Selling affordable home

The Ayatolla

Bought house in 2005 for 180k as part of affordable housing scheme

I have around 10k paid off the mortgage

Someone has offered 120k to buy the house.

Are there going to be any major stumbling blocks here with the local authority and the sale ?? Am I liable to pay them any money ?

ballyharpat

I would think that there would be about 50k of a stumbling block. I know nothing about affordable housing, but I am assuming you signed a contract to buy at e180k and you have since paid e10k, leaving a shortfall of 50k?????

Ken.

http://www.citizensinformation.ie/en/housing/owning_a_home/help_with_buying_a_home/affordable_housing.html

If you bought an affordable home

If you sell your house within 20 years, you will have to pay the local authority a percentage of the proceeds of the sale - known as 'clawback'. This percentage is expressed as the percentage difference between the sale price and the market value of the house. This amount will be reduced by 10% each year after you have owned your home for 10 years. So, if you sell your home after 20 years, you will not have to pay any clawback to the local authority.

The market value at the time of selling your affordable home is used to calculate the amount of clawback due to the local authority. If the gap between the original sale price and market value has narrowed, the amount due to the local authority will also reduce. If the proceeds of the sale of your affordable home are below the initial price actually paid, you will not be liable to pay the local authority a percentage of the proceeds of the sale.


http://www.housing.ie/Housing-Information/Home-Ownership/Living-in-an-Affordable-Home

Selling an Affordable Home

If you sell your affordable home within 20 years of buying it, you must pay back to the local authority an amount known as the ‘clawback’.



Seems like you'll owe the council something. Best talk to someone in the council or a solicitor about it.

The Ayatolla

"If the proceeds of the sale of your affordable home are below the initial price actually paid, you will not be liable to pay the local authority a percentage of the proceeds of the sale."

This would imply I pay nothing though?

ballyharpat

It seems that first you have to pay off the mortgage, then if the selling price is more than the price you paid for it, you pay 20% of that to the council if you sell in 10 years, after 10 years, it is reduced by 2% PA http://www.askaboutmoney.com/showthread.php?t=35256

sarkozy

I would assume that you at least have to pay the mortgage balance. Whether you have to pay back any capital ... I don't know. You need to investigate this carefully. Contact your council first and if you cannot afford legal advice, see if FLAC can help.

Dandelion6

You will have to pay the Council whatever you still owe on the mortgage. The clawback only kicks in on any profit you make over and above the price you originally paid for the property, so you don't have to worry about that.

The Ayatolla

Yeah so the balance of the mortgage to the council has to be paid to them but no clawback. Gotcha

bigblackmug

County Council might have been lazy with paperwork for estate and you may have problems conveyancing but otherwise it should be easy enough. I sold mine for less than clawback threshold in 2011.

Snakeblood

I sold an affordable apartment. I got the council to come round, agree the valuation, and I repaid my share of the loan in its entirety. As in, I had a mortgage of 150, I had paid 5 off, then I had to repay 145 while selling for 125.

IndyIrish

There is a clawback clause in the original contract. Afaik it differs in relation to the time already lapsed. You should revert to your written agreement for the breakdown of penalties in place.



quote="The Ayatolla;86895958"]Bought house in 2005 for 180k as part of affordable housing scheme

I have around 10k paid off the mortgage

Someone has offered 120k to buy the house.

Are there going to be any major stumbling blocks here with the local authority and the sale ?? Am I liable to pay them any money ?[/quote]

mickyp1984

Hi,

Does anyone know how the clawback works in relation to solicitor fees and estate agent fees?

I currently have a 2 bed apartment which I got on affordable housing in 2009(valued at the time by the council at 280K, but that's a different story), so bought in 2009 for €214,500. Now have another child and need to get a bigger place. Thankfully with the market the way it is in Dublin at the moment we reckon we can get 225K for it but I would like to know when the council start the claw back procedure do they base the claw back only on profit after Estate agent fees, solicitor fees have been taken out of the equation? Also is there any allowance made for investment made in the property i.e. we have put fitted wardrobes etc. into the apartment.

I would at least like to get my money back on the sale. Does anyone have any experience with this kind of situation?

