Signed Contract on New House but now price has dropped

C

ckbny

Guest
HI,

I put a deposit on a new house back in May of this year. I still have not moved into the house because the builder is dragging his heals.

So far I have paid 25k for the house as a non refundable deposit.

Today I found out that the same house is selling for 5-10k cheaper than what I have signed for in my contract. In my contract the house is 500k
I am gutted! What are my options...?

can I pay the cheaper price or the price I agreed and signed for in may?​
 
ckbny said:
HI,

I put a deposit on a new house back in May of this year. I still have not moved into the house because the builder is dragging his heals.

So far I have paid 25k for the house as a non refundable deposit.

Today I found out that the same house is selling for 5-10k cheaper than what I have signed for in my contract. In my contract the house is 500k
I am gutted! What are my options...?

can I pay the cheaper price or the price I agreed and signed for in may?​
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Not much you can do in this case - how would you feel if the house went up in value and the builder came looking for the increased price?
 
SPC100 said:
Has the builder got a lot of units still available for sale?

You could threaten to walk away, and see if the builder will play ball with you, and agree some discount or extras

Legally, I guess you lose your 25 if you walk away, but the builder may prefer
485-490 in the hand, than 25 in the bush.
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not true - legally the builder can force you to close on the contracts which at this stage of proceedings may be a better bet for him than looking for new buyers.
 
ckbny said:
Today I found out that the same house is selling for 5-10k cheaper
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Are you buying as an investor? do you intend to sell tomorrow or have you bought a property to live in?
If the latest, do not be obsessed by the real time price of your property...enjoy it.
 
bacchus said:
Are you buying as an investor? do you intend to sell tomorrow or have you bought a property to live in?
If the latest, do not be obsessed by the real time price of your property...enjoy it.
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Bacchus is right. If it is to be your residence the market price of the house is immaterial. while it is irritating in the extreme that the price has come down you haven't "lost" money as such as you aren't selling. Presumably you are there for a number of years at least. The only price that will be of importance to you is the price the houses are fetching when you are selling.
 
Camry said:
If you want to trade up later and your house is worth 10% less in, say, 5 year. Your new house will also be 10% cheaper (and 10% of a larger sum probably)
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This sounds like flawed logic to me. After 5 years of paying a 30 year mortgage, you will typically have paid off less than 10% of the principal. If you are in negative equity, it's not going to make it any easier to trade up. As other posters have already stated, if you're happy to be there for the long term though (+10 years), then you should not worry about annual fluctuations so much.

I suggest that the OP try and get the amount that the banks will lend them revised downwards. Take this to the builders and explain that as a result of them dragging their heels, they can no longer get a mortgage for the original price. No builder wants a buyer pulling out in the current market. It's possible they would end up going bust before they are able to take you through the courts, so you have more bargaining power here than you may think.
 
FredBloggs said:
If it is to be your residence the market price of the house is immaterial. while it is irritating in the extreme that the price has come down you haven't "lost" money as such as you aren't selling.
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If you buy the same house today for less than what the OP agreed on how could there not have been money lost? If it goes down another 20k would you still think that no money has been lost?
 
FredBloggs said:
Bacchus is right. If it is to be your residence the market price of the house is immaterial.
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You are joking, of course?

It never ceases to amaze me the number of people when buying a house that treat the purchase price as some sort of abstract number. This is just not true: it is real, hard cash that you are handing over. The fact that you never actually see it as it invariably comes from a bank is immaterial: you will have to pay it back, and with a long term mortage a significantly greater sum at that.

Regardless of what happens in the future, if the purchase price is €10k lower, you are €10k better off.
 
Camry said:
You would be €10,000 better off if the market goes down 10%.
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Are you sure they would really be in a better position though? The shortish term mortgage you chose in your example manages to avoid the buyer being in negative equity however I think they will still have problems trying to trade up.

In the case where there is no increase in price the trader upper needs to get a mortgage with a LTV of less than 90%, while after the fall the trader upper will need to get a LTV of around 94.5%. There's a good chance they will be denied a mortgage with such a high LTV, especially if the market is falling.
 
Camry said:
You saw the numbers didn't you?
  • Case one, new bigger/better house with a 170k mortgage
  • Case one, new bigger/better house with a 180k mortgage
And if you can't save another €10k over 5 years (€150 per month at 4% interest) there is no hope for you.

Plus, a smaller mortgage is a smaller multiple of your income, hence easier to get approval.
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I'm sorry, if you have to make assumptions regarding future saving ability and future lending criteria to back up your case then I think your whole argument falls apart tbh. You've simply pointed out that one figure is less than another but that fact on its own does not reveal which scenario will be better for the trader upper.

