What happens if property loses value ?

D

dar82

Guest
Hi,

I have been offered Broadfield hall.
Market Value €359k
Clawback at 51.6%
My mortgage will be €170k

What will happen if the Market Value drops to say €259k (€100kdrop)
after 10 years and I want to sell

Say I sell for the €259k after 10 years.

My mortgage will now be reduced after 10 years of payments.
Say my mortgage repayable to the bank in 10 years time is now €130 k down from the original €170k after 10 years of payments.

Do I walk away with the €40k (€170k - 130k) or nothing ?
Will it be the equivalent of renting for 10 years ?
 
Sorry, I can't answer your question and I'm not up-to-date on Affordable Housing valuations but I almost fell off my chair when I read your post.
Who the hell valued the property at 359k?
That is INSANE.
Can you have that valued again by someone else?

I'd expect to get that kind of money for a three-bed semi in the area with a front and back garden and no management fees.
 
Dar82,

If you were to sell your property for 259K, then the clawback you will owe to the council is €133,644 (i.e. 51.6% of the selling price). However if you still owed 130K on your mortgage, then you would only have to pay the council 129K back so that you dont go into negative equity. So you would not make anything out of it. Not sure how selling agent fees come in to it either.

I'm not familiar with the apartments you are buying but it does seem like a very high market value, and therefore the clawback is high too. I know I argued in vain with the council to get my market value reduced, but know some people have been successful in getting the market value reduced.

Best of luck,
eims
 
How many bedrooms has the place you've been offered?
If it's only two, or even three, it is over valued by a huge amount. I wouldn't buy affordable housing from SDCC for this reason.
 
[ims appears to be incorrect in his interpretation of clawback.If you look up The Affordable homes.ie website, it is explained in full. The clawback was designed to simply stop profiteering.You would not be in this position so it operates as follows--you will owe the council the new price of apt 259k minus what you originally paid170k. Amount owed council 89k.
    1. ​
 
Thanks for all the replies.

Seems the market value is very high.

Will need to try and re negotiate.

That's what I thought about a devalued property.

The bank gets paid back.
The Council loses (ie negative equity.)
The individual walks away with nothing.Equivalent of renting.
 
dar82 said:
Equivalent of renting.
Click to expand...

It's not the equivalent of renting. You are paying a mortgage, not giving rent to landlord. If you're there for a few years you will have equity in the property minus the interest, granted interest is a lot in the first few years.

If you get a smart market value you are actually in a better position in today's market than someone buying privately - you are protected from negative equity up to a point. The hard bit is getting the good market value, it might even be impossible in SDCC?
 
I stand corrected. As per [broken link removed]

Scenario 4 - If the Market Value of the Affordable Home Decreases

  • 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.
So if you sell at a lesser market value then you would make money if you sold for 259k in ten years, you would owe the council 259-170 = 89K, plus say you still owed 130K on your mortgage, then you would make a profit of 40K.
 
so what if the market value drops to say the affordable price you paid or even lower? does this mean you dont pay any clawback?
 
Hi, does anyone know if the senario below also applies if you want to buy out the Council and the property price has fallen from the original price at purchase?

eimsRV said:
I stand corrected. As per [broken link removed]

Scenario 4 - If the Market Value of the Affordable Home Decreases

  • 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.
So if you sell at a lesser market value then you would make money if you sold for 259k in ten years, you would owe the council 259-170 = 89K, plus say you still owed 130K on your mortgage, then you would make a profit of 40K.
Click to expand...
 
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