Selling AH - Lower than the Valuation?

P

phil1147

Registered User
Messages
76
My girlfriend and i bought an affordable home only 4 months ago. The market value was €310,000, we paid €200,000, thus approx. 32% clawback. Now my girlfriend is expecting :-O and we need a bigger place.

We are going thinking of selling but were told the market value is now around €280,000.

Does anyone know what will happen now.

I thought that even if i sell the apartment for €280,000, that means i made a profit of €80,000 and i would only have to give the council 32% of the 80k.

Is this correct?
 
Re: Im selling Affordable home - Lower than the Valuation

My understanding is that you will have to pay 100% of the clawback as you'll be selling before 10 years of ownership. So, you 'll own €110k (clawback amount) to the council if you sell. AH has an anti-profiteering policy.
 
Re: Im selling Affordable home - Lower than the Valuation

Hi there, just to clarify, I have the Clawback Provision document in front of me...

Y = diff between the market value of the property and the selling price to the applicant at date of sale, i.e amount of discount

Z = market value at date of sale to applicant

Clawback = (Y x 100) / Z

Example:
Market Value (at date of sale to applicant) or Z = 500,000
Agreed Sale Price to applicant = 250,000

Discount or Y = 250,000

(250,000 x 100) / 500,000 = 50% clawback

However, in your case, the original clawback is:

110,000 x 100 / 310,000 = 35.48%

However, there are clawback reduction rules between years 10 - 20, but that does not apply in your case now as you only have the place 4 months.

If you sell at a market value lower than what the market value was when you bought, this is a negative equity situation.

In this case, the clawback is re-calculated based on the NEW market value.

The NEW estimated market value is 280,000, i.e. the sale price.

So, the clawback is calculated on the lower market value of 280,000.
The difference between the NEW market value of the property and the selling price to the applicant at date of sale is 280,000 - 200,000 = 80,000.

You owe this 80,000 back to the county council. In some sense you have been let off, as you originally owed the council 110,000.

You could never make a profit, unless you sold the property for more than the original market value of 310,000, and in this case you would pay the council the clawback percentage of this profit also.

I hope this helps!
 
Re: Im selling Affordable home - Lower than the Valuation

thanks anonymous thats very helpful, i rang my solicitor about it today and she will be getting back to me tomorrow, i hope. she also asked me to contact the council. The number unfortunatley rang out.

If what your saying is true anonymous i think we will just break even, ie; give the council back the 80k and we get our mortgage back = 200k

Is this correct.

Well at least we break even.
 
Re: Im selling Affordable home - Lower than the Valuation

phil1147 said:
thanks anonymous thats very helpful, i rang my solicitor about it today and she will be getting back to me tomorrow, i hope. she also asked me to contact the council. The number unfortunatley rang out.

If what your saying is true anonymous i think we will just break even, ie; give the council back the 80k and we get our mortgage back = 200k

Is this correct.

Well at least we break even.
Click to expand...

You may break even but remember you are no longer first time buyers. You now have to consider:
1. you will have to pay stamp duty on any further properties
2. The banks have tightned up on lending meaning you may need up to 10% of any asking price of your next house.
Both these points mean you may need a sizeable amount of cash for your next purchase.
just some extra things you may want to think about!
 
Re: Im selling Affordable home - Lower than the Valuation

phil1147 said:
My girlfriend and i bought an affordable home only 4 months ago. Now my girlfriend is expecting :-O and we need a bigger place.
Click to expand...

Surely the baby won't take up that much space!! Do you have more than one bedroom in the house?, and why didn't you factor in the possibility that you would be having children before you made the decision to purchase this particular property.
 
Re: Im selling Affordable home - Lower than the Valuation

Exactly right. Although, you obviously have paid interest on you mortgage which you won't get back. Plus, depending on your mortgage, you may have to pay a penalty for paying back the bank early - that's if you do pay the bank back instead of using the money towards a new property.

If the market dipped to such a degree that the new market value of your affordable home dropped below 200,000, which is what you paid for it, then there is no clawback to pay back to the council.

Obviously, your solicitor will be able to advise on the legal small-print and the interpretation of "market value".

Info on the clawback, I'm pretty sure, is available in the Affordable Hosuing handbook which can be got online.

See Affordable Housing Partnership website and/or your local County Council website.

Take care and best of luck!
 
Re: Im selling Affordable home - Lower than the Valuation

eileen alana said:
Surely the baby won't take up that much space!! Do you have more than one bedroom in the house?, and why didn't you factor in the possibility that you would be having children before you made the decision to purchase this particular property.
Click to expand...

There are 2 bedrooms in the apartment. One bedroom is already taken up with my girlfriends 5 year old child and its a very small room.