Thanks in advance,

The_Conductor

Any fees you incur when selling the property- are costs you have to bear- they are not subtracted from the final achieved price of the property, to come up with a net sale price. You bear the solicitors and/or estate agent fees, as they pertain to you. Your buyer pays their fees, taxes and duties. You have a headline sale price, which is what is advised to the Revenue Commissioners, which is what the purchaser pays stamp duty on, and which is what the council base their calculations on.

mickyp1984

It seems like a pretty black and white system, any idea can exceptions be made?

The_Conductor

mickyp1984 wrote: »

It seems like a pretty black and white system, any idea can exceptions be made?

What are you suggesting?
It is pretty black and white.
You have a sale price- period.
You don't get to deduct anything from it.
If you went down the road of allowing deductions- where do you stop?
I'd love all my mortgage payments to be allowed as deductions- you will have someone say that- and then you'll get someone else wanting deductions for having painted the property, or fixing lightbulbs or some such.......

Its black and white- the headline sale price, no deductions, no exceptions.

Sorry.

mickyp1984

Just to clarify this is my partners home so she is the one who signed up.

Its a bit silly then as there is no incentive for anyone to sell these houses, even if cost could be taken away then everyone would be a winner. The council would get some money for projects and then the home owner gets to move on. As it is most people are going to stick it out until the cost of selling is null.

I understand the claw-back rules were put in place to deter profiteering in these schemes but as the scheme is indefinitely stood down the rules are somewhat defunct as all they do now is lock families into homes they can't sell.

The_Conductor

Well- you have to keep in mind, the intention of the scheme was to house people- it was not envisaged that these would be sold for other properties- or if they were, they would be held long term, and then sold. The raison d'etre of the scheme- was to provide housing to those who weren't able to afford it on the open market- and in that context- it was a success.

mickyp1984

I'm not disputing this at all, it was very successful but the reality of things has changed. The majority of properties on this scheme were 2-3 bed apartments which are not sufficient as family homes long-term. I think the legislature needs to be re-assessed with the view to incentivising people to put these back on the market, it may help with addressing the new property bubble we are seeing in urban areas right now. I just can't see who loses by doing this.

The_Morrigan

mickyp1984 wrote: »

Just to clarify this is my partners home so she is the one who signed up.

Its a bit silly then as there is no incentive for anyone to sell these houses, even if cost could be taken away then everyone would be a winner. The council would get some money for projects and then the home owner gets to move on. As it is most people are going to stick it out until the cost of selling is null.

I understand the claw-back rules were put in place to deter profiteering in these schemes but as the scheme is indefinitely stood down the rules are somewhat defunct as all they do now is lock families into homes they can't sell.

Not true, you can sell, you just have to pay back a percentage of the profit (if any) to the Council. Personally that isn't a bad thing as right now anyone who availed of the affordable housing scheme is in less negative equity than their neighbours who bought at the same time.

If couple A bought a house on this scheme for 200K and couple B bought an identical one on the open market for 300K - who do you think is better off when they come to selling it now?

Costs associated with selling or buying a property are the responsibility of the buyer/seller - not the banks/councils/brokers/NAMA.

mickyp1984

That's not entirely correct, you do not pay a percentage of the profit you pay a percentage of the sale value.

So for 99% of cases unless we see a return to celtic tiger era prices all those who purchased affordable housing are only going to get back what they paid, minus cost of sale i.e. estate agent & legal fees. Because of this all those who own these houses are going to find alternatives enabling them to keep the home full term(20 years) so they can avail of the profits from the sale.

The other issue is, as property prices in urban areas increase, the opportunity for these home owners to move up the property ladder diminishes as they will only ever get back the original price of the property minus the costs.

I also understand that many people will have purchased similar properties at the market value and are now in negative equity but to punish those who purchased affordable housing purely because it would be unfair on the other group is just childish.

I'm just saying the the situation at the moment is not ideal and a change is needed.

The_Morrigan

mickyp1984 wrote: »

That's not entirely correct, you do not pay a percentage of the profit you pay a percentage of the sale value.

