Response from Developer.......What do you think??????

jjlandlord

Mark148 wrote: »

The property was priced at £243.950 with an £18k incentive.

That's pretty clear to me that this means that the property is priced at £225k.
It's just that, for marketing purposes, it is presented as a discount from some higher price.

kingstreet

In these circumstances the mortgage application should be completed with £243,950 as the purchase price and the builder's "incentive" listed where appropriate.

The surveyor instruction will then show the transaction like this and the CML incentive form is handed to the surveyor at the time of the inspection to ensure he is aware of the structure of the transaction.

The surveyor then decides if the property is suitable security for the mortgage at the price agreed.

It is possible that, in this case;-

- the surveyor valued the property at £225k because that's what he feels it's worth
or
- the surveyor valued the property at £225k because the transaction wasn't recorded correctly in the mortgage application.

As I said earlier in the other thread on the issue, the incentive may have been disallowed by the lender as builder gifted deposit because at 7.7%, it exceeded 5% of the gross price.

Halifax criteria, for example;-

Builder cash incentives will typically be acceptable provided the value of these does not exceed 5% of the lower of purchase price/valuation.

Abbey;-

We will accept up to 5% cash back towards the purchase price (no financial limit) and builder’s payment of legal fees and stamp duty only

So, in this instance, the transaction would best be structured as a price reduction from £243,950 to £236,842 with a 5% builder gifted deposit to leave a net price of £225,000 to give it the best chance of success.

Richard_Webster

I'm corrected by Kingstreets' suggestion - that's a way of getting a mortgage perhaps - but don't necessarily expect the house to be worth £236,842 in a year or so's time in the present market conditions.

kingstreet

Richard_Webster wrote: »

I'm corrected by Kingstreets' suggestion - that's a way of getting a mortgage perhaps - but don't necessarily expect the house to be worth £236,842 in a year or so's time in the present market conditions.

... and no-one should view my technical description as an endorsement of the plan or the sense in purchasing newbuild property in such a fashion. :eek:

Thrugelmir

If the valuer is happy with a purchase price of £225k. Then the developer is unlikely to discount further. Why should they? Just because the purchaser doesn't have the funds available to complete the transaction isn't a bargaining position in my mind.

Mark148

Thanks for all your comments. It is just so annoying when you realise that the whole incentive concept is really a load of B******S. To me an incentive is a reduction in the market price or a decent option of spec incentives included in the price.

The price should be current market price and not some over inflated figure plucked out of a developers backside.:mad:

Dpc_2

The reason the developer does this is flexibility, increasing the chance of selling the plot.

For example, nice simple cash buyer gets straight forward discount to 225k they are happy they negotiated money off. Someone with decent deposit, again easy, discount given to level they know mortgage surveyor will sign off, ie the 225k. Someone who is having to stretch themselves to buy, bit more risky but go down the gifted deposit route, needs to value up higher but net figure is the same to them.

As other posters have said, the company will always be looking to hit the net figure (or more) they will package the sale any way to get it through the mortgage process. Indeed they will look at it that they are helping you to buy the property that technically without the incentive you could not buy.