House Purchase ~ Property & Contents Valuation Dilemma

J

JohnOB

Registered User
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Hello,

I hope you can help me sort my problem.

The scenario is that I've signed contracts to buy a house.

The agreed price is €280k ... vendors issued contracts stating that the property was worth €235k and the contents worth €45k.

All fine with me as my solicitor has asked that they produce a valuation for contents for that amount.

The problem is .... if they'll get €5k worth of contents they'll be lucky. Why do I know this? Their valuer rang me (inadvertently) to say that if he'll get €5k worth of contents he'll be doing well. I told him that it was their side had come up with the 'valuation' on the contracts and that it was their side had to provide the valuation as part of the contract agreement.

My difficulties:

  • If they can't come up with a valuation for the €45k (contents) .... what happens then?

  • If for example the valuation is only for €5k can I then state than I'm only willing to pay €240k (€235k property & €5k contents)?

  • Are they committed to selling me the property at €235k as per contract?

  • If by any miracle they come up with a valuation of €45k for contents should I dispute it as the valuer in question has told me that contents is worth €5k max?

  • The vendors may look to increase the value of the property and reduce the value of the contents but still have a bottom line sale figure of €280k. Can I dispute this? Why should I allow a property to be increased in price (If anything I should be looking for a reduction in the current climate) ..... this route by the vendors would increase my stamp duty liability.

As it stands .... this price was agreed 8 months ago ..... and I've been very patient as my solicitor has tried to decipher the quagmire of legal problems; access etc. Contracts were even issued with a non-existent right of way access despite vendors being aware that no access existed.

Thank God I've a great solicitor.

Things are coming to a head and I'm unsure of my options. The only thing that has changed since I agreed and signed contracts is that my wage has been reduced dramatically. I can still afford the mortgage but ... just ... and if I could get any little bit more off the sale price it would be great.


  • Another issue that people in the mortgage line might be able to help with .... I was granted a 22 year loan (based on my age) but my birthday is coming up .... (it's been a year since I got mortgage approval with further approval last September) ... if I hit my birthday date before I draw down the loan could the bank insist on renegotiating the loan down to a 21 term to reflect the fact that I'll be another year older?

All advice/insight gratefully appreciated.
 
First thing John -- The Bank will only issue a Mortgage on the basis of the value of the property excluding the contents. Mortgage is for Property lending not contents. If you have waited 8 months so far there is something very wrong. In this market vendors do not hang around or delay issues. The Bank might not lend the same amount if they are aware that your wages have dropped -- Did your Solicitor place a condition in the contract in the case of no Mortgaged Approval. Sounds like this house might not be for you !! You are the buyer and this is a buyer's market and don't forget that point.
 
Thanks Mercman.

I got approval for €257600 but only got a mortgage for €245k

Going by your post that means I have to come up with an extra €10k as the property is only valued at €235 on contracts. Am I reading you right?

Another scenario ... if I draw down less than agreed will that reflect a reduced payment each month. I went for a 5 year fix as the rate was so low. Will the repayments adjust down accordingly?

Re. the property .... all legal problems are now 100% sorted. My solicitor is top class and will be well worth his fee when finished.

I really want this place. It's the only reason I have held on so long.

The loan based on property valuation is one I hadn't thought of/been aware of ... thanks mercman.

I guess I need to know my options as the matter is coming to a head this week.

I could compromise with the property valuation being increased to match my loan amount as long as they'd reciprocate by keeping the contents valuation at a realistic amount and that overall I'd pay a little less.

My difficulty is that higher property valuation means higher stamp duty. But if I get a reduction off overall price then that would offset that.

Coming up with the extra cash to reduce loan amount would be the difficulty.

It's difficult to know how to proceed.

I'm in daily contact with the solicitor and am in need of a strategy that can reduce my financial outlay without increasing my tax liabilities in relation to stamp duty.

I want to be above board.

My loss of earnings is a big issue for me and any money I can save buting the property is needed.
 
My reading of your situation as explained above is that you are falsely increasing the contents valuation, apparently with your solicitor's connivance, in order to dishonestly reduce your stamp duty liability. This is illegal.
 
John, certainly if you draw down a lesser amount the repayments should be less. But have you noted that Interest rates are likely to increase and as well property prices could drop further. Frankly and to be honest with you, if you want to drop your financial outlay then pull out of the deal (if possible).