So for 99% of cases unless we see a return to celtic tiger era prices all those who purchased affordable housing are only going to get back what they paid, minus cost of sale i.e. estate agent & legal fees. Because of this all those who own these houses are going to find alternatives enabling them to keep the home full term(20 years) so they can avail of the profits from the sale.

My contract has the clawback on the profit element only - no profit, nothing owed to the council.
Also, the whole point of the scheme was not to make a profit, it was to house you - you can't now start arguing that you won't make a profit because you will only get back the price you originally paid. It goes against the whole ethos of the scheme.

I have no idea what you're talking about with regards this comment? How are people who bought on the scheme being punished?

I also understand that many people will have purchased similar properties at the market value and are now in negative equity but to punish those who purchased affordable housing purely because it would be unfair on the other group is just childish.

The_Conductor

A little clarity might help- I'm confused too- how do you reckon you're being punished?

mickyp1984

I'm not saying people are being punished, but I see a lot of people on here and The_Morrigan you did it yourself where you compare people who bought affordable housing and those who purchased at market value, people make reference saying things like "well they are not as bad off as those who purchased at market value". This is true but it has no relevance to the situations of those who purchased affordable housing.

In relation to your contract stating that the claw back is only on the profits, this is true to a point. You will never pay back more than you paid for the home. But just so people reading this don't get confused.

If I bought an apartment for €214,500, I then sell it for €235,000. The percentage difference between the sale price and the purchase price is 8.8%. Then the council multiply the sales value by 8.8% which gives you a figure of €20,680 & this is how much you owe the council but if we are to take that figure away from €235,000 it gives us €214,320, this figure is below what we actually paid for the house so to make sure you get back what you paid the figure you owe is €20,500.

To say the claw back is on the profit makes people think you are just paying a percentage of the profit back to the council. This is not true until you get to the point where the apartment is worth more than the initial valuation. Pre-2007 valuations.

This is the next problem. Anyone who got their affordable housing between 2007 and when the scheme was stood down had their homes valued at pre-crash prices. So in my partners case her 2 bed apartment was valued at €280,000 but similar properties in the area were going for €225,000 but because she was a single mother it was her only option and would only get a mortgage from the bank because of the scheme, so she took it. I imagine majority of other cases are the same.

The purpose of the scheme was not to house people(that is a separate requirement altogether), it was to help lower-income households purchase their own home. People purchase homes as an investment, otherwise we would all be renting. It was to help people get onto a property ladder but now as the market has changed the rules of the scheme are locking people into these homes that when their family situation changes are not fit for purpose.

Yes, people can sell their homes but at a loss to themselves and it is not the market that is dictating that loss(like those in negative equity) it is the legislation that is dictating that loss. Also the claw-back rules were designed in a time when house prices were on the up and up so when the house value went above the market valuation the owners made a small profit and this was the intention(so they could move up the property ladder).

Nobody is winning from keeping this legislation the way it is. The council is not getting any additional revenue as people are holding onto their affordable homes and 2-3 children families are crammed into 2 bed apartments.

I think a big reason most people would dis-agree with the legislation being changed is because of that typical Irish mentality of, dragging everyone else around you down and not letting others have an advantage because you never got one.

The_Morrigan

mickyp1984 wrote: »

I'm not saying people are being punished, but I see a lot of people on here and The_Morrigan you did it yourself where you compare people who bought affordable housing and those who purchased at market value, people make reference saying things like "well they are not as bad off as those who purchased at market value". This is true but it has no relevance to the situations of those who purchased affordable housing.

eerrrm...you kinda did...

mickyp1984 wrote: »

I also understand that many people will have purchased similar properties at the market value and are now in negative equity but to punish those who purchased affordable housing purely because it would be unfair on the other group is just childish.

I stand by my point - people who did purchase under the scheme are not worse off than those who purchased on the open market as right now in the current climate, they are in less negative equity as they had to avail of less of a mortgage.
I don't understand what your issue is with this statement.

mickyp1984 wrote: »

In relation to your contract stating that the claw back is only on the profits, this is true to a point. You will never pay back more than you paid for the home. But just so people reading this don't get confused.

