New Build Disaster - help needed!

franklee

RedTomato wrote: »

It's a long shot but you might possibly just have a case against the advisor - have a search around the website of the financial ombudsman. His advice sounds like tosh. Banks have never been so willing to lend money on property as during the past 5 years so if a valuation is coming up short this should ring serious alarm bells and any advisor worth their salt should have told you that.

If the flat had gone up by 20K in value the OP would be congratulating themselves on ignoring the valuation and going ahead with the purchase. But having ignored the valuation and facing a loss it's miss-selling? I think not! At least haymans74 is taking personal responsibility which is good.

Having made one mistake of being too optimistic on property values it would be a shame to make another so I'm with the posters who've said sell to cut the losses, it could get far worse. Clearly the flat isn't viable as a let and if haymans74 and spouse needed a mortgage holiday to pay for the wedding they are not in a position to finance another purchase and maintain a let property.

I wonder how many landlords there are in such a precarious position whose tenant could get chucked on the street should the lender repossess?

lynzpower

simhar wrote: »

Mortgage valuations are almost like repossesion valuations - don't worry !! That's just the figure they would sell the property at if they had to boot you out !

Cheers

simhar

email: [EMAIL="simhar@talk21.com"]simhar@talk21.com[/EMAIL]
web: http://www.landlord-software.co.uk

How many times have you been banned now SIMHAR- stop peddling your business. :spam:

eek

simhar wrote: »

Mortgage valuations are almost like repossesion valuations - don't worry !! That's just the figure they would sell the property at if they had to boot you out !

Which is fine until they use it for your re-mortgage request and then refuse your request.

8.25% would be a bit of a shock from 4.69%.

thelawnet

When I flick through the ads in the middle of the free London papers, they are constantly advertising new-build flats, usually artist's renditions, and so many of them seem to be in Feltham. Given that the first hit on google for "feltham" is the notorious Young Offenders' Institute, it's not hard to see why they have to advertise it so much.

Feltham is never going to be desirable, or anything other than a last resort for people priced out of better areas (it's too close to Heathrow, and nearby Hounslow is pretty scummy too) and £224,000 might look very optimistic in a couple of years time. The price you paid for it isn't really relevant

olly300

I found this interesting article about Feltham:
http://www.quinparker.com/zone6/feltham.php

Hounslow has better transport links and restaurants than Feltham.

Bubble_Pricker

keeperbear wrote: »

Why is this a silly argument for buying rather than renting? I am sure that many people who have benefited from HPI over the last ten years would totally disagree with you.

Yes, because they would extrapolate from the price development of the past ten years to the infinite future. Which is silly.

keeperbear wrote: »

As for your comment on property depreciating, your argument is too simplistic. It depends on what you are valuing. If it is a freehold property, an important part of the valuation is the very land it sits on, rather than just the bricks and mortar of the property itself.

Correct. The land portion of your property should in the long run, and all other things being equal, increase in line with inflation, i.e. increase in nominal terms and stay the same in real terms. But the building portion will inevitably decrease in value over time, even if the "housing market" keeps going up. What the property-crazed British public fail to understand is that figures about the market as a whole do not say anything about the value of individual property.

A property requires upkeep or it will fall down. This upkeep costs money and you need to add that to your calculations. It is stilly to say "I bought a house in 1950 for £1000 and it is now worth £500,000." You need to add to the original £1000 all the money spent on upkeep and improvements and then inflate all figures with the rate of general inflation over the years. You will find that the result gets you close to what your house is supposed to be worth today. Ony the remaining difference is what house price inflation has added to the value. Of course, the house price market figures issued by lenders and other institutions include, aside from general inflation, all the money put into property in the form of upkeep and improvements. They do not reflect the value curve of an individual property.

Even with the money spent on upkeep, the intrinsic value of an individual property will still continue to fall over the years. New built apartments more so than period houses. If a flat does not have a share of the freehold, its value will tend to zero over the term of the lease, or the life of the building, if shorter.

Look, it really is very simple, the natural intrinsic value of any individual property declines down to zero for the building part and remains the same in real terms (i.e. adjusted for inflation) for the land part over the life of the property. That's how property is properly valued. The problem is that in the UK, this has been thrown out of the window and been replaced with the assumption that property prices will always go up, notwithstanding the loss of intrinsic building value. This has been true for the past ten years, but there is no guarantee that it will cotninue. In fact, I think it is very unlikely to continue.


As for the OP, two points: (1) why do they insist they paid £245, when effectively they paid less, because they got incentives and rebates from the builder. Are they really that daft that they do not see that they paid the incentives and rebates to themselves with their own money? (2) Their lender is clearly not willing to give them a BTL mortgage on the property. This must be because the lender perceives such a lending arrangement as too high a risk. And this in a climate of loose lending standards! This should raise all sorts of red flags. If a lender is not willing to finance the flat on this basis for letting out, does the OP really think it is such a good idea to do it anyway?


One final point of consideration for the OP: In the 1950s and 1960s, the tower blocks erected then were seen as "state of the art, modern housing". Does that ring a bell with the OP as to what they might have read in the sales brochure for their flat? The "luxury stylish apartments" of the 2000s, which in reality are nothing but cheaply constructed rabbit hutches in undesirable areas, will be the tower blocks of the 2030s and 2040s. Isn't that bleeding obvious if you think about it rationally for a minute?

silvercar

The point is that OP didn't really pay 245, the price was 245 with a buyers deposit of 5%, so the price paid was 232,750!

If I sell a house worth 200k for 400k with a 50% deposit, that doesn't mean that it is worth 400k and I'm a very nice person it means its worth 200k and the figures have been massaged either to think you're getting a discount or to help mortgage applications.

OP actually paid out 232,500 (after allowing for the gifted 5%), the mortgage valuer gave a figure of 230k and now estate agents are saying it should be marketed for 220-230k.

Kez100

When we sold in 1994 we were in negative equity. Never did it occur to me that we couldn't afford to sell at a certain price. We had no option - the market is what it is and we had lost and had to come to terms with that.

Our damage was 4k. Doesn't seem a lot in comparison to todays values but it was to us. We ate tomato pasta and such like for six months to enable us to move and settle up or debts. We did and, on a falling market, ended p buying somewhere far cheaper.

I know this was us not you. However, look forward and if you minimise yur losses now at least you are not putting at risk your future happiness and financial security.

devils_advocate

Look, it really is very simple, the natural intrinsic value of any individual property declines down to zero for the building part and remains the same in real terms (i.e. adjusted for inflation) for the land part over the life of the property. That's how property is properly valued.

Quite true. I worked for a bank in the 1990s where I was involved with property appraisals. (we were trying to get the mortgage money back). On one property, the valuation methodoly used by the professional valuer was "site, less demolition costs."

ixwood

Not sure I agree, Declines down to zero with no maintainence maybe. Or eventually when no habitable house is left.

Maybe worse with new builds, but proper solid houses aren't going anywhere quick. I'm pretty sure most old stone cottages have kept their value at least, if not multiplied it in real terms.