Affordable Housing : clawback if fall in apartment prices?

[FTB81]

Just wondering if anybody knows the situation with clawback on affordable homes if there is a fall in house prices? All the examples the county council give are for the situation that prices go up and you basically split the sales proceeds based on the % discount you got on purchase. What happens if the price falls? Do the council split the loss with you? Or are you left with the full loss to bear and negative equity?
Any thoughts would be appreciated!!

 

[banba]

Re: Affordable housing clawback if fall in apartment prices?

I don't understand. The claw back % is worked out on the purchase price so how would it matter if the house value dropped or went up? Would you not still be working on the same % of the purchase price anyway?

 

[petra]

Re: Affordable housing clawback if fall in apartment prices?

If the value of the property drops - then what you have left after paying your % clawback won't be enough to cover the mortgage. So you'll be left in negative equity. They never considered that house prices might fall when setting up the scheme. It's not looking like such a great idea now. Am just about to sign for an affordable house, and the market value they used to calculate the clawback is now more than the house is worth. I wonder if it's possible to re-negotiate before signing?

 

[Afuera]

Re: Affordable housing clawback if fall in apartment prices?

The Housing (Miscellaneous Provisions) Act 2002 allows the clawback to be waived if there is a fall in the price. This means that negative equity is avoided unless the price goes below the purchasers mortgage.

http://www.irishstatutebook.ie/2002/en/act/pub/0009/sec0009.html


"The amount payable under paragraph (a)" here refers to the clawback.

(d) Where the amount payable under paragraph (a) would reduce the proceeds of the sale (disregarding solicitor and estate agent's costs and fees) below the price actually paid, the amount payable shall be reduced to the extent necessary to avoid that result.

 

[Howitzer]

Re: Affordable housing clawback if fall in apartment prices?

I wonder if it's possible to re-negotiate before signing?

Read some of the longer running threads on Affordable Housing. A large number of people have done just that but they had to jump through a lot of hoops and not take no for an answer.

The issue isn't really about being in negative equity (as Afeura as pointed out) but about never EVER being in positive equity as the initial valuation is so high as to to never (in the short to medium term) be able to achieve the same price on the open market. In the long term it doesn't matter as the clawback reduces to nothing typically after 10 years.

 

[swordshead]

Re: Affordable housing clawback if fall in apartment prices?

If the value of the property drops - then what you have left after paying your % clawback won't be enough to cover the mortgage. So you'll be left in negative equity. They never considered that Am just about to sign for an affordable house, and the market value they used to calculate the clawback is now more than the house is worth. I wonder if it's possible to re-negotiate before signing?

Petra..if you're about to sign on an AH property you should honestly find out more information as everyone should be aware when getting an AH property that 1.you cant go into negative equity 2.yes it is possible to renegotiate the market price..it takes patience and persistance but if you feel like youve a valid case keep persuing it.

 

[Afuera]

Re: Affordable housing clawback if fall in apartment prices?

everyone should be aware when getting an AH property that 1.you cant go into negative equity

Technically this is not correct. It's still possible, but your chances are reduced with the provisions that are in place.

 

[lightup]

Re: Affordable housing clawback if fall in apartment prices?

In the long term it doesn't matter as the clawback reduces to nothing typically after 10 years.

As I understand it, the clawback begins to reduce by 10% each year after year 10. It does not reduce to nothing until year 20.

 

[seriams]

Re: Affordable housing clawback if fall in apartment prices?

Yes, lightup that is my understanding too. It's 20 yrs before the clawback is obsolete.

 

[FTB81]

Thanks for all the responses! Certainly makes me feel better about the process.

 

[Cheeus]

Re: Affordable housing clawback if fall in apartment prices?

The Housing (Miscellaneous Provisions) Act 2002 allows the clawback to be waived if there is a fall in the price. This means that negative equity is avoided unless the price goes below the purchasers mortgage.
.

It's true that the Act covers negativity equity but apparently the contracts do not. Typical of our public sector not to adequately plan for future down turns and to be content to sit on a time bomb.

If it is not in the contract how can a buyer have peace of mind that they can sell their property and be protected by the Act. For example - how long would the property have to be on the market for before the council are willing to take the hit? There is nothing stopping them from putting a period of years on it since it is not there in the contract.

Too many questions left unanswered about this in my opinion. I could not get a straight answer to the nature of the protection against negative equity because the councils / AHP don't know themselves.