If I bought an apartment for €214,500, I then sell it for €235,000. The percentage difference between the sale price and the purchase price is 8.8%. Then the council multiply the sales value by 8.8% which gives you a figure of €20,680 & this is how much you owe the council but if we are to take that figure away from €235,000 it gives us €214,320, this figure is below what we actually paid for the house so to make sure you get back what you paid the figure you owe is €20,500.

To say the claw back is on the profit makes people think you are just paying a percentage of the profit back to the council. This is not true until you get to the point where the apartment is worth more than the initial valuation. Pre-2007 valuations.

This is the next problem. Anyone who got their affordable housing between 2007 and when the scheme was stood down had their homes valued at pre-crash prices. So in my partners case her 2 bed apartment was valued at €280,000 but similar properties in the area were going for €225,000 but because she was a single mother it was her only option and would only get a mortgage from the bank because of the scheme, so she took it. I imagine majority of other cases are the same.

Again - my contract states that the clawback was only based on any profit made, not the percentage over the the entire sale. Councils differed on their contracts, for instance my clawback percentage was only 11% over 20 years but a lot of clawbacks were 20 - 30%.
As for the pre 2007 valuses. this is wrong - the value was not set in stone from 2006, I bought in 2008 and my apartment was valued that year. I had to get the valuation done myself as part of the mortgage application.

mickyp1984 wrote: »

The purpose of the scheme was not to house people(that is a separate requirement altogether), it was to help lower-income households purchase their own home. People purchase homes as an investment, otherwise we would all be renting. It was to help people get onto a property ladder but now as the market has changed the rules of the scheme are locking people into these homes that when their family situation changes are not fit for purpose.

Yes, people can sell their homes but at a loss to themselves and it is not the market that is dictating that loss(like those in negative equity) it is the legislation that is dictating that loss. Also the claw-back rules were designed in a time when house prices were on the up and up so when the house value went above the market valuation the owners made a small profit and this was the intention(so they could move up the property ladder).

I'm sorry but this is BS. Plenty of people around the country are 'trapped' in homes that are not suitable for their family anymore, it isn't the fault of an Affordable Housing clawback scheme. It's the state of the market as a whole.

When I said that the purpose of the scheme was to house people, I meant it as in their own home, not family or a landlord, freeing up the rental market for those not in a position to buy. I realise that point was not clear - apologies.

mickyp1984 wrote: »

Nobody is winning from keeping this legislation the way it is. The council is not getting any additional revenue as people are holding onto their affordable homes and 2-3 children families are crammed into 2 bed apartments.

I think a big reason most people would dis-agree with the legislation being changed is because of that typical Irish mentality of, dragging everyone else around you down and not letting others have an advantage because you never got one.

What legislation are you referring to?

mickyp1984

The_Morrigan wrote: »

eerrrm...you kinda did...

What I was referring to was that if legislation was not changed based on the fact that there are people in worse situations would be to punish them

The_Morrigan wrote: »

I stand by my point - people who did purchase under the scheme are not worse off than those who purchased on the open market as right now in the current climate, they are in less negative equity as they had to avail of less of a mortgage.
I don't understand what your issue is with this statement.

Yes, this point is true but my issue is that it has no relevance to what we are talking about. Why should the situations of those who bought at market value have any bearing on how you deal with the situations of those who purchased affordable housing

The_Morrigan wrote: »

Again - my contract states that the clawback was only based on any profit made, not the percentage over the the entire sale. Councils differed on their contracts, for instance my clawback percentage was only 11% over 20 years but a lot of clawbacks were 20 - 30%.
As for the pre 2007 valuses. this is wrong - the value was not set in stone from 2006, I bought in 2008 and my apartment was valued that year. I had to get the valuation done myself as part of the mortgage application.

Well you are very lucky because the majority of ones I have seen from my research into this are crippling in their valuations. I can only say what I know about the Dublin councils claw back and ratios are alway above 20%

The_Morrigan wrote: »

I'm sorry but this is BS. Plenty of people around the country are 'trapped' in homes that are not suitable for their family anymore, it isn't the fault of an Affordable Housing clawback scheme. It's the state of the market as a whole.