Your idea of compromising in havcing the valuation increased will not wash anymore. Those days are gone and to include contents in a valuation is madness.

I understand your anxiety to purchase the house, but stand back and weigh up the entire situation. As for your mortgage you had better check that in this New Year that your Bank is ending according to the past equations.
 
mathepac said:
My reading of your situation as explained above is that you are falsely increasing the contents valuation, apparently with your solicitor's connivance, in order to dishonestly reduce your stamp duty liability. This is illegal.
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Not me ... the sellers came up with that valuation when they issued contracts.

Me I would agree that there is no more than €5k worth of contents in the place.

I want all things legal and am not asking for an illegal way out of the situation.

My solictor is beyond reproach and has only asked for a written valuation to support the contracts they issued.

The contracts state:

  • Property: Value of €235k
  • Contents: Value of €45k

I didn't ask for this. This is what sellers and their solictor came up with. Me I was prepared for stamp duty on the total purchase price of €280k.

My problem is now that I could do with the sale price being reduced to reflect my drop in wages .... I'm not asking to 'cod' the system.

Can I use the seller's connivance to get things sorted realistically so that my bottom line price is reduced.


Again, mathepac ..... there is no attempt at deception on my part or on the part of my solicitor.

I have nothing but admiration and respect for my solicitor and count him as 100% honest.

I will have no regrets when I pay my solicitor his fee as he has guided me brilliantly all along. Only for him I could have bought a property 6 months ago wilth no legal access to it. He has crossed all the t's and dotted all the i's correctly.

My only reason in posing my dilemma here is to get a fresh perspective so that I can reach a satisfactory and 100% legal conclusion.


Would the following be acceptable?

Raise property valuation (thus more stamp duty for government), reduce contents valuation to a realistic amount and I pay the revised propety price plus the new contents price minus the crazy over the top contents valuation?

e.g. Raise property valuation to €255k (up €20k) and reduce contents to €5k. Total €260. I get €20k off the bottom line, contents is realsistically valued and my stamp duty remit goes from €7700 to €9100 meaning my total outlay is €269100.

Vendors drop €20k because of the unrealistic contennts amount and I don't pull out of sale because they have signed contracts with a €40k contents valuation that they can't fulfill.

Am I making any sense?

I'm not out to con the system. I just want to buy the property as cheaply as I can and I want to do it within the next week so that I can plan for the future.


All views are appreciated.

Thanks mercman and mathepac for your insights.
 
But if you have contracts signed there is very little you might or can do. The Bank pay a valuer to undertake a job .. Yours is just one of many he might do this year, and he is unlikely to doctor the figures for you. And if he does he would be completely mad. The vendor is probably dropping the sale price to save CGT on the sale. If the contents are worth €5k then give him €5k -- no more. If the house is worth €235k then this is what you pay him.(or less)
 
The 5 year fix I got was excellent and it means 5 years of knowing where I stand with regard to mortgage payments (I like to plan my spending). My current home is mortgage free so the plan would be to sell in the long term and using some of the proceeds to pay off the mortgage I'm taking out on this purchase. This is a down sizing exercise for my retirement so the current property should fully cover the mortgage with an excess left over when the time comes.

When I took out the loan I went for as little as possible (looking at worst case scenario) and that has come close but I reckon I could take more of a hit before it would become a crisis issue. I've always lived within my means and have never spent what I haven't got so I would be confident that my not so extravigant lifestyle will stand to me. My disposable income will be seriously curtailed but I have weighed up the pros of the property purchase against the cons and the pros far outweigh the cons.

My down-sizing lifestyle will be worth it in the long term. The house, though rural, has a view of the sea and as it comes with acreage that will allow me to indulge my passion of keeping animals and growing my own veg etc.

The propery was initially put up for sale at €380k. I agreed a €280k purchase and am still happy to pay as close to it as needs be. The contents valuation was a ploy on the vendor's side to reduce CGT .... not mine so I can say I'd be happy to up property valuation because the contents valuation at €0k was what I was expecting. If they upped the property valuation by €20k and reduced contents to €5k I'd be very happy .... I'd get a reduction from the bottom line, I'd have a written contents valuation that would be reasonable, vendors would drop €20k and would (if they could see it) be damn glad I didn't pull out of contracts that they couldn't fulfill.

