New builds- buy 75% of house now and 25% in 5 years.

pinkshoes

I would look at what a non-new build of a similar size in the same area costs, and if that's around the £250 mark, then it seems a fair price for it. I wouldn't mess around with their gimmicks. Just offer them £230k for the all in price.

If other 4 bed older properties in the area are around the £210k mark, then offer them £210k all in.

A lot of builders are having cash flow crisis, so NEED to sell in order to pay workers/suppliers etc... so they might accept a good deal.

Richard_Webster

pinkshoes wrote: »

I would look at what a non-new build of a similar size in the same area costs, and if that's around the £250 mark, then it seems a fair price for it. I wouldn't mess around with their gimmicks. Just offer them £230k for the all in price.

If other 4 bed older properties in the area are around the £210k mark, then offer them £210k all in.

A lot of builders are having cash flow crisis, so NEED to sell in order to pay workers/suppliers etc... so they might accept a good deal.

I agree with this post.

Incisor

Richard_Webster wrote: »

... So you buy a house allegedly worth say £200K and take out £150K mortgage. You owe 25%. In 5 years time:

If the house is worth £300K then you will have to find £75K on top of your existing mortgage - total mortgage £225K -only 75% LTV (loan to value ratio) but will you have sufficient income to support the loan?

If the house is worth £220K then you have to find an extra £55K but that makes total borrowing of £205K - 93.18% LTV. Will a remortgage/further advance for such a high LTV be available then?

If the house is worth £180K then you have to find another £45K - that makes £195K borrowing - and negative equity, so you can't borrow it.

Therefore this is a highly dodgy scheme and I would never advise any buyer client to touch anything like this with a very long bargepole - it is far too risky.

OK, it is bad for the buyer. But if that is the case, is it good for anyone? I am now wondering whether builders are getting the 25% underwritten by finance houses at for say 15%. Thus the builder takes something of a hit, but gets 90% of the asking price and the finance houses get a cut of a huge number of houses at 60% of current value - which won't turn a loss after 5 years, the value could be argued up, simply by the expedient of getting an associate to buy out the first house to come on the market on any scheme at around 5 years for an inflated price.

It looks to me like the way to buy here is to work out what the sharks are offering and offer the builder 75% plus the sharks' contribution - only if it works for a buyer like that is it worth looking at.

PasturesNew

It's not about you being on a spine of pay and you think you'll be earning X in 5 years' time. It's more complex than that.

- what if you are incapacitated due to ill health?
- what if your workplace stresses become so much you feel the only option is to leave?
- what if you get pregnant?
- what if you split up/divorce?
- what if there's some epiphany and you want/have to move and need to try to sell it on with the peculiar clause?
- what if you find in 4 years' time you've achieved your higher earnings - and perhaps a promotion - and now want a nicer/bigger/lovelier/better placed house?

And those are typical life events. As house prices are falling and lending criteria is tightening, it could be that you simply can't raise the mortgage needed.

Spreadsheet some scenarios:
£200k - house now
£150k - buy this bit
£50k - combined earnings

In 4 years' time
£160k - house now
£40k - extra mortgage required
£60k - combined earnings

You're now trying to raise £150k + £40k mortgage on a house worth only £160k.

If the LTV at that time is 10%, you'd be able to get a £146k mortgage. So, you'd have to raise the extra £40k by some other method. But how? Personal loan? Borrowing from family?

And it's in the contract ... you HAVE to come up with the other £40k... but how?

Your extra earnings don't help much if the value of the house has fallen.

obsessed_saver

guppy wrote: »

Some people that did this featured in the 1995 episode of Panorama that was linked to here a few days ago. Watch it before buying:

http://www.bbc.co.uk/mediaselector/check/bristol/realmedia/092007/bs_panorama?size=4x3&bgc=C0C0C0&nbram=1&bbram=1

OMG. The points they made in this programme are still very valid today!

And those people interviewed were not trying to make a profit or anything. They were just people wanting to buy their own homes, being duped in by shared equity schemes, and payment protection insurance! Both of which are still happening today, 13 years on.

BettiePage

I can't watch that Panorama programme. It keeps asking me to find a plug in but it won't work. Using a Mac, tried FF and Safari. Can use iplayer no problems.

Any ideas?

turbobob

BettiePage wrote: »

I can't watch that Panorama programme. It keeps asking me to find a plug in but it won't work. Using a Mac, tried FF and Safari. Can use iplayer no problems.

Any ideas?

It's in Real media format. I think if you download this it should work - http://www.apple.com/downloads/macosx/internet_utilities/realplayer.html

Bf109

Whats the point? You still pay 100% in the end.

Total stupidity.

PasturesNew

Bf109 wrote: »

Whats the point? You still pay 100% in the end.

Total stupidity.

It depends on which posting you are asking this of.

What is the point of SO? For some it is the only way they can secure their tenure in a house. They can get their own place now, while the cheapest property might be too pricey for them to get a mortgage.

What is the point of buying 75% now and 25% later? It makes FTBs think they're getting a special deal, and maybe they can't afford 100% of the SO part either right now.

I had a SO house. When I bought my half I never expected a time to come when I could afford the 2nd half. I was just happy that securing half meant I had a home that I could feel settled in and that nobody was going to want me out etc.

LittleMissAspie

Round here I wouldn't spend the asking prices of SO houses on 100% of it. Waaaaaay overpriced, even more than normal houses.