Bought new build, finished in summer 09, can we renegotiate as prices slide further ?

alunharford

Consider the worst case scenario, assuming that you've currently got a good deal (I can't comment there as I've not seen the property).

Assume that between now and summer 2009 house prices continue to fall as generally predicted, losing 20%. You're now in the unfortunate position of buying a £236,000 house for £295,000.

Losing the £59,000 is already bad.
You may find it's even worse, because no lender will let you borrow more than 90% of the new value (£212,400) so you need to find £82,600. If you can't find that, you've already signed a contract to buy the house so the developers will sue you and you will go bankrupt.

Personally, I'd get out for now, wait until they're pretty much finished and reopen negotiations at that point. You may find you can get the property much cheaper then anyway.

carolt

Why not pull out now and wait?

Either (a) the devt will go ahead, and you can buy later down the line, when prices have fallen and the house is already there so you can see what you are buying. It's not as though prices are exactly likely to rise in the meantime, is it?!

or (b) the devt will not go ahead, the developers may go bankrupt, prices will almost certainly fall further, etc.

Either way, you will be much better off pulling out now and buying at a later date. It's not as though you can move in now, anyway, so in the kind of market we're in now, I simply cannot see any logical reason for committing yourself to this house now.

You mentioned that the cheapest equivalent non new-build house was a fair bit more - but not that much more. Why not offer them the same as you've agreed to pay for this as yet to be built house, and see what they say? They may well jump at a potential buyer with no house to sell and an agreed mortgage. Worth a try.

Or sit back and wait another year - you weren't going to be moving in for another year anyway. Then you'll be in a better position to take advantage of continuing falls.

silvercar

Consider, and run past your solicitor, the risks of exchanging with no stop date and finding your mortgage offer has expired and you can't secure another one.

Amino

I guess the issue for us is that (if we pull out and wait) is that their is only one more property of this type available for sale on both phases of the site (Phase 2 has just started to be developed), which is a worse position on the plot with a smaller garden and only a single garage which is not attached to the house.

Also at the ripe old age of 24 we never thought we could get a house like this for at least another ten years so there is some degree of grab it while you can whilst at the same time trying to weigh it all up and keep as level headed as possible which is proving somewhat difficult.

If we are in contract at an agreed price and the property is downvalued by the lender, they would not lend the money, that said if I showed to the deveoper then would they not be inclined to accept the downvaluation of the proprerty than lose the sale comepletley ?

I dont think even in this economic madness that we would/should get refused a mortgage as we have £121,000 as the deposit for this house, at £295,00 sale this is a LTV of ~59% !? if i've done the maths correctly..is this a wild assumption or am I fair to say this ? As this one is going in my name I would considered as a FTB, decent job, no credit cards, only one current account operating an overdraft of £5k..I know every case is individual but on paper it does not sound like a high risk loan to lender surely ?!?

If the development drags on past the date they gave then this would not be ideal but I think when it boils down to it we will be based from my other half parents house so there are going to be minimal overheads running up to that time, obviously if I were renting then I would wholeheartedly agree with most comments that hav already been made re finishing dates


And finally im not sure wether I should actually factor in the fact that they are paying the stamp duty from their own pocket so that £295,000 in reality from our perspective is £286,150 ??

GDB2222

If we are in contract at an agreed price and the property is downvalued by the lender, they would not lend the money, that said if I showed to the deveoper then would they not be inclined to accept the downvaluation of the proprerty than lose the sale comepletley ?

They don't lose the sale completely, do they. They get to keep your 10% deposit and sell the property to someone else. They also get to chase you for any loss they suffer over and above the 10%. As you have £121,000 available, they will be able to get their money out of you. So, they can sell the property for say £195,000 to someone else. They have your £30k deposit, which they keep, and they collect the other £70k from you personally. There's absolutely no incentive for them to reduce the price they sell to you at.

GDB2222

Oh, and you have to take any incentives such as stamp duty payments into account in calculating LTV. Also, if the price comes below £250k, and it's not that far off, the stamp duty goes down to 1% anyway.

Amino

would they not have to work something out though if the lender simply said the property was worth less than they are asking for it and they would not lend to us on that basis ? Prob a stupid question but hey...

GDB2222

Amino wrote: »

would they not have to work something out though if the lender simply said the property was worth less than they are asking for it and they would not lend to us on that basis ? Prob a stupid question but hey...

Yes, it's a stupid question, I'm afraid.

Amino

fair enough its my first/ our second house purchase so need to cover all bases

GDB2222

Amino wrote: »

fair enough its my first/ our second house purchase so need to cover all bases

Basically, buying off-plan violates one of the basic rules of house purchase. That rule says you should have your finance in place before signing the contract. However, because the contract is so open-ended, it's impossible to have a finance offer that lasts long enough.