# House valuation below purchase price :-(



## mischief (7 Aug 2007)

Apologies - correct I should not have removed the initial post.....:-( My sincere apologies. 

From memory, basically what happened was this:

I purchased a unit of the plans 18 months ago. Subsequently got it valued upon completion and 
the valuation came in at 35K below the original purchase price. I queried here as to what my options were 
in relation to a) Pulling the plug and losing my deposit b) what options people felt I may have in relation
to resolving the situation as the property was originally 100% financed and given I'd changed lenders
I was only able to achieve the valuation price leaving me to make up the 35K difference ( minus the deposit paid )
and in a position of negative equity.

Hopefully the above clarifies the original position and people can pick up on the subsequent replies. Many thanks again
to all that replied. It certainly helped me in my negociations. 

Post removed - appreciate all your replies. Apologies, I haven't had time to reply individually. 
The builder has agreed to lower the value of the property this morning. Looks like the developers
have as much to lose as the purchaser. Whilst, I didn't want to drop my deposit, the builder
didn't appear too keen to go to court or have poor publicity in the development as units still for sale, so we've come to an agreed valuation. Thanks all.


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## LDFerguson (7 Aug 2007)

Did you get an initial valuation when you got the original loan offer? If so, the original lender may only require a certificate from the original valuer that the property has been completed.


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## Thirsty (7 Aug 2007)

I don't understand how a Soltr let you sign the contract without having funds in place to complete the purchase?


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## LDFerguson (7 Aug 2007)

Kildrought said:


> I don't understand how a Soltr let you sign the contract without having funds in place to complete the purchase?


 
I'm guessing the original poster got approved for a 100% mortgage so all the funds were coming from the mortgage.


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## ClubMan (7 Aug 2007)

mischief said:


> I had previous loan approval however, I've opted for a new broker and lending instituation who will only lend me the value of the property as laid out by the independent valuer. I wouldn't expect the original lender to be any more generous.


Are you saying that the original loan approval is no longer an option?


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## mischief (7 Aug 2007)

Hi guys,

Yeah, the property is to be 100% financed. My solicitor did advise me
that the contract was 'not' subject to loan offer approval and that it was legally binding. I went in with my eyes wide open. It wasn't possible to get a valuation on a property that was not complete. The original loan offer is not 
an option as the bank will require a valuation report now that the property has been completed.


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## Haille (7 Aug 2007)

Are you liable for stamp duty.? If so wonder will Revenue accept current valuation rather than original price in ascertaining liability?


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## TheBlock (7 Aug 2007)

Who has valued the property at 35K below the purchase price? Surley this can be rectified as a property is worth as much as a buyer is willing to pay for it and if you are willing to pay 35k that is how much it is vauled at?

Valuers can place any value on a property surley the bank are only intrested in if you can service the mortgage.


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## Dave Vanian (7 Aug 2007)

Get your old broker to get a valuer who will value the property at the purchase price.


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## ClubMan (7 Aug 2007)

Haille said:


> Are you liable for stamp duty.? If so wonder will Revenue accept current valuation rather than original price in ascertaining liability?


The house is off the plans so unless it's over 125sqm or the original poster is an investor then _SD _is not an issue.


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## sandymount (7 Aug 2007)

Are all units sold? 

Can your solicitor advise you on how long you could string the developer along without incurring major legal fees. The developer will not want a long drawn out costly legal battle, they will want their cash. You said the developer won't move, how hard have you pushed. Have you made him a reasonable offer?


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## mprsv1000 (8 Aug 2007)

If the bank won't give you the money (and if you were them would pay 35,000 more) then how does the builder expect you to pay?
He's simple being an asshole and in the current market I doubt he'll get HIS asking price from anyone else. So he has these choices 
1) go through with sale to you at current valuation
2) Continue to be a stuborn ass and try to get the money from you through the courts, which is a bit stupid as you don't have the money and the bank won't give it to you.
3) Try to sell to someone else, but in this market that is easier said than done.

Just play hardball with him...a lot harder... call his bluff. Tell him exactly what to do with himself ( and I mean leave him in no doubt) if after pointing out his options he still wants the extra 35,000.

If I were in your shoes and he expected me to pay way over the market value, his bloody greedy ears would be aching for a month...I'm sure he's made plenty of dosh over the years

Anyway best of luck, but I do think the odds are in your favour


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## MrMan (8 Aug 2007)

> If I were in your shoes and he expected me to pay way over the market value, his bloody greedy ears would be aching for a month...I'm sure he's made plenty of dosh over the years


I don't think it matters if the builder is a millionaire or not, OP signed contracts and the price is held within, would you let a house go €35,000 less simply on the back of one valuers estimation.



