Due to complete on new build and cant get finance!!

Lot_lad

Hi,

I put a deposit down 10%,on a new build property with Berkeley Homes in June 2007 (talk about a peak) and the development is due to complete next month.

However, the mortgage providers valuation is 60% of the original value and Berkeley Homes will not reduce the price. I have met them twice and they will not negotiate and say I am bound to the original price. This leaves me with 66k to find?! I have no savings (savings were the deposit) and they are serving notice so what can I do??

Solicitors say they cannot find fault with the contract and developers wont budge and say they will sue. Will they just keep my deposit and sue me for the rest? If I was made bankrupt I would surely lose my job.

Losing lots of sleep and need help please!

Gwhiz

Unfortunately this is the risk of buying off-plan. If property prices had rocketed you would still expect them to honour the agreed price. I do not think there is a way out of this...either you will need to purchase or lose your deposit!

silvercar

Is the home ready on time? or has the lender caused a delay? It is in Berkeley homes interest to sort this out as much as yours. Keep them in the picture and see what they suggest.

The cases where a builder has taken a buyer to court for failure to complete are few and far between. They are generally commercial transactions, not individuals.

Builders to not want the negative publicity of explaining to the court how they sold for a price that is way above a valuation. They have never actually provided anything that was worth the price agreed. At the time of you signing contracts it was a building site with a future projected value that now hasn't materialised.

Lot_lad

The home is ready on time and the clause on the contract only mentions if they are over 12 months late which gives them another 11 months.

In terms of the present situation, there are a much larger number of individuals who are in a similar situation - would that affect their decision to take me to court?

If they do not budge or do not provide some way of reconciling would there be a way for me to get my deposit back?

franklee

silvercar wrote: »

The cases where a builder has taken a buyer to court for failure to complete are few and far between. They are generally commercial transactions, not individuals.

Have you considered that may be because in the boom times this situation just didn't happen with individuals because the mortgage providers valuation was not significantly lower and if it was there wasn't loss to the builder as the property could easily be sold to some one else?

The OP agreed to buy in June 2007. Times have really only changed in the last year and thus allowing for building time we are seeing the first cases of failure to complete on a new build starting to come to light now.

silvercar wrote: »

Builders to not want the negative publicity of explaining to the court how they sold for a price that is way above a valuation. They have never actually provided anything that was worth the price agreed. At the time of you signing contracts it was a building site with a future projected value that now hasn't materialised.

But they sold in line with valuations then, presumably the OP had it valued by his lender who agreed to lend to that value. During the boom I didn't see buyers lining up to pay the builder the new higher value when the property was finished, quite the reverse buying off plan and selling on was a way to make money. You have no way of knowing the builder won't sue, I'd guess they will.

Lot lad, can you get some professional advice on debt and bankruptcy and who will hopefully provide assistance in negotiating with the builder?

silvercar

franklee wrote:

But they sold in line with valuations then, presumably the OP had it valued by his lender who agreed to lend to that value.

Clearly they didn't sell with a true estimate of the value at the time it would be ready, or there wouldn't now be a problem.

The lender agreeing to lend to that value is an interesting point. OP did you have a mortgage offer when you exchanged? Did your solicitor warn you that it was risky to exchange contracts without a mortgage offer that would be valid at the time of completion?

Times have really only changed in the last year and thus allowing for building time we are seeing the first cases of failure to complete on a new build starting to come to light now.

This has been going on for at least 6 months. There was an article in the Times about it a while ago. It quoted a case where a builder had sued, in that case the court looked at the financial impact on both parties. Here:

http://property.timesonline.co.uk/tol/life_and_style/property/article4913206.ece

franklee

silvercar wrote: »

Clearly they didn't sell with a true estimate of the value at the time it would be ready, or there wouldn't now be a problem.

The lender agreeing to lend to that value is an interesting point. OP did you have a mortgage offer when you exchanged? Did your solicitor warn you that it was risky to exchange contracts without a mortgage offer that would be valid at the time of completion?



This has been going on for at least 6 months. There was an article in the Times about it a while ago. It quoted a case where a builder had sued, in that case the court looked at the financial impact on both parties. Here:

http://property.timesonline.co.uk/tol/life_and_style/property/article4913206.ece

Here are the links to the last couple times you have quoted this article as you can see other posters have referred you to why this isn't relevant now so I link to those posts too. As you can see that case refers to a rising market so the builder didn't suffer loss yet still was able to keep the deposit. Now we are in a falling market the builder will suffer loss too, so there is no saying that the buyer just owes the deposit:

http://forums.moneysavingexpert.com/showpost.html?p=14976543&postcount=18

http://forums.moneysavingexpert.com/showpost.html?p=15163897&postcount=22

http://forums.moneysavingexpert.com/showpost.html?p=14980675&postcount=15

Premier wrote: »

Thanks for the full details GDB222

Reading through quickly it appears the Nigerian only agreed to a 10% deposit. The reference in the Times article to it being very large was because the property itself was £2.16m.

The basic issue appears to be that the vendor made a substantive profit because of the purchasers failure to complete based around the background of a rising market at the time.

The vendor was entitled to retain the deposit. The vendor was not entitled to additional costs in this particular case simply because the vendor didn't make any loss overall.

http://forums.moneysavingexpert.com/showthread.html?t=1218203

So in a rising market the builder typically keeps the deposit, in a falling market he can claim his losses too if they are greater than the deposit paid which they seem to be in the case of Lot lad.

As for if the property valuation was a true estimate of what it would be on completion:

a) A buyer should get their own, typically their own lenders valuation.

b) No one including the builder has a crystal ball to be able to see what the price will be from June 2007 till now, i.e. nearly two years into the future. That is the risk the buyer takes in agreeing to buy off plan.

angel81

Hi there

Unfortunately this has affected a number of people. A support group has been set-up to investigate different options: search for berkeley-customers on Yahoo Groups (I'm not allowed to post links as a new user!)

HTH

helenjg

Just a thought...... You shouldn't accept the house as being completed until all the requirements of the original planning permission have been fulfilled. Have you checked the house builder has complied with all the conditions on the original permission? If they haven't then I'm pretty sure you could delay the handover - not sure you could delay it for 11 months though.

Richard_Webster

Did your solicitor warn you that it was risky to exchange contracts without a mortgage offer that would be valid at the time of completion?

This is pretty important. I would never advise anyone to exchange contracts without a valid mortgage offer. Have a look at any written material you had from your solicitor on the subject. If you were not celarly warned you may be able to sue him.

Also did you look at similar 5-20 year old properties in the area and compare the prices. A lot of builders just invented prices that were way over the top, or produced house types that weren't easy to compare with others in the neighbourhood, and nobody really thought through what they would sell for in the future, leaving aside any depression type conditions.

Jonbvn

angel81 wrote: »

Hi there
Unfortunately this has affected a number of people. A support group has been set-up to investigate different options: search for berkeley-customers on Yahoo Groups (I'm not allowed to post links as a new user!)

Here's the link!
http://groups.yahoo.com/group/berkeley-customers/