I am currently in the decision-making phase and would like to get a second opinion (preferably from you).
It concerns our future house. I found a new development project (3 duplex houses, i.e., 6 semi-detached units) in Langenhagen (Hannover region). A real estate agent purchased a large plot and plans to have an architect build 3 duplex houses on it. I contacted the agent and received an offer after the three of us (the agent, the architect, and I) discussed which features I would like in our semi-detached house (some changes in the floor plan).
The offer is as follows:
The house costs a total of €600,000 plus property transfer tax (€30,000) and notary fees (€8,000), so the total comes to €642,000 for about 150 sqm (1,615 sq ft) of living space and 374 sqm (4,025 sq ft) of land. The agent showed us her own house as a sample, which she built two years ago with high quality. I was promised that our house will be built to the same quality (solid construction, island kitchen, freestanding bathtub, Town & Country toilet, 1mx1m (3.3ft x 3.3ft) tiles, etc.). It is planned to be built to KfW 40 energy efficiency standard.
We are now at the point where I want the agent to sign a contract. Upon signing, a payment of €25,000 is due as a flat fee for modification work (and simultaneously as a down payment). This means the agent will start building the house with her own money. There is a draft for the notary purchase agreement, which we are only supposed to sign once the house is completed (around April 2022). We will receive the house turnkey.
My question to you is: Are we making a mistake by signing this agreement? The risk is that we would lose the €25,000 if we can’t secure financing for the house or for any other reason do not sign the notary purchase agreement (€575,000).
I have already spoken with banks about loan offers and received several options. I cannot finance the house on my own because the loan amount is too high. Unfortunately, my girlfriend is not currently taken into account because she does not yet have permanent residency. However, she will obtain permanent residency in February 2022, about two months before the house is completed. Together, we will probably be able to finance the house, as both of us are employed with a combined net income of over €5,000 and equity of about €80,000.
Would you take the risk in my position? If not, why?
Thank you in advance.
It concerns our future house. I found a new development project (3 duplex houses, i.e., 6 semi-detached units) in Langenhagen (Hannover region). A real estate agent purchased a large plot and plans to have an architect build 3 duplex houses on it. I contacted the agent and received an offer after the three of us (the agent, the architect, and I) discussed which features I would like in our semi-detached house (some changes in the floor plan).
The offer is as follows:
The house costs a total of €600,000 plus property transfer tax (€30,000) and notary fees (€8,000), so the total comes to €642,000 for about 150 sqm (1,615 sq ft) of living space and 374 sqm (4,025 sq ft) of land. The agent showed us her own house as a sample, which she built two years ago with high quality. I was promised that our house will be built to the same quality (solid construction, island kitchen, freestanding bathtub, Town & Country toilet, 1mx1m (3.3ft x 3.3ft) tiles, etc.). It is planned to be built to KfW 40 energy efficiency standard.
We are now at the point where I want the agent to sign a contract. Upon signing, a payment of €25,000 is due as a flat fee for modification work (and simultaneously as a down payment). This means the agent will start building the house with her own money. There is a draft for the notary purchase agreement, which we are only supposed to sign once the house is completed (around April 2022). We will receive the house turnkey.
My question to you is: Are we making a mistake by signing this agreement? The risk is that we would lose the €25,000 if we can’t secure financing for the house or for any other reason do not sign the notary purchase agreement (€575,000).
I have already spoken with banks about loan offers and received several options. I cannot finance the house on my own because the loan amount is too high. Unfortunately, my girlfriend is not currently taken into account because she does not yet have permanent residency. However, she will obtain permanent residency in February 2022, about two months before the house is completed. Together, we will probably be able to finance the house, as both of us are employed with a combined net income of over €5,000 and equity of about €80,000.
Would you take the risk in my position? If not, why?
Thank you in advance.
N
nordanney3 Jul 2021 21:5811ant schrieb:
You will quickly realize: a payment schedule in two installments, about 4% before the start and then 96% after completion, just can’t work honestly; no developer has that much capital or would want to tie it up in advance for so long. To be honest, this is quite common in the developer business. The developer has to finance with the bank anyway. I currently have a developer project in Duisburg on my desk – purchase payment only upon completion.
Although they end up paying somewhat more in interest overall (which can’t be offset like under real estate agent and developer regulations), they save significantly on processing fees, real estate agent and developer regulation guarantees, etc.
The bank appreciates this since the administrative workload is drastically reduced.
nordanney schrieb:
Honestly, this is done quite often in the property developer business. The developer has to secure financing from the bank anyway. I currently have a developer project in Duisburg on my desk – purchase price payment only upon completion.I think you are mostly dealing with "old-school" developers who have the necessary capital and creditworthiness. In my experience, however, at least in the semi-detached house market segment, the typical "wannabe / makeshift developer" who finances their business through payment plans, builds on demand from hand to mouth, and takes plenty of risks is the norm today. Congratulations if you are still dealing with professionals nowadays – but I think you could almost call that an island of the fortunate, or it’s now only common in multi-unit residential construction, while in the undergrowth the amateurs and risk-takers are active. The original poster’s description sounds to me like a real estate agent diversifying into development in cooperation with an architect-as-general contractor (often a shell company) – both operating with a correspondingly small credit line.
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