House valuation below purchase price :-(

M

mischief

Guest
Apologies - correct I should not have removed the initial post.....:-( My sincere apologies.

From memory, basically what happened was this:

I purchased a unit of the plans 18 months ago. Subsequently got it valued upon completion and
the valuation came in at 35K below the original purchase price. I queried here as to what my options were
in relation to a) Pulling the plug and losing my deposit b) what options people felt I may have in relation
to resolving the situation as the property was originally 100% financed and given I'd changed lenders
I was only able to achieve the valuation price leaving me to make up the 35K difference ( minus the deposit paid )
and in a position of negative equity.

Hopefully the above clarifies the original position and people can pick up on the subsequent replies. Many thanks again
to all that replied. It certainly helped me in my negociations.

Post removed - appreciate all your replies. Apologies, I haven't had time to reply individually.
The builder has agreed to lower the value of the property this morning. Looks like the developers
have as much to lose as the purchaser. Whilst, I didn't want to drop my deposit, the builder
didn't appear too keen to go to court or have poor publicity in the development as units still for sale, so we've come to an agreed valuation. Thanks all.
 
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Did you get an initial valuation when you got the original loan offer? If so, the original lender may only require a certificate from the original valuer that the property has been completed.
 
I don't understand how a Soltr let you sign the contract without having funds in place to complete the purchase?
 
Kildrought said:
I don't understand how a Soltr let you sign the contract without having funds in place to complete the purchase?
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I'm guessing the original poster got approved for a 100% mortgage so all the funds were coming from the mortgage.
 
mischief said:
I had previous loan approval however, I've opted for a new broker and lending instituation who will only lend me the value of the property as laid out by the independent valuer. I wouldn't expect the original lender to be any more generous.
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Are you saying that the original loan approval is no longer an option?
 
Hi guys,

Yeah, the property is to be 100% financed. My solicitor did advise me
that the contract was 'not' subject to loan offer approval and that it was legally binding. I went in with my eyes wide open. It wasn't possible to get a valuation on a property that was not complete. The original loan offer is not
an option as the bank will require a valuation report now that the property has been completed.
 
Are you liable for stamp duty.? If so wonder will Revenue accept current valuation rather than original price in ascertaining liability?
 
Who has valued the property at 35K below the purchase price? Surley this can be rectified as a property is worth as much as a buyer is willing to pay for it and if you are willing to pay 35k that is how much it is vauled at?

Valuers can place any value on a property surley the bank are only intrested in if you can service the mortgage.
 
Haille said:
Are you liable for stamp duty.? If so wonder will Revenue accept current valuation rather than original price in ascertaining liability?
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The house is off the plans so unless it's over 125sqm or the original poster is an investor then SD is not an issue.
 
Are all units sold?

Can your solicitor advise you on how long you could string the developer along without incurring major legal fees. The developer will not want a long drawn out costly legal battle, they will want their cash. You said the developer won't move, how hard have you pushed. Have you made him a reasonable offer?
 
If the bank won't give you the money (and if you were them would pay 35,000 more) then how does the builder expect you to pay?
He's simple being an asshole and in the current market I doubt he'll get HIS asking price from anyone else. So he has these choices
1) go through with sale to you at current valuation
2) Continue to be a stuborn ass and try to get the money from you through the courts, which is a bit stupid as you don't have the money and the bank won't give it to you.
3) Try to sell to someone else, but in this market that is easier said than done.

Just play hardball with him...a lot harder... call his bluff. Tell him exactly what to do with himself ( and I mean leave him in no doubt) if after pointing out his options he still wants the extra 35,000.

If I were in your shoes and he expected me to pay way over the market value, his bloody greedy ears would be aching for a month...I'm sure he's made plenty of dosh over the years

Anyway best of luck, but I do think the odds are in your favour
 
If I were in your shoes and he expected me to pay way over the market value, his bloody greedy ears would be aching for a month...I'm sure he's made plenty of dosh over the years
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I don't think it matters if the builder is a millionaire or not, OP signed contracts and the price is held within, would you let a house go €35,000 less simply on the back of one valuers estimation.

It has now been valued at €35K below the purchase price
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I would definitely get another valuer and point out that the purchase price is the current value, it shouldn't be a stretch for him to do this.


It wasn't possible to get a valuation on a property that was not complete
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This should not have been the case, the valuer can value a property not yet completed by commenting on what level the property is at, current value, and value upon completion. They will also usually recommend a final survey for when property is completed and this is just to look for signs of subsidence etc. - Just might be handy for you to know for the future.

