower market value of €260,000 less what they paid €196,000, which is €64,000. So they have to pay back €64,000 to the local authority when they sell in addition to any money owing on their mortgage.

This is how I thought the scheme worked in these cases, although the other approach appears more appropriate given the nature of the scheme. Let's not consider those who bought into affordable housing schemes where the quoted prices by the council were higher than the market value.

when I bought this is how it was explained to me, so hence my confusion with the info on the website.

In regards to all the comments re: long term residence etc - I had every intention to stay longterm, but it is mainly due to the councils mismanagment of my estate and also the drastic change in situation in the estate directly opposite which means the estate is no longer suitable for raising children (it was when we moved in and for the first year, but not now). We are not looking moving to profit or flip - but purely to try to reside in a more family friendly area.

Again I understand the points made re: other people's losses and negative equity, but on this I just have a couple of points:
- first, as a social housing initiative it seems to go against the whole point of such a scheme to have people result in negative equity.
- second, yes I know the 'negative' equity would pass to the council and therefore the taxpayer, but I am also a tax payer, and I did pay for my home, I didn't get it for free and futhermore, the council it appears did over estimate the value at the time of my purchase.
- thirdly, the reason for pushing for sale now, is to minimise the negative equity. Several EA's have valued the property at €175k, we would sell for €165k to encourage a quick sale (if possible). If we leave it longer then we will be further behind.

You can hardly blame a person for trying to minimise their negative loss, can you?

still waiting on a reply from council by the way :rolleyes:

The_Conductor

It may very well be counterproductive having people who availed of the social housing scheme go into negative equity- however the fact of the matter is that at this stage anyone who purchased residential property in Ireland since 2002, is almost certainly in negative equity. Further- why should purchasers of social housing be afforded an additional safety net- not available to all those first-time-buyers who bought their shoebox apartments, with the intention of trading up to suitable accommodation down the road? Even Eddie Hobbs was flogging the blasted things. As an aside- the income threshold for social housing in some areas of Dublin was actually up to a joint salary of 90k (for several estates in Dublin 15). This makes a mockery of the whole concept imho........

tatli_lokma

smccarrick wrote: »

It may very well be counterproductive having people who availed of the social housing scheme go into negative equity- however the fact of the matter is that at this stage anyone who purchased residential property in Ireland since 2002, is almost certainly in negative equity. Further- why should purchasers of social housing be afforded an additional safety net- not available to all those first-time-buyers who bought their shoebox apartments, with the intention of trading up to suitable accommodation down the road? Even Eddie Hobbs was flogging the blasted things. As an aside- the income threshold for social housing in some areas of Dublin was actually up to a joint salary of 90k (for several estates in Dublin 15). This makes a mockery of the whole concept imho........

to be fair, I don't think you can apply the same rules for buying property in general to those who bought AH - AH is a social housing scheme and as a result is developed under a different ethos. The whole idea is to provide housing as a social initiative, to help those who would not otherwise be able to afford a home on the open market. This was my situation - when I bought there was no way in hell I would have got a mortgage at the time.

As for your comment about the €90k income, whilst to an extent I see your point, but when you take into account the price of some of the social houses, €90k would be the minimum joint income you would have required. but that just proves that the councils were also benfiting from the AH scheme and not pricing the properties in the spirit of social housing.
If you consider that many of the councils built houses and even with the 30% discount still made good profit, and continue to do so via the interest on the mortgages, I don't think its fair to say that I am uing tax payers money to minimise my loss. (I know this was not you Smccarrick, but a previous poster).

The_Conductor

I'm not arguing about you in particular- I just think the whole scheme is deeply flawed- the fact that the different councils seem to be incapable of coherently answering what should be general questions about the scheme and the implications of various courses of action- is just sympthomatic of how complicated they managed to make it.

I know you availed of the AH scheme- because otherwise you wouldn't have been able to afford a property. The norm for many others- was having parents act as guarantor because they wouldn't qualify- or even more common- the financial institutions accepting purely spurious income and outgoing statements.