Camry said:
Why are people so wedded to this belief that rising property prices must be good for them??
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You can't seriously think that someone who has purchased a property should be glad to see their equity reduced/wiped out? Property price falls will only really benefit those that are not in the market to begin with or have pulled out of it.

Camry said:
A 25 year term would be considered the industry standard eveywhere in the world (except Ireland).
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I agree with your sentiment but unfortunately that's the reality of the current market in Ireland. The 25 year term in your example is wishful thinking for most of those taking on a new mortage these days.
 
Is the house you paid deposit on in the same development as the houses now selling for a lower price? My understanding is that if the developer drops the price having sold some houses at a higher price the first buyers are entitled to a refund of the difference. ask the agent who sold the houses or a solicitor.
 
There was an arguement to scrap VRT on cars. One of the reasons given against it was that reduced new car prices would have the knock on effect of reducing the price of used cars, so everyone who owns a car loses money. This arguement, whilst theoretically correct, becomes ridiculous when you realise that in future most people will trade up to a newer car (possibly many times) so reductions in future expenditure far outweigh the immediate loss.

It's the same with houses. People who have yet to buy a house will certainly benefit from cheaper housing. People intending to trade up will also be ultimately better off. The people who'll lose out are people looking to trade down to release equity.

The original poster is in the same position as when he agreed the price. He has the same apartment for the price agreed. It hurts when someone else gets a better deal but that does not make his position any worse.
 
Markets alway take cycles , your house will recover and gain value it may be 12 months though.
 
HI all,

Thanks for all the posts. you have raised some interesting posts...
I am buying the house as a home to live in for years... not for investment.. i am not planning to sell it soon.
however i am looking to get some value for the money i am buying...
its like the saying 'let the buyer beware' if you can get a product for 100 in shop a and the exact same product in shop b for 90 why would you pay the extra for the same product...

I am not so worried about the house dropping or raising in value in the future but i am worried about the now.
if i buy the house for 500k today knowing that i can buy the same house for 495.. it means i have lost 5k from the date of the close.
the mortgage i am getting will see me pay off 5k off my mortgage in the first year and 20k in interest... this means that for the first year i will be trying to pay off a mortage to make the house equal what i owe on the mortgage...

has anyone managed to get extras from a builder?
what i am planning to do is to ask the builder for 5k in extras... like floors or appliances?? not sure if i should...
i dont want to risk pulling out of the sale because i really want the house!!!
 
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It's worth trying. as one of the previous posts mentioned any builder should be quite keen to get cash in hand at the moment.

I see your point that it sucks double to lose money on the place before you even move in. Buying off plans so far in advance is seen as the norm these days but that was not the case in the past and will not necessarily be true in the future.

At the end of the day though the only worry you need have is that you can afford the mortgage and keep up some kind of lifestyle at the same time.
 
FredBloggs said:
Bacchus is right. If it is to be your residence the market price of the house is immaterial. while it is irritating in the extreme that the price has come down you haven't "lost" money as such as you aren't selling. Presumably you are there for a number of years at least. The only price that will be of importance to you is the price the houses are fetching when you are selling.
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That is a completely ridiculous statement. Of course you have lost money if you pay more for the house that you needed to! For example, it is the same as saying that if I had a car for sale for 10,000 that you would happily pay me 15,000 because the price that you pay for it is not really important.
 
Camry said:
Using your logic every single decision you ever make loses you money.
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My logic is simple: if I pay, say €310,000 for a house rathar than €300,000 then I am €10,000 worse off, will be even worse off if I had to borrow to pay the difference and can never make it back again.

Believe me, it would matter to me if that were to happen.

What makes no difference to me is if, say, I paid €250,000 for my house six years ago, it was "worth" €800,000 last year and is now only "worth" €700,000. Have I lost €100,000 in the last year? Don't think so. In this case, the numbers really are abstract: the only figures that matter are the figure paid when purchasing and the figure obtained when selling. If I pay more than I have to when purchasing, which is the dilema faced by the OP, then I can never get it back.

We do agree on one thing: I'm amazed too at the number of people who don't understand the difference between price and value.
 
that's pretty inconsistent logic. In the same way the OP is €10k worse off by not delaying his purchase, the person in your example is €100k worse off than last year for not selling.

The alternative arguement is that at the point of purchase the OP paid €310k to live in a house. The OPs position has not changed in that regard. When you're talking about buying a house to live in rather than as a tradeable asset then you should not worry about any gains/losses on paper. Selling may not occur for years and who knows what way prices will go in the future
 
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