Originally posted by charliey
An investor who did not want to be named says the expenses-paid trip to Melbourne clinched the deal. She says: "We also got gift packs with wine and chocolate."
Any investor who is swayed by free flights, wine and chocolates, is going to be stung sooner or later. It is unfortuante, there will probably always be those who are willing to take advantage of others.
The shock for investors did not end there. Three of the properties had fallen substantially in value, compared with the original valuations that Sonntag had shown to investors. Breheny says: "When we went to the first creditors' meeting and heard the drive-by valuations, people gasped."
The investors learnt that, as unsecured creditors and with mounting default interest, they were in grave danger of losing most of their investments.
Again, how much real research did this investors do on these properties? In the case quoted here, the developer appears to have done their job and completed the project. If the property was overvalued, much of that is owed to the investors who perceived it's value to be higher that it really is.
We're all told that we shouldn't trust real estate agents, but why is it that some people are so much more trusting in situations like this? People have told me that their off the plan purchase has gone up 20% since they bought it. I've then asked how they know that, and the answer is invariably that other compariable OTP properties are being sold at those prices. The problem is that they are not compairing apples to apples.
When an OTP development approaches completion, it no longer has the same stamp duty savings, marketing machine etc. The new purchaser can no longer choose their colours and finish. If you were investing, why would you buy something that's only 90% what you want for $500k and a year old, when you could buy exactly what you want, brand new, with a $10k deposit bond?
I've seen comparisons on appartment prices where a new appartment bought now is worth 100% than a new appartment bought 10 years ago was worth. What it doesn't note, is that the appartment bought 10 years ago is now looking a bit tired and is only worth 50% more than what it was bought for - the new appartment is attracting a premium.
I believe that people who take others money and run should certainly be held accountable for their actions, but it is the market place which gives these people the oppertunity to opperate. I also believe that people who go to the casino and bet their life saving on black should be prepaired to see the ball land on red.
