Selling on contract

J

JackB

Guest
What are the rules in selling on a contract for profit?
Does the developer allow this?
I have an opportunity of buying off plan and making a considerable ammount.. even after CGT it will be worth it but dont know how the developer might feel..
Thanks, JB
 
Check your own contract - in general there is a prohibition in the Contract preventing you from doing this. Developers don't like it - if there is a profit to be made, they want to make it.

Given the current uneasy climate why do you think there is a definite profit to be made?

mf
 

The developer has to agree to insert a clause in his contract which allows you to do this. Otherwise you may have to complete the sale, which would include stamp duty, if you are not a FTB plus legal fees etc.

If you are a FTB you should be aware that you would lose this status if forced to complete the sale. I'm not sure where you stand with regard to FTB status if you 'flip' the contract.

If the developer does allow you to 'flip', you will have legal fees and capital gains tax.
 
Redo.. Before, I would have thought the same but when the opportunity comes along to make possibly 400k-500k, you would probably do the same.
As I am recently a FTB I would not do it to the average Joe like myself. These are luxury homes being built on Irelands Coastline with prices expected to rise by 500k in two years. I have a chance to buy now off plan.. Is this not known as an "Investment?"
I kicked myself for not buying years ago.. I dont want to regret it again..

Good info Lightweight, but it the property was to rise in value by 500k, I would pay 20% (100k) CGT of which legal fees etc would come out of the 100k if thats right?? Can I negotiate the contract as to be able to "Flip" if I choose, or do developers generally put this clause into their contracts not allowing you to "Flip" the contract?
After all, a two year investment of my 200k deposit means im taking the risk if anything negative were to happen the property market..

Thanks guys for your replies..
Jack
 
Jack B, I think you should buy it. sounds like a great way to make a few hundred thousand. I mite buy a few myself and then when they go up 500k i will make a million. I dont know why i didnt think of this before though. i feel a bit silly now.
 
The only people I know who've done it negotiated the deal through the estate agent. I've never done it myself. As far as I know, the developer has his solicitor put an extra clause in saying that you can flip but there's usually a time limit on it....he won't wait for his money forever!

The advantage of not completing the sale (apart from the others already discussed) is that if the property is under 125sq.mts. it can still be exempt from stamp duty for an owner occupier. I think there is a reduction on stamp duty for owner occupiers of new builds anyway even if it's over that size. That means you can spread the net wider when looking for potential purchasers.

Capital gain is based on the selling price, less purchase price+allowable expenses, less 1270 allowance.

If I were to do it, it would be of paramount importance that my solicitor realised what my intentions were and that he/she go over the contract with a fine tooth comb! Providing, of course, that you can get the developer to agree. 200K at the start of a build may well look good to him.
 

No hard feelings Jack. You may get a better return on your 200k betting that the property market will increase with the bookies
 
Money Man, maybe you should..

In a nutshell.. This week, it was predicted the market will grow by 13% this year and 7% the following..
As I have a chance to invest, I believe 200k of an investment over 18 months on an exclusive developement of only 22 homes which are being sold off plan for between 2.9m and 3.2m is worth taking.. Even if they were to go up by 13% over 18 months it will be a risk well worth taking..
Liteweight, thank you for your replies.. appreciated..

Jack
 
JackB said:
This week, it was predicted the market will grow by 13% this year and 7% the following..
Click to expand...

Do you know who predicted this?
Do you know what their business is?
Do you know why they might have said this?

You can flip a contract with permission from the builder.

You should only do this if you are ok with the possibility of loosing 200k....and possibly more if you are forced to complete the purchase.
 
somebody I work with has tried this and if you are in direct competition with the developer and they have units still to sell, you might have a problem getting their consent...
 
You should speak to your solicitor about signing the contracts in trust. I know of a few people who have done this successfully with the consent of the builder.
 
Also consider that the government might act to make it difficult to profit from selling new build contracts.

Noel Ahern spoke recently on speculation in the property market; he said:

“There are people buying houses and apartments off the plans and never taking the keys but selling on the contract. I don’t think those people are giving any added value to the whole issue. I personally would like to see those people taxed out of existence. "

[broken link removed]
 

Firstly, these are predictions. I believe Dan McL in BoI has predicted 3% growth for 2007. I believe he's a good track record. You can find loads of different predictions from people of various knowledge levels and various vested interest in seeing their own predictions coming true.

Secondly these are for average growth. Prices for some properties could grow by more, prices for other properties could grow by less, or even decline, and you still get the predicted average growth.

Thirdly it is now September. Of the 13% growth predicted for 2006, I'd say most of it has already happened. So you are probably looking at 4% growth for the remainder of the year.

You may indeed be on to a winner, but I'd be worrying about a lot more than just the form of the contract. Whatever you do, get a good solicitor.
 
JackB said:
Thanks guys.. You've been a great help!!

Jack
Click to expand...

Fair dues to anyone taking this scale of punt. It is impressive given no intention of completing.

Banks would prob need an income of 350k a year to give the mortgage and stamp duty itself is north of 300k if had to buy.
 
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