> It has now been valued at €35K below the purchase price



I would definitely get another valuer and point out that the purchase price is the current value, it shouldn't be a stretch for him to do this.




> It wasn't possible to get a valuation on a property that was not complete



This should not have been the case, the valuer can value a property not yet completed by commenting on what level the property is at, current value, and value upon completion. They will also usually recommend a final survey for when property is completed and this is just to look for signs of subsidence etc. - Just might be handy for you to know for the future.



> The house is off the plans so unless it's over 125sqm or the original poster is an investor then SD is not an issue.



furthermore if properties bought as a principal residence exceeds 125sqm, stamp duty is payable on the site value , or 25% of the full value of the property, whichever is the greater, and if both of these two values comes below €127,000 then property is again exempt from stamp duty.


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## Lobby (8 Aug 2007)

The current value may be established by similar finished units in the same development being on sale at 35K less than what was agreed here. In that case the valuer is going to use the current sale price as the value. In the event the bank had to re-possess and sell the house today, they would obviously only realise the lower figure. 

If there are no other similar units for sale, then the value is exactly as has been mentioned above, i.e. what the purchaser is willing to pay. 

Even if an original valuation was done at the full price, the final valuation forms for most banks has a question on it: "Current Value, if different from original valuation"


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## nelly (8 Aug 2007)

Can i ask do you want to walk away or try buy the house at this point? its not clear to me. If you are scared the prices will continue to decrease why are you even trying to get mortgage approval / valuation?


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## mprsv1000 (8 Aug 2007)

I don't think its a case of a house (be that any house) being worth waht a buyer is willing to pay if the buyer is planning on using someone elses money i.e. the banks.

In that case its only worth what the bank are willing to pay, by way of lending someone the money, unless someone is willing to put their own money in on top. Its would not make any financial sense to pay way over a current valuation.


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## mf1 (8 Aug 2007)

There are several separate issues here. 

1. Contract price. This is what was agreed between the parties and a Court will enforce it, if needs be. Whether or not the OP can arrange to borrow the funds or a part of them elsewhere is separate.
2. Current valuation. Its a shame but the market dictates what the  property is now is worth. This does not need to be the same as the contract price, which was the agreed price for the property at the time of signing the contracts. 
3. What a bank is willing to lend to a borrower. This is based on a number of issues: current value, ability of borrower to repay. 
4. Whether or not, if compelled to do so, the OP could find the difference  elsewhere and whether or not he wants to complete the purchase. 


In contract, the OP is bound to complete at the original price. If he cannot or will not do so, the Builder  is entitled to a range of reliefs. One of them is to put the property back on the market, sell for whatever he can get, and bill the OP for any difference. Or just take the OP's deposit  and release him from the contract. Or sue to enforce the contract.

I have had a number of clients seek to withdraw from contracts where they signed maybe 18 months ago and they feel now that there is better value elsewhere. Mostly the builders when approached have indicated that they do not have another purchaser, they do not anticipate finding another purchaser and they will pursue the purchaser to complete. Whether they would nor not is another matter but as long as the situation remains unresolved, you have nervous people looking for resolution and unable to move forward. 

I have never agreed with the concept of playing hardball when entirely in the wrong. 

mf


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## Sunny (8 Aug 2007)

mf1 said:


> One of them is to put the property back on the market, sell for whatever he can get, and bill the OP for any difference.
> 
> mf


 
Didn't realise that was one of the reliefs. Out of interest, is there *any* protection for people who buy off plans. They take on the risks that property prices don't fall and can't complete as seen above, as far as I know they can't flip contracts if prices rise before completion and they don't have any comeback to delays by the builders. It seems to me like the buyer is taking all the risk. Begs the question going forward, why would anyone buy off plans from builders???


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## LittleWalter (8 Aug 2007)

mischief said:


> Hi guys,
> 
> I purchased a property off the plans 18 months ago. It has now been valued at €35K below the purchase price.....  Yes, the property bubble has well and truely burst.....
> 
> ...


 

It depends on your circumstances. 

The fact that you were taking out a 100% mortgage suggests to me that you do not have other assets or much in the way of savings. Am I correct?

