14-07-2008, 02:26 PM
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Senior Member
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Join Date: Jan 2008
Posts: 97
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Quote:
Originally Posted by Investy
Everyone wont follow my advice, but smart investors should not get involved with funding developers little money making adventures that may or may not deliver.
Fadesa of Spain for example made all sorts of promises when they sought eagre buyers, but now the products have been delived in a terrible state with showers that go cold if you turn on a kitchen tap.
This is the problem with offplan, you just never know what will be delivered.
Fadesa are struggling financially which is a real example of why one should not part with any cash until the product is delivered. The Banks could pull the plug on them any moment.
One method that to an extent aliviates the going bust worry, is where developers sign over the land plot when the deposit is made. Ive seen this done in the Bahammas and Carribean. At least that way the investor owns something if the developer goes bust.
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Hi Investy...well said!!!
Pretty much agree with everything you've presented in your last two comments in opposition to our Red Sea salesman.
Another time to part with ones hard-earned cash is when there is a full money-back guarantee provided through either a Title Co or Lawyer warranty through Escrow Account. Increasingly the case by law in many countries. Your funds remain yours while held in Escrow and, only released post walk-through (satisfactorily concluded) by the client or their professional assessor.
As a 'Licensed' international professional obviously this is the only way I operate but, also, as commercial finance broker I arrange funds for developers. Nowadays, all they need is 1.5% of the total cost of land purchase & construction cost to fund their project. Let's put this in persepctive. Yes, that's just 375,000 Euros to obtain 100% funding for projects requiring say, 25M Euros at current rates of 5.5% interest.
So, there's absolutely no reason for a developer to seek to 'use' a buyers money unless their credentials don't match standard banking requirements. (Not a good sign if they don't!!!)
Of course the buyer should expect to 'park' funds into a 'safe' Escrow Account while the homesite is under construction and to lose a proportiion of their money if they withdraw for reasons outside the buyer/developer agreement. Since these clauses are usually very well-defined, the buyer should understand their full liabilities and either accept or not.
Next time any slick salesman is trying to convince a buyer to part with their funds and not offer for this to be held in a secure Escrow Account, tell 'em to take a hike. Keep your funds to developers who automatically offer this security with their sale.
Good luck with your investing wherever it might be...
Olly
Last edited by Olly; 14-07-2008 at 02:32 PM.
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