GRAPEVINE
New Member
In recent months, after sharing some beers and lunches with worried developers and builders I know, the following scenarios were played out to me of what has been the Property playing field in the Algarve for the last few years, which I am sure does not differ much from any other Euro Holiday Destination.
Please feel free to correct me if I am wrong in putting together their experiences.
We had the birth of the Inspection Trip “MACHINES”, what a wonderful way to buy investment property in the sun, practically free flights, top notch hotels, wonderful food and drink for the entire trip and driven around the entire region you picked in a top end luxury car, etc, etc, etc. Brilliant!!
We now know who paid for all this , yes, it was the property buyer, who overpaid in the early days 5% over original developer/builders price list as the standard commissions practiced had been no more than 5%, this additional 5% was lumped onto the price list and guess what? They sold like hot cakes!, some developments of over a 100 apartments, sold out in a matter of weeks.
So, second phase, these amazed developers/builders quickly looked for a new project to develop, land suddenly became very expensive (everyone heard of the success of sales, even with astronomical commissions) but the developers did not worry too much that the purchase of new land was more expensive, they had proof that whatever the cost they could simply work it into the final price list and again guess what, these also sold like hot cakes, so, Phase three was a repeat of phase two with one exception, the “MACHINES” now started to demand more than the 10% commission, as much as 15% was put in place, TOGETHER with the developer/builder having increased their margins too, hey! If it worked for the “MACHINES” it would work for them too!
Result, the buyers during the last 12 months before the collapse of the “MACHINES” paid so much over the real value that they will now have to keep the property for over a decade before they can sell at break even prices.
I won’t even go into the Rental scenarios that were presented to these buyers to “PROVE” how their loans would be covered and a few quid extra would remain to cover your holiday costs, like I said, I won’t even go there!
So!, what are we left with?
Thousands of property owners who completed and now have to wait many years before selling so as not to lose their money, find money to pay the loan that is not being covered by rentals and basically going through a really tough time!!
We also have the Phase three buyers who bought off plan, paid the promissory contract amount (which could never be less than 20% as the “MACHINE” had to be fully paid at this time, (Portuguese standard tradition is 50% on Promissory and 50% at final deed)
Now many of these buyers find their property is ready for completion (if they are lucky) and surprise, surprise!!, bank valuation for their loans now are WAY below the original purchase price.
This results in many simply walking away and losing their 20-30% deposits.
This leaves the Developer/builder with a property which WAS sold and now isn’t BUT he did keep the deposit, or at least the part remaining after deducting the “MACHINES” percentage which he had to pay at the time of the promissory contract.
We now have very worried developers/builders with many units previously sold now back requiring to be resold, and there are no buyers!!
This scenario has given birth to the BELOW MARKET VALUE “BMV MACHINES”.
The “BMV MACHINE” can give you amazing deals.
No Personal money down property investing.
Cash back at deed, in other words, you buy a property with NO PERSONAL money AND you still get THOUSANDS given to you at the deed.
Oh!, by the way this also rides on the back of incredible rental figures that once again cover your mortgage.
The less desperate developer/builder is keeping well away from these “BMV MACHINES” but the hard up ones are going with it. Hope it works out for them and their buyers.
You are now wondering who I am and what background do I come from and why post this. Well I have lived in the Algarve for 24 years now and have always been involved in the building /property world and in the last few months have been approached by Developers and Builders I know who are desperate to shift their unsold properties and are wondering how to contact buyers DIRECTLY and avoid the “MACHINES” old or new.
Their concept is to get potential buyers to analyze their property specs, visit the property, arrange an independent valuation or whatever the buyer needs to make a serious balanced offer, they will then respond with acceptance or refusal of said offer.
What do you think of this approach?
The truth is, the Algarve has got to return to the” Good old Days” of the pre-industrial days of the “MACHINES”.
Please feel free to correct me if I am wrong in putting together their experiences.
We had the birth of the Inspection Trip “MACHINES”, what a wonderful way to buy investment property in the sun, practically free flights, top notch hotels, wonderful food and drink for the entire trip and driven around the entire region you picked in a top end luxury car, etc, etc, etc. Brilliant!!
We now know who paid for all this , yes, it was the property buyer, who overpaid in the early days 5% over original developer/builders price list as the standard commissions practiced had been no more than 5%, this additional 5% was lumped onto the price list and guess what? They sold like hot cakes!, some developments of over a 100 apartments, sold out in a matter of weeks.
So, second phase, these amazed developers/builders quickly looked for a new project to develop, land suddenly became very expensive (everyone heard of the success of sales, even with astronomical commissions) but the developers did not worry too much that the purchase of new land was more expensive, they had proof that whatever the cost they could simply work it into the final price list and again guess what, these also sold like hot cakes, so, Phase three was a repeat of phase two with one exception, the “MACHINES” now started to demand more than the 10% commission, as much as 15% was put in place, TOGETHER with the developer/builder having increased their margins too, hey! If it worked for the “MACHINES” it would work for them too!
Result, the buyers during the last 12 months before the collapse of the “MACHINES” paid so much over the real value that they will now have to keep the property for over a decade before they can sell at break even prices.
I won’t even go into the Rental scenarios that were presented to these buyers to “PROVE” how their loans would be covered and a few quid extra would remain to cover your holiday costs, like I said, I won’t even go there!
So!, what are we left with?
Thousands of property owners who completed and now have to wait many years before selling so as not to lose their money, find money to pay the loan that is not being covered by rentals and basically going through a really tough time!!
We also have the Phase three buyers who bought off plan, paid the promissory contract amount (which could never be less than 20% as the “MACHINE” had to be fully paid at this time, (Portuguese standard tradition is 50% on Promissory and 50% at final deed)
Now many of these buyers find their property is ready for completion (if they are lucky) and surprise, surprise!!, bank valuation for their loans now are WAY below the original purchase price.
This results in many simply walking away and losing their 20-30% deposits.
This leaves the Developer/builder with a property which WAS sold and now isn’t BUT he did keep the deposit, or at least the part remaining after deducting the “MACHINES” percentage which he had to pay at the time of the promissory contract.
We now have very worried developers/builders with many units previously sold now back requiring to be resold, and there are no buyers!!
This scenario has given birth to the BELOW MARKET VALUE “BMV MACHINES”.
The “BMV MACHINE” can give you amazing deals.
No Personal money down property investing.
Cash back at deed, in other words, you buy a property with NO PERSONAL money AND you still get THOUSANDS given to you at the deed.
Oh!, by the way this also rides on the back of incredible rental figures that once again cover your mortgage.
The less desperate developer/builder is keeping well away from these “BMV MACHINES” but the hard up ones are going with it. Hope it works out for them and their buyers.
You are now wondering who I am and what background do I come from and why post this. Well I have lived in the Algarve for 24 years now and have always been involved in the building /property world and in the last few months have been approached by Developers and Builders I know who are desperate to shift their unsold properties and are wondering how to contact buyers DIRECTLY and avoid the “MACHINES” old or new.
Their concept is to get potential buyers to analyze their property specs, visit the property, arrange an independent valuation or whatever the buyer needs to make a serious balanced offer, they will then respond with acceptance or refusal of said offer.
What do you think of this approach?
The truth is, the Algarve has got to return to the” Good old Days” of the pre-industrial days of the “MACHINES”.