If so, there is not actually very much that the builder can do. Suing you would be pointless as you've got no money. He can't force you to take out a loan to buy the property.

Technically he could force you into bankruptcy but that would cost him money and he would get absolutely nothing back. He's not going to do it.

If you buy the house, you've lost £35k immediately. I wouldn't do it. I'd write him a nice letter explaining that circumstances have changed and that you cannot proceed with the purchase. 

A change of address might not be a bad idea though, in case he is the type to 'send the boys round!'


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## mf1 (8 Aug 2007)

"Out of interest, is there any protection for people who buy off plans."

No. This is sooooooooo   simple! Don't buy off plans. 

"why would anyone buy off plans from builders???"

People assumed that prices would continue to rise so that unless they got in there fast, they would not be able to buy. They took the risk. This is the downside of that. 

mf


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## sapmanie (8 Aug 2007)

Is it a home or an investment?If a home, what difference does it make what the current price of the property is? Ok it'd be nice for it to be worth more the day you move in, but that is just yout being greedy. You have a home, be happy, fruitful and multiply. In a few years, house prices will rise again so makes no odds.If an investment, it's just tough as you'll have to wait longer for capital appreciation.


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## ClubMan (8 Aug 2007)

100% mortgage might suggest that it's a _FTB_ _PPR _rather than an investment?


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## Sunny (8 Aug 2007)

sapmanie said:


> Is it a home or an investment?If a home, what difference does it make what the current price of the property is? Ok it'd be nice for it to be worth more the day you move in, but that is just yout being greedy. You have a home, be happy, fruitful and multiply. In a few years, house prices will rise again so makes no odds.If an investment, it's just tough as you'll have to wait longer for capital appreciation.


 
I think the problem is that the OP is not in a position to complete as the bank will only lend on the current value of the property. So he short the agreed price in the contract with the builder


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## Bronte (8 Aug 2007)

Don't know if they can but maybe the bank can lend you more than 100%.  If you can't do this borrow from a credit union or family member.  Only borrow what you can afford to repay though.  

Alternatively ask the builder does he know any valuers who will value the house at the amount you want to borrow. Or does the builder have a friendly bank that would be willing to lend to you.   This bank will want the houses to be sold so the builder doesn't go out of business etc....

Personally I would not like to be buying a house that is overpriced. But that's a decision for you.


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## ClubMan (8 Aug 2007)

Aileen2 said:


> Don't know if they can but maybe the bank can lend you more than 100%.


Extremely unlikely that any lender would lend more than 100%.


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## MrMan (8 Aug 2007)

Just to take a step back, have you yet taken advice from another valuer as to what its worth, you could approach EA's with the view of telling them that you are selling on once completed and see what values they come to you with. If you are making assumptions off of one persons valuation they could simply be under valuing the property. 

If all come in at similiar prices then state to the builder in a letter that because the valuations are coming in €35k below what you agreed to pay, your 100% mortgage will only cover the original price minus €35,000. Tell him you are willing to wait until the market allows the value to meet the mortgage price because that is the only scenario that will provide you with the means to pay for the house. Tell him that you are open to suggestions, but as it stands you have exhausted every avenue to provide you with the funds required to no avail. Keep in contact with him and find a common enemy with him i.e valuer, bank etc so that he may start viewing things from your side. As long as he feels that you still want the house he might be more open to negotiation, because I'm sure some builders are experiencing people trying to pull out during a downturn even though they can well afford the property.


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## PatriciaFox (8 Aug 2007)

If it is a 100% mortgage, when initial contracts were signed, wasn't the original mortgage amount drawn down in part in order to cover the non-refundable deposit?


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## LittleWalter (9 Aug 2007)

I can' believe that people are actually advising you to try to get a higher valuation done so that you can buy this house!

It's dropped in value by £35k in the last 18 months and the house price crash has not even properly got under way yet! I would suggest that it is likely to fall in value by another 25-40% over the next 4-5 years

The contract and the law are on the side of the builder. However, I would still urge you to leave your deposit behind and walk away.

The builder may have the law on his side but in practicality *there is nothing he can do.*

Total worst case scenario is going bankrupt. But if you have no real assets this is a walk in the park compared with being lumbered with a big mortgage and an increasingly large chunk of negative equity.


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## LittleWalter (9 Aug 2007)

sapmanie said:


> Is it a home or an investment?If a home, what difference does it make what the current price of the property is? Ok it'd be nice for it to be worth more the day you move in, but that is just yout being greedy. You have a home, be happy, fruitful and multiply. *In a few years, house prices will rise again so makes no odds.*If an investment, it's just tough as you'll have to wait longer for capital appreciation.