I think if you actually read what I said you would see that I am differentiating from people who are in negative equity, people who are in negative equity are stuck in homes because the market dictates it to be that way. their home is worth less than what they paid for it. Its something that needs to be actioned by the government but its a different story.

People who bought affordable homes in urban areas are starting to see their home increase in value now,Dublin especially. Some are no longer in negative equity. The claw-back system means that they can not make any kind of profit off their house even though it is worth more than what they paid for it. This is a non-market factor dictating that people whose homes are worth more than what they purchased them for are not getting a profit.

I believe it would be advantageous to all parties involved if this factor was removed from the rules.

The_Morrigan wrote: »

When I said that the purpose of the scheme was to house people, I meant it as in their own home, not family or a landlord, freeing up the rental market for those not in a position to buy. I realise that point was not clear - apologies.

Apology accepted

The_Morrigan wrote: »

What legislation are you referring to?

Part V, planning and development act,2000, section referring to re-sale

My question to you is, what issue would you have with them changing how claw back works.

The_Morrigan

The clawback can't be removed easily as it is part of individual contracts across the country. That is a hell of a lot of legal advice that must be obtained by each homeowner, not to mention the costs associated.

mickyp1984

So your only issue is that it might be difficult. I'm sure some of the legal minds they have in Leinster house will be able to figure out a blanket solution.

The_Morrigan

mickyp1984 wrote: »

So your only issue is that it might be difficult. I'm sure some of the legal minds they have in Leinster house will be able to figure out a blanket solution.

A change in law cannot be retrospective. It would mean each and every contract would have to be redrafted and resigned..thats is more than difficult to be fair.

This would not be figured out by the Govt it would be a case by case change in contracts.

Ray Palmer

The_Morrigan wrote: »

My contract has the clawback on the profit element only - no profit, nothing owed to the council.

Have we not already established if you sell for less than you bought you do have to pay the council the negative equity? So you do have to owe the council

A few threads have come up on this and I am truly shocked and the expectation people have about this housing. It just seems incredible self serving to expect a discounted property and then when it drops in price that they are some how free to leave their debts behind. This thread and the one about giving the keys back.

Have people no financial understanding or is it just plain greed? The way people go on about LLs being greedy over a couple of thousand but this is tens of thousands we are talking about and people don't get outraged. Misplaced sense of outrage in my eyes

The_Morrigan

Ray Palmer wrote: »

Have we not already established if you sell for less than you bought you do have to pay the council the negative equity? So you do have to owe the council

A few threads have come up on this and I am truly shocked and the expectation people have about this housing. It just seems incredible self serving to expect a discounted property and then when it drops in price that they are some how free to leave their debts behind. This thread and the one about giving the keys back.

Have people no financial understanding or is it just plain greed? The way people go on about LLs being greedy over a couple of thousand but this is tens of thousands we are talking about and people don't get outraged. Misplaced sense of outrage in my eyes

The affordable housing scheme had you take out a mortgage with a bank, not the councils.
If you sell for less than you bought then you are responsible for any debt left over with the bank.
If you sell and break even - mortgage is repaid
If you sell and make a profit - you owe the council a percentage of that profit.

At least this is the case in the contract I have.

Ray Palmer

The_Morrigan wrote: »

The affordable housing scheme had you take out a mortgage with a bank, not the councils.
If you sell for less than you bought then you are responsible for any debt left over with the bank.
If you sell and break even - mortgage is repaid
If you sell and make a profit - you owe the council a percentage of that profit.

At least this is the case in the contract I have.

Some of the mortgages were half and half with the bank and council. You pay the bank the mortgage and you pay the council rent. Later on you get a bigger mortgage and pay the council off.

I thought most of the schemes were like this with some of the earlier ones being affordable housing you just got with the banks. The half and half was the much larger scheme is how I recall it. Maybe it is a different name?

The_Morrigan

Ray Palmer wrote: »

Some of the mortgages were half and half with the bank and council. You pay the bank the mortgage and you pay the council rent. Later on you get a bigger mortgage and pay the council off.

I thought most of the schemes were like this with some of the earlier ones being affordable housing you just got with the banks. The half and half was the much larger scheme is how I recall it. Maybe it is a different name?

That's shared ownership, so a completely different scheme.