Selling apartment but AH sellers devaluing MV

Bitthedust

New Member
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7
I’m a new member but was here previously back in the heady days of 2006-07. That was when I made a massive mistake in buying a 1 bed apartment in a large complex in Dublin. It was a private sale. There were two affordable housing schemes introduced, one i think in 2006 and the other later maybe 2010. I paid €290k for my apartment in the end. €50k of hard earned savings, rest mortgage. I wasn’t entitled to AH, earned about €7k too much. Lived there for over 8 years and now am renting as have a child with my partner. Rented apartment out but am not breaking even because of exorbitant revenue, management fees and very few expenses which is a massive drain on annual budget along with renting at current values. Very little savings. We are both working now but my partner was out of work for over two years in the recession and also took a year out to mind our child, when I returned to work.

A while ago a very similar apartment in the complex sold for €210k. I put my apartment up for sale the following week and began to feel hopeful for the first time since the recession. At one time the market value had sunk as low as €90k. I thought I might finally be able to sell in positive equity and have the beginnings of a deposit to buy a small house in a commuter town.

Then, within 2 weeks, 3 similar apartments were put up for sale @ asking price €30-€40k below mine, bringing me back into negative equity. One went sale agreed very quickly. I can only assume they were AH apartments and that owners are trying to avoid the council clawback by selling them at the price they paid.

I do appreciate that people don’t want to pay the clawback to the council but have I any other options? We are in our late 40’s. Our time to get another mortgage is running out.
 

Brendan Burgess

Founder
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37,956
I can only assume they were AH apartments and that owners are trying to avoid the council clawback by selling them at the price they paid.
That doesn't make any sense unless they are selling them to a friend at underprice.

As far as I know, there is no disadvantage to the seller of an AH in getting a higher price.

If 4 similar apartments are for sale in the one development, then at least one of them will have to reduce the price to sell it.

That is the way that the market works.

Brendan
 

Bitthedust

New Member
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7
Hi Brendan, my understaning from looking at AH threads is that if the seller achieves more than the discounted price they paid for the property, that they are subject to clawback, which means they have to give any profit back to the council, idea being to support the further provision/ purchase of discounted housing for AH buyers. But I think what is going on is people resent having to give the council all the ‘equity/profit’ so they sell for less.

I hadn’t thought of AH seller selling to a friend and then achieving the ‘real’ price later.

It’s a very big development but I’ve never seen 3/4 1 beds for sale at the same time. The majority of one beds would have been sold on the private sale market I think.
 

Brendan Burgess

Founder
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37,956
A while ago a very similar apartment in the complex sold for €210k.
I’ve never seen 3/4 1 beds for sale at the same time.
This happens from time to time. People are thinking of selling and then one apartment goes for much more than people thought it was really worth and a few people are motivated to sell theirs.

That is a much more likely one than the person selling an AH at a lower price than it's worth. This is biting their nose off to spite their face.

Brendan
 

vandriver

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1,753
Brendan,if you sell your AH dwelling for less than the stated value on purchase then every penny above your discounted original purchase price goes to the council.
There is zero incentive to get a better price,unless you can achieve a price greater than the original undiscounted value.
There is a great incentive to set a selling price at or near the discounted purchase price as the sale will fly through!
 

noproblem

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1,747
I'm thinking t here's also an incentive to under-declare the price if the buyer and seller agree on doing so.
 

Brendan Burgess

Founder
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37,956
,if you sell your AH dwelling for less than the stated value on purchase then every penny above your discounted original purchase price goes to the council.
O.K., I see your point.

I said that there was no advantage in selling it at less than the market price, but there is if you want to just sell it. Just knock the price down by €50k and it will sell quickly.

But wouldn't you be better off in holding on to it if it were anyway close to the pre-discount value as you keep any surplus over it?

Let's say that the pre-discount value was €100k
The AH price was €70k.

So it doesn't matter if you sell it at any price between €70k and €100k.

But if you could sell it for €110k, you would be mad to sell for €90k as you lose out on the €10k.

Is that right?

Brendan
 

Brendan Burgess

Founder
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37,956
Rented apartment out but am not breaking even because of exorbitant revenue, management fees and very few expenses which is a massive drain on annual budget along with renting at current values.
Do you have a tracker mortgage? If so, it's very likely that most of your repayments are capital and so this is a very profitable investment.

Even if it's not a tracker, it's still likely to be very profitable at current rents in Dublin.

How to evaluate whether to keep an investment property

Brendan
 

New2This

Registered User
Messages
13
It's not true that you have to pay all of the money over the affordable housing price back, that's not how clawback works. You pay the % of profit that your house was originally discounted by, a 5 second google search confirms this (key words "affordable housing scheme clawback").

I don't think there is some big conspiracy here, just people like yourself who want to sell apartments that are no longer suitable for their requirements. You probably just need to look at the numbers for your situation and go from there. There is no point worrying about what other people are doing.
 

RedOnion

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3,133
It's not true that you have to pay all of the money over the affordable housing price back, that's not how clawback works. You pay the % of profit that your house was originally discounted by, a 5 second google search confirms this
I undertook a 5 second Google search and it suggests you're wrong.

