Your new-buyer questions answersd
Can we get deposit back if we buy off plans?
Q I am considering putting a deposit on a new home in Blessington, Co Wicklow. Only the showhouses have been built so far, so we are buying the property off the plans. Is the booking deposit fully refundable before signing contracts, and once the contracts have been signed, under what circumstances, if any, can the deposit be refunded?
ABuying off the plans tends to be something people do in a rising market or when there is a scarcity of property for sale. So why are you so keen to buy off plans now when these conditions do not apply? A booking deposit, usually only a few thousand euro, doesn't do very much other than express your interest in the property. It is not legally binding on either side and can be fully refunded if either side pulls out. If you go further and sign contracts and pay a substantial deposit (usually 10 per cent) then that contract typically commits you to going ahead with the purchase once the house is complete - with little or no opportunity to pull out. But all contracts depend on the wording and what clauses both sides are agreeable to. In a typical contract it is very difficult for the purchaser to pull out, which many buyers are now finding out to their cost. The builder will be keen to get you to sign a binding contract but if you really are set on this particular house make sure you don't sign anything you can't get out of if the property drops in value.
There may be a clause that can be inserted in the contract to this effect. Talk to your solicitor who will also be keen to protect you from signing anything foolish. But also, what's your rush? If the house isn't built why not wait until it is to see if you really want it.
What happens if bank won't lend full amount?
Q We are considering signing contracts based on a price of, say, €400,000. We know what level of mortgage we can get, and we have savings to cover the balance of the price, but what if the bank's surveyor/valuer says, nearer the completion date, that the house isn't worth the price agreed now, and won't give a mortgage for the amount we've been approved for? Can we have a clause written into the contracts, to safeguard against this?
AThe lender will only lend on the basis of their valuation on completion. So if the house is worth less than the price agreed in initial contracts, the lender will adjust its offer downwards leaving you to find the shortfall. For example, if they originally offered 80 per cent of the price then that 80 per cent will probably still stand (though maybe not) but will be 80 per cent of the new lower valuation. This shortfall could be quite substantial. Talk to your solicitor to see if there is the potential to include a tightly worded "mortgage approval" clause. It might be worth asking your lender to value the house now even before it is complete - you may find the lender already considers it to be less than the builder's price of €400,000.
Your questions
Send queries to Property questions, The Irish Times, 24-28 Tara Street, Dublin 2 or email propertyquestions@irish-times.ie. Unfortunately it is not possible to respond to all questions. The above is a representative sample of queries received. This column is a readers' service and is not intended to replace professional advice. No individual correspondence will be entered into.
