New build houses - equity shares

magicjohnson1984

Good evening all,

My fiancee and I went to view a new build house tonight and were considering offering on the premise of a 75% 25% equity share holding, where the house builder retains 25% in the house.

We were then told that if we wished to go on this scheme we would have to pay full price?

Can anyone let me know if this is correct, and usual on these schemes?

Your help is appreciated in advance,

Thanks.

Cat695

in my experience yes you will have to pay full price (give or take a couple a grand)

I was offered a 25k DISCOUNT if I DIDN'T use the scheme.....goes to show its not such a good bargian!

terrierlady

you can negotiate with taylor woodrow barratts and david wilson so i expect they all will

Richard_Webster

My fiancee and I went to view a new build house tonight and were considering offering on the premise of a 75% 25% equity share holding, where the house builder retains 25% in the house.

We were then told that if we wished to go on this scheme we would have to pay full price?

This really answers itself if OP thinks about it for a minute or two.

The implication is that there could be a discount if the scheme is not used. The discounted price is the real value of the property - because it is what someone would pay for the place in the open market. So using this scheme you will normally go into instant negative equity.

Example: House marketed for £200K. Will sell for £180K without 25% equity share. Therefore house only worth £180K. Assuming (big assumption) lender's valuer accepts the £200K value then lender might lend £150K. However, if prices don't change when OP wants to sell, he has to pay back 25% of value (£180K) to builder - that's £45K - but also has £150K loan from lender - in a couple of years this could have been reduced to say £143K but this would still mean that the house would have to sell for £143K + £45K + costs of sale say £3K = £191K to break even - but property only worth £180K.

This is another case where there should be a standard sticky warning. The question comes up so often on this board.

wsharp

Richard_Webster wrote: »

This really answers itself if OP thinks about it for a minute or two.

The implication is that there could be a discount if the scheme is not used. The discounted price is the real value of the property - because it is what someone would pay for the place in the open market. So using this scheme you will normally go into instant negative equity.

Example: House marketed for £200K. Will sell for £180K without 25% equity share. Therefore house only worth £180K. Assuming (big assumption) lender's valuer accepts the £200K value then lender might lend £150K. However, if prices don't change when OP wants to sell, he has to pay back 25% of value (£180K) to builder - that's £45K - but also has £150K loan from lender - in a couple of years this could have been reduced to say £143K but this would still mean that the house would have to sell for £143K + £45K + costs of sale say £3K = £191K to break even - but property only worth £180K.

This is another case where there should be a standard sticky warning. The question comes up so often on this board.

Hi Richard,

We are FTB,would appreciate any advice from you/the forum.

We put our offer down for a house 2 weeks ago and has been rejected. Their asking price was 195k, and all the way along we was lead to believe that they will accept an offer between 185-180k, however, we put the offer down from 175k all the way up to 185k, still been rejected. Yesterday, one of my friends pretend that she was interested in buying that house try to find out what is the figure they are looking for now, which they said they already had offer for 185k and they are looking for 187k to cover their legal costs. This to me I feel the sellers are quiet mean at this current market still so greedy, to us 2k more is not such a big deal, but i don't feel comfortable to deal with them. However, my husband is quite tempt to get this house. Also, after they turned our offer down, we looked at some new development, and I really liked one of them, and personally I would like to buy a brand new rather than 2nd hand (altho that house was only 4 years old). But I've got a husband who worries about anything and everything,grrr... so he's arguments with me are:
- new development even not build yet,at the current financial market, if the builders run out money cannot complete it would this be a problem?
- as its a brand new development, how about the neighberhood we will get: this one drives me really mad

I am really confused and depressed at the moment with the on going arguments have with him...

onthecase

My son is buying a house on this scheme.

He was to pay £110,000 but the mortgage valuers valued it at £95,000 so the builder reduced his price to £95,000. They are also throwing in all sorts for him, carpets, blinds, washer/dryer, fitted wardrobes, fireplace, so all in all I think it's an OK deal.

It's the only way he can start off and intends to be in the property for at least 6 years when hopefully he will have overpaid on the mortgage. His rent is more than the mortgage so if he's in it for the long run, he should be OK I think.

Richard_Webster

Hi Richard,

We are FTB,would appreciate any advice from you/the forum.

We put our offer down for a house 2 weeks ago and has been rejected. Their asking price was 195k, and all the way along we was lead to believe that they will accept an offer between 185-180k, however, we put the offer down from 175k all the way up to 185k, still been rejected. Yesterday, one of my friends pretend that she was interested in buying that house try to find out what is the figure they are looking for now, which they said they already had offer for 185k and they are looking for 187k to cover their legal costs. This to me I feel the sellers are quiet mean at this current market still so greedy, to us 2k more is not such a big deal, but i don't feel comfortable to deal with them. However, my husband is quite tempt to get this house. Also, after they turned our offer down, we looked at some new development, and I really liked one of them, and personally I would like to buy a brand new rather than 2nd hand (altho that house was only 4 years old). But I've got a husband who worries about anything and everything,grrr... so he's arguments with me are:
- new development even not build yet,at the current financial market, if the builders run out money cannot complete it would this be a problem?
- as its a brand new development, how about the neighberhood we will get: this one drives me really mad

I am really confused and depressed at the moment with the on going arguments have with him...

Well the first question is how brand new houses compare in price to the £175K/£185K/£195K band that you have had with the one you were interested in. The extra amount for a new house should really be very little - £5,000 maybe - but builders try it on and really load extra money onto the value because the house has an extra en-suite or whatever.

Also how did the one you were interested in compare with others on the market nearby? There needs to be some reduction from 2007 levels and you need to find out what similar houses were selling for then to gauge how much of a reduction the sellers have made - although as I have said in another thread the percentage variation will be different in different parts of the country - so national statistics are dangerous.