Anyone who's property's MV has fallen to affordable price buying council out?

[Cheeus]

Since prices have fallen so much in the last year there must now be some affordable apts where the current market value is now the same as what was paid by the affordable purchaser a year or two ago.

Is anyone in this position buying out the council now?

For example.. last year I know that 2 beds duplexes in Erris Square were sold at an affordable price of €280,000. I noticed yesterday on daft that towards the end of last year they were advertised at this price privately!
Link is still here:
http://www.daft.ie/searchsale.daft?search=Search+%BB&s[cc_id]=c1&s[a_id]=189&s[mnp]=&s[mxp]=&s[bd_no]=1&s[mnb]=1&s[mxb]=&s[pt_id]=&s[house_type]=&s[mna]=&s[mxa]=&s[search_type]=sale&s[transport]=&s[advanced]=&s[price_per_room]=&s[furn]=&s[refreshmap]=1&limit=10&id=117836

Would make it a really good time to buyout the council and be free of clawback, free to rent out etc..

I'm just wondering how difficult it would be to actually do this? I suspect that by next year some of the apts being sold now could be bought out well below current market values that they're advertised at today. Is anyone doing it? Thanks

 

[monos]

Good question Cheeus, would be keen to see someone who's doing so with affordable housing purchase made where open market price has now fallen to affordable price. Is definitely something any affordable housing buyer should know about and keep a watchful eye on. I will be keeping my ear to the ground and pouncing as soon as the price drops enough to trigger the clawback of €0 to get out of the ties of the county council purchase. (btw I have no property yet but am at top of list!)

 

[Cheeus]

Yes Monos, I think we will be fighting each other for the same development. I too am 'top' of that list ;-)

A concern I have this:
Say if we bought an apt now at €265k Affordable Price / €375k MV.
This market value is still inflated but probably the best they'll give us. Apts in the same area/development are currently advertised at €345k second hand. Perhaps you could go in with an offer of €325k now? Who knows.

But... it's not inconceivable that by next year our smaller cheaper build apts would only fetch €265k on the open market. My concern is that the resale mightn't be as easy as the council indicates it would be. If your circumstances changed suddenly and you really had to sell, willl the council really let you sell at what you're offered or will they insist on 'their own' inflated MV again?

I'm just afraid that in reality we might find ourselves trapped. I think the scheme is brilliant and I'm not council bashing at all. It's just that I haven't seen this scenario worked out in reality yet and it's a bit worrying.

 

[Afuera]

You're confusing two different things here. One is to buy the council out and the other is to pay a clawback when you sell the property before a specific time.

To buy the council out, they will charge you the difference between what you paid and the original market value. The current market does not come into it.

The clawback you have to pay when you sell is different. Say the council originally paid 30% of the purchase price then the clawback would be set at 30%. If you sell before 10 years you would have to give 30% of the proceeds from the sale back to the council.

The bit where it gets interesting is when negative equity is involved. The legislation around AH states that the clawback will be all or partly waived if it would cause the seller to incurr a financial loss. This means that if you have to sell the property for less than the original valuation, you only lose if the sale price goes below the mortgage that you have taken out on it. Up to that point the council will absorb any negative equity.

 

[Howitzer]

You're confusing two different things here. One is to buy the council out and the other is to pay a clawback when you sell the property before a specific time.

To buy the council out, they will charge you the difference between what you paid and the original market value. The current market does not come into it.

The clawback you have to pay when you sell is different. Say the council originally paid 30% of the purchase price then the clawback would be set at 30%. If you sell before 10 years you would have to give 30% of the proceeds from the sale back to the council.

The bit where it gets interesting is when negative equity is involved. The legislation around AH states that the clawback will be all or partly waived if it would cause the seller to incurr a financial loss. This means that if you have to sell the property for less than the original valuation, you only lose if the sale price goes below the mortgage that you have taken out on it. Up to that point the council will absorb any negative equity.

I believe the clawback is also incurred when someone remortgages. This had been a real issue as you were somewhat locked in to your original mortgage provider even if their rates were uncompetitive. If remortgaging "forces" you to incur the clawback AH legislation stops you from incurring a loss so the Council would have to "sell" their share to you at a knock down price.

