Overseas property. Advice desperately needed.

Miss_Sunshine1

Hi. I put a deposit down on a property in Pizzo, Italy over a year ago when the pound was relatively good against the Euro. I have paid approx £30,000 however as the exchange rate is so poor I will not be in a position to find the additional funds required on completion. My solicitor has issued a letter advising there are two options. They can negoitate to get me out of the contract and I will lose all the deposit or I can find a 3rd party buyer who can pay me the deposit and a new contract drawn for them. As my solicitor is on holiday until 15th January I have been unable to discuss this further. Does anyone have any advice on how I would find a 3rd party buyer? Is the estate agent I orginally visited able to do this? I assume this would not be the case as I have not exchanged final contracts. Its all so confusing or maybe its because I am blonde lol All advice greatly appreciated x

Rick62

The original EA should be the best person to find another buyer, unless its part of a new build development and the EA is more motivated to sell other previously unsold properties.

You would however have the EA fees again and maybe other government fees and legal fess etc.

Can you not take out a Euro mortgage on the property? What is the total property value?

Miss_Sunshine1

Hi, thanks for responding so quickly! The total value of the property is €95,500 so I have approx €55,000 left to pay. I have £25,000 in savings and knew I would have to get a small loan for the remaining balance, however, in the current market that means I would require £30,000 instead of £13,000 as originally thought. I wanted the property so I could rent it out but I am concerned that with the current climate I may not have this to rely on. Thanks again

Rick62

You could take out a Euro mortgage on the property. Although you would have a larger mortgage than you planned the asset (i.e. the property) is also worth more in sterling terms. If paying E95k this was probably about £70k and now with the weak pound is over £90k, so not all bad news. There are some good mortgages available, probably about 5% interest and then the mortgage will be in the same currency as the property.

dwsjarcmcd

I would agree with Rick, it would be mad to lose £30k when you have seen the property rise because of the changes in rate. We don't know much about you income etc but I think a euro mortgage is your best route at the moment.

My other piece of advice is to accept bookings in euros, paid into your euro bank account and given the size of the mortgage, it won't take too many bookings to help fund the repayments.

I do know your issue to an extent as we have an apartment in the South of France, where we were lucky and transferred our main payment at €1.47. By the time we completed our mortgage payments were locked in at €1.26 until this March. Thought that was rubbish at the time!!

We will see a big increase in the mortgage payments but we have some euros in our French account which will help.

When are you due to complete?

Miss_Sunshine1

Thank you both for your advice. I am due to complete in March 2010 so I am probably panicking over nothing. Hopefully by that time everything will have settled down. I hadn't even considered a Euro mortgage so I feel much better that I have this option. Thanks again x

dwsjarcmcd

Miss Sunshine1, you've got time on your hands and who know what will happen to the exchange rate by the time you complete, but many experts (not me!) are predicting a slight recovery in sterling.

Also you can fix the exchange rate you get for up to 2 years using currency brokers, so if you can afford the repayments on the rate you agree to, then fluctuations aren't really such an issue.

David

robin_banks

There is likley to be a recovery in sterling, to around the 1.10 EU level.

GDB2222

Umm, any idea what the property is actually worth? What do similar ones actually sell for, and what are price trends like in that area? The UK is not the only area having a property slump.

dwsjarcmcd

GDB2222 wrote: »

Umm, any idea what the property is actually worth? What do similar ones actually sell for, and what are price trends like in that area? The UK is not the only area having a property slump.

And if it doesn't sell then, or doesn't complete then she guarenteed to lose £30k out of a €95k purchase price! Also she has made money on the exchange rate movement, so it would seem to make more sense to complete and go back to the original plan of renting it out.

Also if the property is not due to complete until March 10, she probably won't know its value, other than by becoming a distressed seller, which by the sounds of it, she is not.

GDB2222

dwsjarcmcd wrote: »

And if it doesn't sell then, or doesn't complete then she guarenteed to lose £30k out of a €95k purchase price! Also she has made money on the exchange rate movement, so it would seem to make more sense to complete and go back to the original plan of renting it out.

Also if the property is not due to complete until March 10, she probably won't know its value, other than by becoming a distressed seller, which by the sounds of it, she is not.

Well, we know the purchase price. What we don't know is what it's worth and where the price is headed, ie up or down? If, purely hypothetically, it was only ever worth say €50k, it may be better to cut and run. I have no idea whether that is the case, but it seems totally daft not to at least consider that possibility. You've only got to look at some new-build properties in the UK to see that sort of thing in action.