25 Sep 2006

Florida property scams

I spent about an hour on Saturday browsing around the International Property Show being held at London’s Excel exhibition centre. These types of show have become very common in the past few years but it was my first visit to one and it was certainly an eye-opener. There must have been 400 or 500 stands all appearing to sell much the same sort of thing — holiday apartments and houses — at a bewildering choice of worldwide locations. The places you might expect were much in evidence: Florida, Spain, Portugal, Dubai, plus a smattering of East European developments with Bulgaria very much to the fore.

But these shows aren’t just shop windows for overseas estate agents. What it’s all about is property speculation. Putting deposits down, buying off plan, and then either selling on for a quick turn or holding on for holiday lets. Most of the visitors have, I understand, already done one or two deals and they are there hunting out the best returns for new investments.

I sort of ambled about looking at various stands, trying to avoid direct eye contact with the many pretty girls employed to pull the punters into a dialogue with the sales teams. Then I got trapped by an earnest young Englishmen who wanted to tell me about his flip scheme. No, I’d never heard the term, either.

Apparently, it’s a guaranteed method of turning $20k into $29k. Sounds good. What I have to do is put a deposit down on an as-yet-unbuilt 3 bedroomed bungalow in Port Charlotte in Florida. The finished bungalows have been “appraised” at $364k and will be bought at this price when completed. If the market won’t bear it, the developer will, via something called a Guaranteed Buy Back Guarantee. That’s two guarantees for the price of one! They are currently offering the bungalows at just $335k, and you only need to put down a deposit of $20k to secure one: you don’t even need to pay any interest on the mortgage you take out because that appears to be rolled up into the price by the developer. You pocket the difference, $29k, when the deal is completed. You don’t even need to go to Florida.

“It sounds too good to be true,” I commented to him, trying to sound just a little bit sceptical.

“I guarantee you that it works,” he said, without any hint of irony.

“But I have just been reading that the Florida property market is in freefall.”

“Oh, the media loves to scare people, doesn’t it? It’s really only falling in one of two over-blown hot spots where development has run out of control. I can assure you that Florida as a whole remains the fastest growing property market in the world. And this site is really well positioned. We do an incredible amount of research before we select the right properties for our schemes.”

“Well I wouldn’t invest without at least visiting the site.”

“No need to do that,” he said. “We’ve undertaken all the necessary due diligence already.”

At this point, I think he saw me sucking my teeth and decided I was not really much of a sales catch and so the conversation sort of petered out. I went away clutching his distinctly unglossy handout.

But it set me thinking. Lots of people obviously do go for all this stuff, otherwise this show wouldn’t have been taking place. And I have no doubt that, if the market keeps rising, they may even make some money out of these schemes.

But Florida isn’t a rising market. And why do they need to guarantee a guarantee? Maybe this sort of thing is for you but it’s definitely not my cup of tea. Take a peek at their website, see if you can make sense of it…www.propertyqc.com

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