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NotMyHouse

"investors" Pull Out, Developer Spits Dummy

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A developer is suing a bunch of people who signed up for the development but then wanted to pull out.

Also seeing a lot of postings on MSE on similar issues with completed missives.

Common theme - prices have fallen since we signed the agreement. Not the last, I'm sure.

Interesting last comment on the MSE thread you linked to - there must be loads of people tied into contracts on belated new builds, with expired mortgage offers. That wouldn't have been a problem last year, but I bet it is now.

So what happens in this case?

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I think with loads of these new development's it will be a case of can not complete. Even if someone wanted to the banks valuation will be way down on what will be needed to obtain the mortgage that buyers would need to complete on their original ifigures and valuations when they were reserved.

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People will not be able to complete deals for a range of reasons:

1. Banks will be reluctant to lend on over-inflated evaluations. (Although for some reason they weren't too bothered before!).

2. Banks need to return to sensible lending criteria i.e. 2.5 to 3.5 times wages - Many of the agreed deals will be for multiples higher than this.

3. Banks need to insist on higher deposits (to reduce their risk to falling prices) - Many of the agreed deals will be with lower deposits.

5. Banks will be wary of those leveraging to make a profit on property.

6. Banks probably don't have sufficient money on deposit (that's why they have been luring savers with higher interest rates). They will then only be able to make loans available at a slightly higher interest rate if they cannot get hold of cash by other avenues.

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I don't quite understand how a deposit works in this case then?

I mean, usually when you pay a deposit it is on the basis of it being refundable or non-refundable. In the latter case if you pull out you lose your deposit.

Has the bubble changed the rules on deposits where house are concerned - or certainly the definition of a desposit?

Surely 'holding fee' would be more apt as it appears so-called deposits have simply been used to secure a house in the frenzy - i.e. get your mits on a new build that will 'always go up in price' before someone else did.

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A developer is suing a bunch of people who signed up for the development but then wanted to pull out.

Also seeing a lot of postings on MSE on similar issues with completed missives.

Common theme - prices have fallen since we signed the agreement. Not the last, I'm sure.

Seems like they signed an unconditional contract to buy a house at a set price with no penalty clauses for delay.

Tough shite. They are tied to the contract. Should have thought about that when they signed up.

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Seems like they signed an unconditional contract to buy a house at a set price with no penalty clauses for delay.

Tough shite. They are tied to the contract. Should have thought about that when they signed up.

They'd better hope that the "developer" runs out of cash and cant complete the build. Could easily happen.

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I don't quite understand how a deposit works in this case then?

I mean, usually when you pay a deposit it is on the basis of it being refundable or non-refundable. In the latter case if you pull out you lose your deposit.

Has the bubble changed the rules on deposits where house are concerned - or certainly the definition of a desposit?

Surely 'holding fee' would be more apt as it appears so-called deposits have simply been used to secure a house in the frenzy - i.e. get your mits on a new build that will 'always go up in price' before someone else did.

I agree that the deposit that the housebuilder requires is upfront to secure an individual plot as a 'holding fee'. The buying price will be agreed, and then upon completion the asking price will be paid - made up of the mortgage and the deposit plus the holding fee.

The deals probably get complicated and murky as they offer incentives, push up valuations, offer to buy the vendor's home etc. The housebuilders like to use their own appointed solicitors and evaluators too.

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Deposits paid on new build usually 10% of purchase price are non refundable,

Lnenders don't like new build anymore. 65% LTV max.

Many people won't be able to complete as with new build you buy off plan, put down your deposit but the valuation is delayed until nearer completion.

If the people can stump up the extra 25% deposit required the deal usually stacks up.

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I think with loads of these new development's it will be a case of can not complete. Even if someone wanted to the banks valuation will be way down on what will be needed to obtain the mortgage that buyers would need to complete on their original ifigures and valuations when they were reserved.

Is this the MSE poster who was saying he'd been to all his mates and family trying to get together the difference between what the bank would now lend him and the price he promised to pay the developer so he could complete?

Madness!!!

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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