The house is off the plans so unless it's over 125sqm or the original poster is an investor then SD is not an issue.
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furthermore if properties bought as a principal residence exceeds 125sqm, stamp duty is payable on the site value , or 25% of the full value of the property, whichever is the greater, and if both of these two values comes below €127,000 then property is again exempt from stamp duty.
 
The current value may be established by similar finished units in the same development being on sale at 35K less than what was agreed here. In that case the valuer is going to use the current sale price as the value. In the event the bank had to re-possess and sell the house today, they would obviously only realise the lower figure.

If there are no other similar units for sale, then the value is exactly as has been mentioned above, i.e. what the purchaser is willing to pay.

Even if an original valuation was done at the full price, the final valuation forms for most banks has a question on it: "Current Value, if different from original valuation"
 
Can i ask do you want to walk away or try buy the house at this point? its not clear to me. If you are scared the prices will continue to decrease why are you even trying to get mortgage approval / valuation?
 
I don't think its a case of a house (be that any house) being worth waht a buyer is willing to pay if the buyer is planning on using someone elses money i.e. the banks.

In that case its only worth what the bank are willing to pay, by way of lending someone the money, unless someone is willing to put their own money in on top. Its would not make any financial sense to pay way over a current valuation.
 
There are several separate issues here.

1. Contract price. This is what was agreed between the parties and a Court will enforce it, if needs be. Whether or not the OP can arrange to borrow the funds or a part of them elsewhere is separate.
2. Current valuation. Its a shame but the market dictates what the property is now is worth. This does not need to be the same as the contract price, which was the agreed price for the property at the time of signing the contracts.
3. What a bank is willing to lend to a borrower. This is based on a number of issues: current value, ability of borrower to repay.
4. Whether or not, if compelled to do so, the OP could find the difference elsewhere and whether or not he wants to complete the purchase.


In contract, the OP is bound to complete at the original price. If he cannot or will not do so, the Builder is entitled to a range of reliefs. One of them is to put the property back on the market, sell for whatever he can get, and bill the OP for any difference. Or just take the OP's deposit and release him from the contract. Or sue to enforce the contract.

I have had a number of clients seek to withdraw from contracts where they signed maybe 18 months ago and they feel now that there is better value elsewhere. Mostly the builders when approached have indicated that they do not have another purchaser, they do not anticipate finding another purchaser and they will pursue the purchaser to complete. Whether they would nor not is another matter but as long as the situation remains unresolved, you have nervous people looking for resolution and unable to move forward.

I have never agreed with the concept of playing hardball when entirely in the wrong.

mf
 
mf1 said:
One of them is to put the property back on the market, sell for whatever he can get, and bill the OP for any difference.

mf
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Didn't realise that was one of the reliefs. Out of interest, is there any protection for people who buy off plans. They take on the risks that property prices don't fall and can't complete as seen above, as far as I know they can't flip contracts if prices rise before completion and they don't have any comeback to delays by the builders. It seems to me like the buyer is taking all the risk. Begs the question going forward, why would anyone buy off plans from builders???
 
mischief said:
Hi guys,

I purchased a property off the plans 18 months ago. It has now been valued at €35K below the purchase price..... :( Yes, the property bubble has well and truely burst.....

My solicitor advises me that I have a legally binding contract with the developer. I had previous loan approval however, I've opted for a new broker and lending instituation who will only lend me the value of the property as laid out by the independent valuer. I wouldn't expect the original lender to be any more generous.

I could just leave my deposit, however, the builder can still take me to court over the full value of the property.

The builder will not budge on the purchase price.

Do I have any options???

Thanks
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It depends on your circumstances.

The fact that you were taking out a 100% mortgage suggests to me that you do not have other assets or much in the way of savings. Am I correct?

If so, there is not actually very much that the builder can do. Suing you would be pointless as you've got no money. He can't force you to take out a loan to buy the property.

Technically he could force you into bankruptcy but that would cost him money and he would get absolutely nothing back. He's not going to do it.

If you buy the house, you've lost £35k immediately. I wouldn't do it. I'd write him a nice letter explaining that circumstances have changed and that you cannot proceed with the purchase.

A change of address might not be a bad idea though, in case he is the type to 'send the boys round!'
 
"Out of interest, is there any protection for people who buy off plans."

No. This is sooooooooo simple! Don't buy off plans.

"why would anyone buy off plans from builders???"

People assumed that prices would continue to rise so that unless they got in there fast, they would not be able to buy. They took the risk. This is the downside of that.

mf
 
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