If you sell the house for less than the original market value, any excess over the discounted price you paid is clawed back.

Unless of course the housing agency have it wrong?...
Scenario 3: https://www.housing.ie/Housing-Information/Home-Ownership/Living-in-an-Affordable-Home
 

iamaspinner

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122
From Citizens Information:

https://www.citizensinformation.ie/en/housing/owning_a_home/help_with_buying_a_home/affordable_housing.html#lf129b

"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."
 

New2This

Registered User
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from your link, I'm not wrong

How Does the Local Authority Calculate the Clawback?

When you bought your affordable home, you got it at a discount to other similar properties on the market. The clawback is based on the percentage discount you got when you bought your affordable home. If you decide to sell your home, the local authority applies this percentage to the price you get for the sale, depending on the current value of the property.
 

RedOnion

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3,133
from your link, I'm not wrong
Did you read scenario 3??

Scenario 3 - 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 €210,000 then the clawback would be based on the lower market value of €210,000 less what they paid €196,000, which is €14,000. So they have to pay back €14,000 to the local authority when they sell in addition to any money owing on their mortgage.
 

New2This

Registered User
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I never addressed the scenario where they sold for less that the price, that isn't what the OP referenced or was being discussed.
 

RedOnion

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3,133
that isn't what the OP referenced or was being discussed.
Really?

That's exactly what Vandriver and Brendan were discussing when you chimed in.

Plus, the OP says they paid 290k for it, and put it in the market for 210k, so one could safely assume that's exactly the scenario that applies here.

And this in the opening post suggests the same:
I can only assume they were AH apartments and that owners are trying to avoid the council clawback by selling them at the price they paid.
 

Bitthedust

New Member
Messages
7
Hi Brendan,

I have a tracker but it was increased after I rented it out as far as I know. Problem is all the rental income is at 40% and there is very little to write off against it. It would be great if we needed a long term investment of a 1 bed apartment but we don’t, we need somewhere permanent/ semi-permanent to live. We’ve no way to save while having high rent, childcare etc and to find €4k in rental income tax every year. We’re in our current place 2 years and average rent in the area has gone up €400-500 in that time. If our LL sells anytime soon, we are likely to be homeless on two incomes. People like me who got stung with the boom have to pay income tax on properties that are like a ball and chain. Others who got a 35% discount on the price of the property in the first place, get to break even and walk away.
 

WillIBeRich?

Registered User
Messages
12
Hello Folks,

I'm looking to sell my AH, & last week I found out that I wont receive any money back on the sale of this property greater than 270 000 (my mortgage) & the current market value of property 345 000. I am very upset by this as for 12 years I was misled to think that anything greater than 270000 would be split between the council & I as per clawback, but no, the clawback only comes in under extreme circumstances as in the property selling for over the original market price back in 2008 of €470 000. So essentially, if you sell the property in year 1 or year 19 it doesn't matter coz you dont make any profit from it. Whereas if you sell after year 20, you own the whole property & can make in excess of 180000 after you clear your mortgage ???

Can anyone who knows about the AH scheme 2007 agree with me on this?
Are there any options for getting around this?
I just feel it's very unfair for this to be the case after residing in the property for 12 years.

We live in Dublin & got the property under DLRCOCO, we are well established here with our children in local schools & now we have to leave the area to relocate somewhere different, away from our family & friends.

Any kind, helpful advice would be greatly appreciated.

Kind regards,

WIBR ...
 

peemac

Frequent Poster
Messages
641
Hello Folks,

I'm looking to sell my AH, & last week I found out that I wont receive any money back on the sale of this property greater than 270 000 (my mortgage) & the current market value of property 345 000. I am very upset by this as for 12 years I was misled to think that anything greater than 270000 would be split between the council & I as per clawback, but no, the clawback only comes in under extreme circumstances as in the property selling for over the original market price back in 2008 of €470 000. So essentially, if you sell the property in year 1 or year 19 it doesn't matter coz you dont make any profit from it. Whereas if you sell after year 20, you own the whole property & can make in excess of 180000 after you clear your mortgage ???


WIBR ...
So you got a massive discount in 2008 and even though the value is still €125, 000 below the market price of when you bought, you have an issue with that

Imagine your neighbors who didn't get ah scheme - they are still in negative equity while you can walk away with a clean slate courtesy of the tax and rate payers.
 

Easter

Registered User
Messages
41
To the OP
When did you purchase your apartment and when were these similar apartments sold as affordable housing? If it was 06/07 then the sellers do in fact have an incentive to sell at full market value. Because clawback reduces after 10 years by 10% per year, the sellers can take a percentage of the profit. It would make no sense for them to sell for less.

Secondly, were they purpose built affordable housing? If yes, then possibly they don’t have en-suites, underground parking, cheaper fittings and fixtures. I’m the voice of experience here ;-)

Thirdly, if you still think you are being undercut just go to the the council and complain. Everyone selling an affordable housing property has to get an agreement from the council as to market value. Just ring and complain if you think there is an issue. There seems to be a drop in what many apartments are achieving. Perhaps it was a natural dip, or perhaps there were multiple bidders for the property that sold for a higher price.
 
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