 
I think everyone now realises that they are going to fall though the floor first!

It could well be 10-15 years before the value of the house gets back to the level of the original valuation in real terms.

Don't walk away - *run!*


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## MrMan (9 Aug 2007)

> I would suggest that it is likely to fall in value by another 25-40% over the next 4-5 years



I would suggest that you take a calm view of things without listening to wild unsubstantiated speculation.


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## Debtwish (9 Aug 2007)

MrMan said:


> I would suggest that you take a calm view of things without listening to wild unsubstantiated speculation.


 
Agreed. However, the suggestion by some folks here that house prices will not fall further is also unsubstantiated speculation.


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## mf1 (9 Aug 2007)

So, back to the OP – does he have any options? 

I think he’s got a broad spectrum of ideas from the “yes, you are in trouble and you have to try and negotiate your way out and good luck in trying times” brigade  to the “no problem, mate, you’ll be grand – just tell him you’re walking and give him the two fingers”  side. 

In most cases, there are so many issues going on ( house prices/Values, bank nervousness, relative position of purchaser and builder, etc.,etc) that the only possible advice to give is to examine the range of options and work through them with the solicitor/EA/builder with a view to finding a resolution.

mf


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## derryman (9 Aug 2007)

http://www.daft.ie/discussions.daft?dcn[forum_id]=4&limit=10&dcn[discussion_id]=99589&dcn[root_discussion_id]=0&dcn[forum_id]=4

Original poster - read the DAFT forum thread above and make up your own mind - also please be aware that this website expressly forbids discussion of house prices movement and as such the advice published MIGHT be biased towards the positive.


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## foxylady (13 Aug 2007)

> Don't walk away - *run!*


 
I am sure they cannot afford to walk away or run as their deposit is a substantial amount of money to most people.


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## SidTheDweeb (13 Aug 2007)

If you don't buy and back out - and the builder does take legal action - while this is happening are you free to purchase another home?

Or is there some sort of legal noose dangling above your head that will prevent banks lending you money?

Can someone explaint he legality here?


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## mf1 (14 Aug 2007)

"If you don't buy and back out - and the builder does take legal action - while this is happening are you free to purchase another home?"

Of course you are free to do so - but its not exactly the brightest idea. Why would you have the threat of legal proceedings on one property and commit to another? Would you not find it all a bit stressful?

mf


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## Paulone (14 Aug 2007)

Back to the OP's dilemma, which is real legal & financial 'Rock & hard place', has the solicitor who advised that the contract with the builder is binding not got anything to say about this?

While its not clear from the OP's description if this solicitor is the same one who supervised the contract signing 18months previously, would it not be in the solicitor's interests to outline the legal scenarios to follow from various ways forward rather than abandon a client in financial quicksand?

If not the OPs solicitor then a legal person familiar with contract law would be useful - it surely must happen all the time that prices agreed months before change afterwards and business organisations fight with eachother about this (and settle)?

There has to be some compromise position that sits somewhere between the OP running away and their trying to find a 120% mortgage?

Unless some very unique situation happened, there must be more people than just the OP in this situ? What about the other people who must have signed a similar contract with this builder? Is there strength in numbers here?


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## mf1 (14 Aug 2007)

Mischief posted again to update - 



Post removed - appreciate all your replies. Apologies, I haven't had time to reply individually. 
The builder has agreed to lower the value of the property this morning. Looks like the developers
have as much to lose as the purchaser. Whilst, I didn't want to drop my deposit, the builder
didn't appear too keen to go to court or have poor publicity in the development as units still for sale, so we've come to an agreed valuation. Thanks all.

mischief


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## CCOVICH (14 Aug 2007)

While I am glad that the OP seems to have had their problem solved, I consider it poor form of them to remove the original context and facts of the situation  .


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## MrMan (14 Aug 2007)

> While I am glad that the OP seems to have had their problem solved, I consider it poor form of them to remove the original context and facts of the situation



I am at a loss did something happen here?


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## mischief (14 Aug 2007)

Apologies, I've updated the original post to include a general synopsis 
of the problem. I hope that clears things up.

Mischief


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## CCOVICH (14 Aug 2007)

Thanks-I'm sure that this thread may be useful to anyone else who may find themselves in a similar situation.


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