Bank reducing loan offer - can't afford to complete

H

Havana

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Hi,

I signed contract on a new apartment approx 17 months ago. I knew at the time it might be a risk but it was one I was willing to take. I was approved for an 82% mortgage - I had the balance from the sale of a previous property. I paid a €17,000 deposit.

The property is complete about 6 weeks but for various reasons I had to delay completing. Last week the bank requested that the property be revalued - I wasn't surprised and didn't hold out too much hope for a positive outcome.

Not surprisingly the valuation came back €25,000 less than the purchase price. The actual properties are now selling for €40,000 less than I signed at.

The bank are only willing to lend me the 82% of the value - so I am short €22,000. There is really no way for me to come up with the extra cash.

If there is no way for me to financially complete can the force me too? Is there any room for me to negotiate considering the current market?

I'm still quite emotional about this - not yet in the place to be able to look at it in a rational, logical way. I will of course be in touch with my solicitor and broker today but just trying to get an idea of where I stand. It's been suggested this doesn't have to be a major disaster - my head can see that, the heart is yet to catch up!!!

Thanks
 
There are other threads on this subject if you do a search. Talk to your solicitor to see where you stand with regard to the contract but chances are you are in a weak position and the developer can make you complete the contract. Talk the developer and see if they are willing to renegotiate. In this market, they might be willing to take the reduced price.
 
If the properties are selling at 40K less than what you signed at, then why is yours valued at only 25K less?

A more pertinent position should be that you negotiate for the lower figure with the solicitor/developer?

Why people look at this situation as a negative is beyond me!!!
 
Lobby said:
Why people look at this situation as a negative is beyond me!!!
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Because she has probably signed contracts at the higher price and the developer does not have to accept the lower offer or negotiate. He can make the OP complete the terms of the signed contract. If the developer plays hard ball, the best the OP can hope for is that they are allowed walk away with just losing their deposit. Thats why people look at this as a negative situation.
 
Losing a 17K deposit is better than paying 25 or 40K over the odds for a property, especially when you add the cost of borrowing that 25K/40K into the equation.

If they've no money, the developer can sue them all he wants - he won't get anything though.
 
I think most people though to be fair would struggle to see the positives in a situation where the best case scenario is losing €17,000!!
 
Lobby said:
Losing a 17K deposit is better than paying 25 or 40K over the odds for a property, especially when you add the cost of borrowing that 25K/40K into the equation.

If they've no money, the developer can sue them all he wants - he won't get anything though.
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"Why people look at this situation as a negative is beyond me!!! "


This is a very ill informed view.
This is not a situation where people can just decide to walk away. There are signed contracts which give rise to legal obligations and consequences.
The person sued may not have assets now but they may very well have them in the future. Many of my clients are fortunate enough to inherit money.
In addition, if a judgment is obtained now and registered, it will seriously affect their credit rating.
It is an exceptionally difficult situation to be in.

mf
 
You could try to negotiate with the builder to lower the price. If this doesn't work (which is most likely), then tell them that you wish to pull out of the purchase, but that you want a written statement that they will not pursue the issue further. You would lose your deposit but if you still like this development, you could apparently purchase a property at 40,000 less than the original price and therefore be 23,000 euro better off than if you had completed your purchase at contract signing. I assume though that there would still be an albeit smaller shortfall in raising 18% of the purchase price.
 
I really can't believe the attitudes of some people to what essentially could be the best "gift horse" they ever stare in the mouth.

The best case scenario is that the purchaser gets the house at the 40K reduction, next best is 25K reduction, and so on. Losing 17K is never a good outcome (though it may be less worse than some others!!).

The developer will be keen (very) to sell the house, the purchaser cannot buy at the moment due to lack of funding. If the developer takes the legal route it will take at least 6 months and maybe much longer to get a resolution, which still mightn't result in any cash for him - and the house can't be sold in the meantime.

His best (if he's sensible) option is to renegotiate. Ignore his protestations about "no negotiations on price". He really has no choice.
 
budapest said:
You could try to negotiate with the builder to lower the price. If this doesn't work (which is most likely), then tell them that you wish to pull out of the purchase. You will lose your deposit but if you still like this development as much, you could still purchase a property at 40,000 less than the original price and therefore be 23,000 euro better off than if you had completed your purchase at contract signing.
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But as MF1 says, you are still depending on the developer. He can still sue for completion and get a judgement registered against the OP. Walking away from signed contracts is not easy as turning around and saying I don't want to complete so keep my deposit.
 