I can't see a valuer giving a contents valuation for €45k .... he be mad to do so .... that being the case the vendors signed contracts with figures they can't stand over. So I would have cause to pull out, demand my deposit back ... or at the very least have grounds to mention to them that in effect I could sue them for breach of contract.

The way I see it .... they are over a barrel as they have committed to sell to me at figures that they'll not be able to stand over.


Solicitor sent material re. mortgage back to bank in Nov as we were to have handover (yet again) in early December.


All I'm looking for is a reasonable, amicable and legal way to resolve this and at the same time put some cash back into my pocket.



mercman said:
John, certainly if you draw down a lesser amount the repayments should be less. But have you noted that Interest rates are likely to increase and as well property prices could drop further. Frankly and to be honest with you, if you want to drop your financial outlay then pull out of the deal (if possible).

Your idea of compromising in havcing the valuation increased will not wash anymore. Those days are gone and to include contents in a valuation is madness.

I understand your anxiety to purchase the house, but stand back and weigh up the entire situation. As for your mortgage you had better check that in this New Year that your Bank is ending according to the past equations.
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mercman said:
But if you have contracts signed there is very little you might or can do. The Bank pay a valuer to undertake a job .. Yours is just one of many he might do this year, and he is unlikely to doctor the figures for you. And if he does he would be completely mad. The vendor is probably dropping the sale price to save CGT on the sale. If the contents are worth €5k then give him €5k -- no more. If the house is worth €235k then this is what you pay him.(or less)
Click to expand...


The valuation for mortgage purposes was for €280k ... valuer stated that the house was worth this and that the reinstatement value of the house was €180k. This was issued by the same valuer (who is now in a quandry about the contents' valuation) prior to contracts being issued (no mention of contents) and the bank official involved with my mortgage dealt with him directly to ensure all was above board.

Only time contents got a figure placed on them was when the contracts were issued ... it was then that the €280k purchase price was diluted by the vendor (vendor's solicitor) down to €235k for property and €45k for contents).

I reckon they thought all was fine until my solicitor asked for the contents to be itemised and that the valuation be put down on paper for my side.

I think the vendor's side have painted themselves into a corner. What I want to do is paint them out of it sooner rather than later because I want to get the whole thing sorted now and not drag it out for another six months. And get the property cheaper if I can to capitalise on their efforts at hoodwinking the system.

Again, I have to say that it's my solicitor's efficiency has stopped the vendors from selling me a legal pig in a poke and also his effieciency is stopping me from getting into trouble with revenue.

Another aside ... since initial viewing to the day I accompanied surveyor around propery (3 months later) contents were removed from the property.
 
JohnOB said:
... since initial viewing to the day I accompanied surveyor around propery (3 months later) contents were removed from the property.
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This says it all about the vendor. Your solicitor will have his work cut out for him. Let us know as to how you get on.
 
mercman said:
This says it all about the vendor. Your solicitor will have his work cut out for him. Let us know as to how you get on.
Click to expand...


Will do mercman .... it will be an interesting week.

Thanks for all advice/insight received.

Have a good one! :D
 
In the light of the new information provided in your latest post, might there be a CGT or other taxation issue on the vendor's side? Its strange that your solicitor seems to want to play ball with them though.
 
My solicitor isn't playing ball with them. He just wants them to back up what they are stating in writing. If they can't then he says they are in corner and will be unable to complete as per signed contracts.

He is waiting to see what their official response to the valuation request will be before proceeding. We are due to close by the middle of next week and the vendor's solictor is aware that a written contents' valuation is a necessary requirement prior to closure.

Vendor is relocating abroad so there must be some efforts on his side at reducing his tax liability. There may be but I want to try and ensure that it won't be at my expense and that I won't be a party to his scheme/plan/efforts.

Me ... I'm just an ordinary guy trying to buy a house. They say patience is a virtue ..... I've added to my virtue during the past year. As has my solicitor added to his!

I don't want to end up screwed. But I want to have closure to this sale without further incident.

It could only happen in Ireland .... willing buyer, bumbling seller, at the height of a recession. And yet the buyer hangs in there as he adds up his income, lists his outgoings and gets as frugal as possible so that he can purchase the property.

What a country.
 
JohnOB said:
Vendor is relocating abroad so there must be some efforts on his side at reducing his tax liability. There may be but I want to try and ensure that it won't be at my expense and that I won't be a party to his scheme/plan/efforts.