Factoring in the possibility of having more children before buying... i really wish i was psychic but its not the case.

I was talking to the council today, they said that there is a stipulation in the contract that affordable house buyers dont make a loss when they sell for lower than the market value. Good news in a way but bad news that we will have to fork out for stamp duty and mortgage down payment.
 
Re: Im selling Affordable home - Lower than the Valuation

Given that you receive the same amount whether you sell for 201K or 310K why don't you sell at the bottom of that range?

You would then reduce your selling costs (I assume the estate agent is charging you a percentage of the sale price), you would need little or no advertising (which the estate agent charges on top of their fees) as the low price would drum up interest, and you would also sell a lot quicker and be able to negotiate alll sorts of conditions with the buyer (close today, move out in 6 months).

People do this all the time when dropping the price on other houses, I don't see why you can't do the same with the Affordable House.
 
Re: Im selling Affordable home - Lower than the Valuation

Howitzer said:
Given that you receive the same amount whether you sell for 201K or 310K why don't you sell at the bottom of that range?
Click to expand...

There must surely be a clause preventing this. The owner can't be allowed to effectively write off the entire clawback without any input from council, plus it would be open to abuse - what if I sold cheaply to my brother or a friend, then he sells on for close to market price and we share the difference (after) taxes?

OP, have you checked with banks to see how much you could now borrow? Given that you purchased 4 months ago and salaries and savings are unlikely to have increased significantly (economic environment, future new arrival, maternity leave etc), could you afford to purchase something larger, or do you plan to rent?
 
Re: Im selling Affordable home - Lower than the Valuation

Starky said:
You may break even but remember you are no longer first time buyers. You now have to consider:
1. you will have to pay stamp duty on any further properties
Click to expand...
Not if they buy a new build.
 
Re: Im selling Affordable home - Lower than the Valuation

rmelly said:
There must surely be a clause preventing this. The owner can't be allowed to effectively write off the entire clawback without any input from council, plus it would be open to abuse - what if I sold cheaply to my brother or a friend, then he sells on for close to market price and we share the difference (after) taxes?
Click to expand...

I would imagine that the council send someone out to value the property before its actually sold. Not exactly sure but they would have thought it thru'.

Also Clubman thats a good point re: buying a new build = no stamp duty. That just means having to do the whole laying floors and fitting out etc.
 
Re: Im selling Affordable home - Lower than the Valuation

This is teh way I see it, I could be wrong but I think that the best person to ask about selling an affordable home is the people you got the mortgage from in the first place, i.e. the institutional lender, these guys would have had their legal teams go through the whole process with a fine tooth comb.

This is what I was told by EBS when I bought one of these homes 2 years ago.

I'm going to use the above scenario you bought the house for 200K and sell it for 280K. market value 320K at time of purchase, deposit 20K, fittings and furnishing 10K

You won't make any profit. Because its a 100% clawback up to 10years drops by 10% per year there after.

1) First you pay back the bank the remainder of the mortgage i.e ~178K

2) This leaves you with 280 - 178 = 102K 32K is yours and you will owe 70K to the council. You should talk to your solicitor about other expenses i.e. auctioneer fees, conveyance etc.

All sales must go through a council auctioneer, you can't sell teh apartment yourself.
 
Re: Im selling Affordable home - Lower than the Valuation

This thread is a year old ????????? methinks that baby is crawling
 
Re: Im selling Affordable home - Lower than the Valuation

so has anyone else found themselves selling an affordable house since the market crash?

I'm in the process of finding out from Fingal how much it would cost me to sell my place at this stage. I see some great deals in houses at the moment, I wouldnt mind trading up if a) I could sell my affordable housing apartment, and b) if I could get a regular mortgage
 
Re: Im selling Affordable home - Lower than the Valuation

Just a follow-up from JohnJay's query, anyone who sold their affordable home as we are desperate to move out of our affordable housing for many personal reasons. Hoping someone would be able to help. Thanks a million.
 
4sure said:
Just a follow-up from JohnJay's query, anyone who sold their affordable home as we are desperate to move out of our affordable housing for many personal reasons. Hoping someone would be able to help. Thanks a million.
Click to expand...

Hi folks,

I'd also be interested in how people are getting on selling their affordable homes in the current market. If the council value the property quite high, and you are having trouble selling, is renting it out an option? I know you're not meant to do it but is anyone actually checking up? Is there a way for them to track if someone is renting their place out?

Thanks in advance,

Simon1.
 
I sold mine no problems. The council accepted the sales price without any issues - they didnt do any valuation. I sold for 4k more than I originally paid. My only problem was that I had a fixed rate mortgage and got stung for a large break-out fee
 
You must log in or register to reply here.
Back
Top