MF, you're in the trade, are there any cases where a developer has successfully sued a FTB to complete a purchase as in the case above?
 
Lobby said:
MF, you're in the trade, are there any cases where a developer has successfully sued a FTB to complete a purchase as in the case above?
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Not yet. But I'm sure it will happen. In many cases, deals will be done. Parents/friends/relatives will all get roped in. I am always interested in how funds can be found when it all comes down to it.

I do think though that people in these circumstances need to really educate themselves about the harsh reality of their own situation, take appropriate advices and formulate a realistic plan of action. Blithely assuming that (a) it will be fine or (b) there is no way the developer will sue will not sort out. I am truly shocked at people who think that because they either don't want to complete or have difficulty completing, that it is as simple as telling the builder - I'm not going ahead.

In saying that this OP is frank and open so the above comment does not apply to them.

mf
 
Thanks folks,

In answer to one of the questions, the property was valued at €15,000 (€285,000) more than they are selling for as my broker pushed that in the hope that it would make things easier for me. The (unlikely) upside of that is that it may stand to me in that I can afford to purchase at the highter price but the next person will only have to pay the €270,000 they are now going for.

I'm very aware that beacause the delay was really down to me that puts me in a weaker negotiating position. I certainly don't have any expectations that the bulider will take pity on me and make my life easy - they're in business to make money after all and I signed my name to a contract. I don't expect to be able to just walk away, at least not without some pain - financial or otherwise! I can only hope that the current economic climate will at least give me some chance of resolving this.

I know that when you look at the figures it can seem that I could come out on top, getting the apartment for a lower price, but this really all seems a little too easy for me! Surely developers have to safeguard against this, especially in these times!
 
Sunny said:
But as MF1 says, you are still depending on the developer. He can still sue for completion and get a judgement registered against the OP. Walking away from signed contracts is not easy as turning around and saying I don't want to complete so keep my deposit.
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Absolutely. Everything depends on how the developer would react. Realistically though, it's not in the developer's interest to force a completion. He just wants to sell all of his properties and will have little interest in legal battles over relatively small amounts. He almost definitely won't choose legal action in preference to negotiation of the contract. The OP should be totally upfront with him and should be able to find a solution.

In many countries, it is as simple as not completing and all you lose is your deposit. I wouldn't sign a contract, unless this was explicitly stated.
 
"In many countries, it is as simple as not completing and all you lose is your deposit. I wouldn't sign a contract, unless this was explicitly stated."

There is no binding contract to complete then and the builders bank would be unlikely to lend funds to actually build.

mf
 
It's certainly possible in other countries that a clause is inserted into the contract whereby only the deposit is lost (or double the deposit is refunded by the seller) if a sale doesn't complete. I guess this would pertain more to second-hand properties than new developments, but I have seen the wording in new-build project contracts also.
 
OP - builders are always open to negotiation, he has to be realistic especially as you are paying 40K over the current value. I would try to purchase at this 40K value as an opening bid/tactic. You have to play hard. I am assuming he does not know how much the bank is willing to lend to you. It is very worrying that a banks valuation is different to the current value. I wonder if the builder's bank is the same as yours. I wish you the best of luck becaue I think you are the first purchaser on here who has admitted that they knew what they were getting into when they signed the contract.
Budapest as far as I know contracts in Ireland used to have a mortgage clause but with the building boom builders were able to force purchasers to sign contracts without this clause. I believe this should never have been allowed. And I blame banks/law society/government for this - not the builders.
 
same in here, what are builders gotta do with the costings, they are just confined to make the building and get their money, the bank is the one that plays the whole lot off tricks.

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Havana, I feel you're pain. Not a nice situation to be in. I'm sure you're currently exploring all options, but it's worth telling the builders (via the agents) exactly what it is you can offer - they'd probably need copies of your original mortgage offer and the revised offer to back up your statement. Then just put the new figure to them and see what they say... I think that would be about the only way to achieve the 'positive situation'.
 
It would definitely be worthwhile speaking to the developer explaining your position. You are still able to complete at a price that is above the current asking price.

Depending on the development and location the developer might not get a better offer anywhere else and in the current market might be hard pushed to sell the property.

The other consideration I would have if I was the developer (open to correction) was that if i took your deposit and tried to pursue forcing the completion, this will be expensive, may be fruitless and I would be unable to sell the property during this process.
 
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