.
Click to expand...

But when you signed the contracts knowing the contents weren't worth 45K weren't you in on the scheme/plan/efforts, particularly as you know full well your stamp duty liability would be reduced in addition to the vendor's CGT liability being reduced?

Did you not agree the sale price of 280K because you decided that that was what the house was worth to you?

What you are trying to do now is after the 8 months reduce your purchase price. You say you can just about afford the mortgage, and only if the bank doesn't reduce the term to 21 years, is that wise? I'm surprised your mortgage offer is still valid after 8 months, are you sure about this?
 
When I signed contracts I did so on the fact that the vendor and his solicitor said that €45k worth of contents would be included in the sale.

At the initial viewing there were many large items within and on the property that I was led to believe would be part of the sale as the vendor was to fully locate to another country. I'm not a valuer and if a vendor states in a contract that contents are worth €45k then I was happy to accept that in writing.

It was only when the valuer rang me up to say that at most there was €5k worth of contents in the place that full realisation hit me.

I have yet to receive a breakdown of contents and I believe that the vendor has yet to take a few more items from the property.

I signed in good faith. I agreed the €280k price because the house was and is worth that to me but I am very annoyed at the hoodwinking that has been tried over the last year. Initial contracts were issued with no access to the property being legally available. This was known to the vendor and his solicitor and they sat on that info for three months before issuing the contracts with no access.

I am not interested in the vedor's tax liabilty. All I want to do is reduce my own if possible.

I think I have a valid reason to pull out of the sale at this stage because of their inability to produce a valuation for €45k ... especially in light of the fact that internal and external property contents have been removed from the property since I agreed to buy.

When I agreed the €280k I thought that stamp duty was on the whole amount .... didn't matter whether it was land/house/contents and I was happy to pay full stamp duty on that as I budgeted for that. When solicitor told me that stamp duty was on property only I was delighted as it lessened the burden on me and I took the changed circumstance into account when budgeting.

Salary reductions of the magnitude I have been hit with weren't expected but I can still keep my head above water. All I want to do is get the vendor to provide written proof of what he stated ... and if not I don't want to at this stage pay the extra again for his bumbling.

My intention is not to defraud anybody or revenue. I want to purchase the property with the least amount of additional cost possible.

Vendor moved goalpost. I don't want him moving it again at my expense.

Re. the bank .... they are aware that my salary has dropped and are still happy with my ability to repay the loan. With regard to the reduction from a 22 year term to a 21 ... again I want to keep my repayments the same as I had budgeted for. I haven't asked the bank if they would want to reduce the term ... I'm just surmising and thinking they may want to do it.

Think I'll ring the bank to see what's the story.
 
Does the contract have a time period in it. The market has dropped significantly in the past year. I think your solicitor shouldpresent ytour case and that you should be able to renegotiate the purchase price, especially if the vendoe is off out of the country.
 
Just off phone ... bank offer may (or may not) be out of date. It must be checked out. So bank may want to reinitiate the whole application process again.

The price was originally €380k and it took a battle to get it to €280k so a further reduction isn't viable.

Regarding a time period in the contract .... that's an answer I can't give because I don't know.

And ..... house insurance quotation with payment ready to go has got to be sorted again (for the third time) ..... quotation has lapsed.

And ... because vendors pushed for an early Sept. '09 closing I had to activate my Life Assurance then or the whole process of applying would have had to start again if the policy hadn't activated within 6 months. So I have Life Assurance set up on a non-existent mortgage since the 1st of September 2009.

What a series of events .... if it wasn't so serious it would be funny.
 
You had better contact your solicitor, as the Bank might not fund the purchase at the price level indicated.
 
mercman said:
You had better contact your solicitor, as the Bank might not fund the purchase at the price level indicated.
Click to expand...


I tried .... he's out til late this evening so no progress til then.

Things will have to be brought to a head this week. This has gone past the point of ridiculous.

Thanks everybody ..... when I have more I'll be back.

Enjoy the snow!
 
I agree with Mercman - the most important point in relation to you mortgage is what the property is now worth - if the banks valuer values the property at for example 240k, the bank will only grant you a mortgage probably up to 90% of that - ie 216k - it doesn't amtter that you are/were approved for 247k - are you in a position to make up the shortfall ?
 
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