Off Plan Developments – It May be Getting Harder to Walk Away

I see that some property investors who walked away from off plan deals face being prosecuted by the developers after a test case which a developer won.
In the last few years, lots of purchasers have tried to walk away from duff off plan property deals - figuring it was better to lose their deposits than complete purchases on properties where the values had fallen heavily (and they were effectively overpaying.)
In some cases, willing buyers were unable to complete their deals anyway as their mortgage lenders had pulled financing as prices of these types of properties collapsed.
(Not terribly bright valuations done in the first place then by the banks!)

High Court Case
The recent High Court test case was won by Prestige Homes and this case could lead to lots of other cases being taken to court by developers.
However, at least one group of investors is resisting, claiming one developer recommended customers use the developers own preferred solicitors who presented purchasers with lists of valuations supposedly carried out by other surveying firms which miraculously matched the sales list”.
Somehow, this all seems very familiar.
I have to say that it really is a case of buyer-beware in property, especially where new build was concerned.
Back in the early and mid Noughties, many new and green investors got mugged by so called "property clubs" into buying a lot of new build stuff that was way overpriced.
We are still seeing the fall out today.

Keys
When I buy a property I love it if the previous occupant leaves lots of keys behind.
Getting new keys cut seems to be getting rather expensive these days and even worse, takes up lots of time as the keys you get copied often don’t fit, necessitating extra trips back to the locksmiths.
This is one of the really irritating nitty gritty aspects of being a hands-on landlord.
If any locksmith can guarantee that he can cut an EXACT copy of a key that he guarantees to fit my locks perfectly, then he can have all my key cutting business.

BBC International – Why Bother
I’m just back from a lovely business -cum-holiday break in Mexico.
And as I always when I’m abroad I watched CNN to keep up with the news - not the much inferior BBC TV service.
If the BBC cannot put out a decent international product, maybe it would be best to shut it down completely.
The BBC Radio service overseas is great… but the TV…. Well, I wouldn’t bother.

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How the buy to let mortgage frauds were carried out - Part 2 - by David Lawrenson of Letting Focus

In part one last week I showed how the property market environment in the early noughties was right for buy to let mortgage fraud to flourish.
I explained how big discounts were negotiated between property companies and builders to shift new build boxes onto mostly novice property investors.
Now let’s look at what happens next.

The sales contract that the builder and the property investment company sign would show the full price but the builder hands back that discount at the time of exchange of contracts to the property company.
When the flats are built, the property company will simultaneously sell on the flat to their own buyers and keep all or some of that discunt, making a nice little earner for them. They may also charge a “finders fee” too.
Now, it must be said, SOME of these buyers will be real ones – very often people whose credit score would normally preclude them from buying conventionally. (And it is worth noting that some of the builder’s discount would often be paid back to buyers which was often used as a way for stretched buyers to buy with “no money down” using the discount as their deposit.)
OTHER buyers could be completely bogus ones who applied for a mortgage using false IDs and fabricated documentation. Some blocks in Thamesmead suffered particularly badly with this latter kind of buyer and in these types of cases the property company would be complicit in the fraud.
The key to all these frauds is that until September 2008, there was no obligation for the builder and property investment company to share information on the discount to the mortgage lender. The lender had to rely on the buyer to do this which, of course, makes the fraud relative easy to commit.

WHO WAS DUPED IN THESE MORTGAGE FRAUDS
To make this fraud work, the properly fraudster needed at least some of the following ingredients.
First, they needed a conveyancer. Whilst the conveyancing company would see the sale price on the contract they would not see the hidden discount between property company and builder. This changed last September. But one wonders how many conveyancers really knew what was going on.
Second, you need valuers who were too lazy to accurately value these new builds. Or maybe it was a case of more than just laziness -which is of course going to be up to the courts to decide.
Third, in the worst cases, the fraudster needed to set up a shell property company and get a load of fraudulent applications going in. This may also involve using REAL people with false IDs who then go and live in the flats until such time as they get evicted.
Fourth, you need dumb banks that were too ready to lend money to “people” - either real or imagined people - to buy these properties at far too high a price.
DAVID LAWRENSON AND LETTINGFOCUS.COM IN THE PRESS
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We are having a break from blogs next week. We’ll be back on 22nd January with a new one.

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Mortgage Company May Cost You says Letting Focus

I read in the Daily Telegraph, 3 great quotes from Warren Buffet, the “Sage of Omaha” and one of the world’s most brilliant stock market investors.
He was talking about stock market investments, but his comments could equally apply to buy to let – and the way that many novice investors have bought the wrong kind of property, egged on by property companies / agents masquerading as property experts.
Here are the quotes:
On investing generally - “Never invest in something you don’t understand” and “Seek only to be fearful when others are brave and brave when others are fearful” (I kept that quote in mind when I bought Barclays stock last week!)
On the credit crunch – “You only find out who was swimming naked when the tide goes out”
Great stuff isn’t it.

Mortgage Lenders
Of course, readers of this column will already know my opinions of those robbers – the mortgage lenders.
On this subject, I see mortgage lenders are now cashing in again. David Whittaker of Mortgages for Business was quoted by the Residential Landlords Association.
He pointed out that nervous investors were buying short-term fixed-rate mortgages that may be inappropriate.
This is because whilst many buy-to-let lenders are offering extremely competitive headline rates, they are gaining their margin through massive arrangement fees of up to 3% that can be added to the mortgage - and hence repayments.

Most Competitive Mortgage Deals
Of course, those with savvy will know that finding the most competitive mortgage means looking at the fees as well as the mortgage headline rate so you can see whether it is a good deal overall.
As a long term finance strategy for those holding on to property short term fixes are rarely appropriate.
Surely, the only reason for brokers and lenders offering these mortgage deals to buy-to-let investors is the potential re-mortgage business in 12 months’ time -i.e. another chance to get more commission for the broker and another juicy “arrangement fee” for the lender.

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Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
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