I wonder how many people who purchased property since 2000, purchased property they are capable of living in longterm- and how many of them were pressurised into buying wholly unsuitable shoeboxes and are now even more stuck than they ever thought imagineable?

Do please let us know what the council say- as there are conflicting stories being given by different councils.

billyhead

billyhead wrote: »

Hi Sean,

I also have a query about the AH scheme. Is it possible to reduce the loan terms from say 20 years to 15 years. I would just like to pay off the council as quick as possible on the house I got with Fingal Co Co

Would anybody know an answer to question or would i be better off contacting the council?

The_Conductor

billyhead wrote: »

Would anybody know an answer to question or would i be better off contacting the council?

Contact the council. Some councils (like Cork Co.Co.) appear to be allowing you to do this- while others (like DCC) aren't allowing it at all.

You need to contact the council and query it with them.

The letter of the law is you cannot repay the mortgage early or transfer the mortgage- without paying the 30% (or whatever percentage) clawback. This is being administered in different ways however......

billyhead

I rang them and they said the only thing you can do is increase the monthly repayments and you eventually have it paid of earlier but the deeds cannot trasnfer until after 20 years. I suppose its better then nothing.

Mailman

billyhead wrote: »

I rang them and they said the only thing you can do is increase the monthly repayments and you eventually have it paid of earlier but the deeds cannot trasnfer until after 20 years. I suppose its better then nothing.

If you accelerate payments or make a lump sum payment then you don't decrease the loan period just the outstanding amount.
I enquired about reducing loan term and they said it wasn't allowed.

Not only that but if you make a lump sum payment or accelerate payments the amount you pay isn't deducted there and then from your outstanding balance, it stays on the account until the end of the year and then your outstanding balance is calculated.
After extensive querying I came to the conclusion that accelerating payments on a Fingal Co. Co. mortgage is not worth the effort as you don't benefit from it in the way that you would with a conventional mortgage.

Also, the mortgage protection at .5418% of outstanding balance is a rip off too.

If you are in a position to clear a Fingal Co. Co. mortgage in one go then go and do it but it's not worth while for lump sums of a smaller amount like 30 or 50K.
If you want to buy out the mortgage then you have to haggle with the Housing department on current open market value and they have no incentive to go easy on you as they really want to get a big wad of cash out of you.
If you are forced to buy out their interest rather than waiting for loan to mature then God help you because they'll ride you.

tatli_lokma

Folks, spoke to the manager in the loans section of Fingal.
He told me that the clawback payment has been reassessed since the property slump.
The definitive answer i got is that you pay the profit to the council. So basically, sale price - original purchase price = x amount, you give the full x amount to the council.
So eg, bought for €150k, sold for €175k, give fingal €25k. bought for €150k, sold for €150k, give council nothing!
Obviously they are looking to see that you are trying to get the best market value, and you need to get a written valuation etc (although why you would do that when you get none of the profit i dunno - makes more sense to sell with no profit, cos you're not going to get it anyway!).

But that is the definitive answer I got today from the manager in the housing loans section.

The_Conductor

Cincikchick wrote: »

Folks, spoke to the manager in the loans section of Fingal.
He told me that the clawback payment has been reassessed since the property slump.
The definitive answer i got is that you pay the profit to the council. So basically, sale price - original purchase price = x amount, you give the full x amount to the council.
So eg, bought for €150k, sold for €175k, give fingal €25k. bought for €150k, sold for €150k, give council nothing!
Obviously they are looking to see that you are trying to get the best market value, and you need to get a written valuation etc (although why you would do that when you get none of the profit i dunno - makes more sense to sell with no profit, cos you're not going to get it anyway!).

But that is the definitive answer I got today from the manager in the housing loans section.

Get this in writing- do not rely on a conversation with him (as this expressely goes against the guidance issued by the Department of the Environment).