Maybe this is one of the reasons for this.

http://www.askaboutmoney.com/showthread.php?t=79994

Looks a legitimate loophole to me.

 

[Cheeus]

To buy the council out, they will charge you the difference between what you paid and the original market value. The current market does not come into it.

Where are you getting this information from?

If you remortgage your house you have to pay the clawback based on current market value, which essentially is buying the council out. The percentage payable is based on prices at time of purchase which decreases to avoid negative equity. Where does it say in the literature that you have to pay the full difference if you remortgage?

My own concern is around selling it on, not 'buying the council out' as such, but if there is a second concern here that is very interesting. If the value goes up the council get the percentage not the difference in prices paid originally. Where does it say that there is a different rule for when it goes down?

If anyone can still answer my initial concern re selling to 3rd party that would be great. Eg: can the council stop you from selling while the market is slow / are there any limitations to when you can sell. I have been told by the council that there is not but this was in a casual interview so I still want to see something concrete.

 

[Afuera]

I believe the clawback is also incurred when someone remortgages.

Correct Howitzer. It is a also refered to as a "clawback" when you remortgage, however the way it is calulated is not the same as when you sell.

Maybe this is one of the reasons for this.

http://www.askaboutmoney.com/showthread.php?t=79994

Looks a legitimate loophole to me.

In that thread I thought the minister was basically proposing that people could remortgage without having to buy the council out (i.e. it would remain an affordable house). I don't think a loophole exists here, but am open to debate it if anyone can find supporting documentation to say otherwise.

Where are you getting this information from?

[broken link removed]

You can remortgage your property, but once you decide to re-mortgage the clawback or discount you received at the time of purchase will have to be paid to Dublin City Council

This reads to me, "if you got a discount of X, then to remortgage you will have to payback X". Anyone else have any other documentation that says otherwise?

Where does it say that there is a different rule for when it goes down?

The Housing (Miscellaneous Provisions) Act 2004

 

[monos]

"This reads to me, "if you got a discount of X, then to remortgage you will have to payback X". Anyone else have any other documentation that says otherwise?"

I would have taken this to mean X% discount off market value on purchase means X% discount off market value on disposal or on any other even that triggers clawback.

 

[Afuera]

"This reads to me, "if you got a discount of X, then to remortgage you will have to payback X". Anyone else have any other documentation that says otherwise?"

I would have taken this to mean X% discount off market value on purchase means X% discount off market value on disposal or on any other even that triggers clawback.

Except it very clearly states that it is "the discount you received at the time of purchase". There is no mention of the market value at the time you remortage.

 

[monos]

[broken link removed]

Have a look at page 8, its based on the % discount.

 

[Afuera]

[broken link removed]

Have a look at page 8, its based on the % discount.

Eh? Where exactly does it say that when you remortgage it is calculated that way?

I know that when you sell, the clawback is based on the percentage discount (unless there is negative equity which is handled differently).

I have yet to see a single document that states that the clawback is calculated the same way when you remortgage (or in other words, buy the council out).

 

[monos]

Eh, this is an open discussion, no need for the smartass tone of your posts thank you very much. Apologies if I misunderstood you, as opposed to buying the council out which is not something I am familiar with, would it not make sense to break the terms of affordable housing e.g. rent out the whol apartment for a period, which would trigger clawback which IS based on the % discount initially received?!

 

[Afuera]

Eh, this is an open discussion, no need for the smartass tone of your posts thank you very much. Apologies if I misunderstood you,

Sorry, it looks like we both may have misunderstood each other. I wasn't sure myself if you were taking the mickey with the previous link you provided.

as opposed to buying the council out which is not something I am familiar with, would it not make sense to break the terms of affordable housing e.g. rent out the whol apartment for a period, which would trigger clawback which IS based on the % discount initially received?!

I'm not sure of the exact steps that would be taken if you illegally rented out the property, but I don't think it's as easy to get the clawback removed as you suggest. There may even be penalties if you were to do as you suggested but I'm no expert in the area, so you'd need to check it yourself.

The thing you need to remember though is that the clawback is calculated by the council themselves when you go to sell/buy them out. They calculate it differently depending on whether you are selling it on to someone else or whether you are buying them out. If you are not selling the property, then the clawback would be based on the original discount you received (not the percentage of the discount).