Mailman

smccarrick wrote: »

Get this in writing- do not rely on a conversation with him (as this expressely goes against the guidance issued by the Department of the Environment).

Agreed, housing department will not stand over anything they say. The Department is a mine of disinformation.
Even getting it in writing isn't adequate. If you can tie it to a FOI request you might just be able to rely upon it but even then don't trust anything they say. Did the person you were talking to have the same name as a Minister of State by any chance?

An affordable housing house that you paid 150,000 for would have typically been purchased at a discount of 28.5% off a notional market price.
150,000 = 71.5%
209790 = 100% open market price(fantasy price)

If the house is sold the Council would be entitled to 28.5% of sale price but 28.5% of 175,000 is 49,875 and that is biting in to your purchase price so they'd cut off their clawback at 25,000 and take no more.
You only get to share in the profit when it is sold above original adjudged open market price which in this case is 209790(it wouldn't have achieved 209700 on the open market ever as that was a fantasy price).
This is the reason why most people shouldn't have signed their contracts for affordable housing with Fingal County Council; the adjudged open market price was well overstated to the benefit of the Council.
The council can wait until your forced to sell and clawback everything on sale and sharing nothing with you. The Council are bigger than you, have the luxury of time and have relatively limitless resources in comparison to you.
Within the first 10 years you'll still have a huge proportion of the mortgage outstanding and won't be pocketing more than small change on the sale of your property when the time comes to move home due to relationship breakdown, marriage, family formation( practically all you could get through affordable housing since inception were one and two bed apartments and townhouses of less than 650 sq. ft in size), change of employment to another locality.

tatli_lokma

Mailman wrote: »

Agreed, housing department will not stand over anything they say. The Department is a mine of disinformation.
Even getting it in writing isn't adequate. If you can tie it to a FOI request you might just be able to rely upon it but even then don't trust anything they say. Did the person you were talking to have the same name as a Minister of State by any chance?

An affordable housing house that you paid 150,000 for would have typically been purchased at a discount of 28.5% off a notional market price.
150,000 = 71.5%
209790 = 100% open market price(fantasy price)

If the house is sold the Council would be entitled to 28.5% of sale price but 28.5% of 175,000 is 49,875 and that is biting in to your purchase price so they'd cut off their clawback at 25,000 and take no more.
You only get to share in the profit when it is sold above original adjudged open market price which in this case is 209790(it wouldn't have achieved 209700 on the open market ever as that was a fantasy price).
This is the reason why most people shouldn't have signed their contracts for affordable housing with Fingal County Council; the adjudged open market price was well overstated to the benefit of the Council.
The council can wait until your forced to sell and clawback everything on sale and sharing nothing with you. The Council are bigger than you, have the luxury of time and have relatively limitless resources in comparison to you.
Within the first 10 years you'll still have a huge proportion of the mortgage outstanding and won't be pocketing more than small change on the sale of your property when the time comes to move home due to relationship breakdown, marriage, family formation( practically all you could get through affordable housing since inception were one and two bed apartments and townhouses of less than 650 sq. ft in size), change of employment to another locality.

Got it in writing today.
To be fair whilst I agree that Fingal over estimated the open market price, in all other respects I have been treated very well by Fingal whenever I had an issue. A while back when I had to stop work due to illness they subsidised my mortgage. When I had one bad month and couldn't pay on time, I rang them and because I had advised them of the problem they were very accommodating - and even sent me a form to apply to pay interest only. Luckily I didn't need it,a nd made up the missed payment over the next two months. Generally when I have dealt with the staff in the office they have been very helpful, and I appreciate that as it is not always the case with council staff.

My main reason for getting AH was because despite having a large amount sved for a deposit (€35k) I still couldn't get a mortgage with a bank due to the prices. In fact, I wouldn't even have got a mortage with Fingal had I not had such a large deposit. Thankfully due to this, I have a relatively low mortgage.

Now the next challenge is "ONLY" getting a bank to allow me to transfer the mortgage to them AND sell our house! Fingers x'd!