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Case 3: Risks in buying pre-developed real estate in Philippines
Many promising development projects by reputable developers have many buyers lining-up for the reservation of a lot or house and lot during the pre-selling or official launching stage. The buyers are lining up because they are sure that the developer will deliver and their investment will get more than double in value within a few years. Sometimes for one lot, there will be three or more buyers who want to buy that particular lot. Since the demand for the lots is more than the supply, many buyers are pressured to reserve right there and then for the property, thinking that the developer will deliver or they can pay in the future. The developer and the marketing arm create more pressure on the prospective buyers by making claims that their project was "Sold-Out". This strategy creates more demand from many more potential buyers who come to know about the project through the flyers, newspaper ads or sales representatives.
It is only after awhile after reserving for the property that some of the buyers would realize that they could not afford to pay for the down payment or monthly amortization of their reserved property. In the end their reservation or even part of their down payment and monthly amortization gets forfeited.
On the other hand, some developers would not be able to finance and sustain their promise to deliver. Developing is like a marathon race, compelling the developer to sustain his capacity to finish the project. Just like some of the buyers, some of the developers would find out that they could finish only a part of the project. Other developers could not handle the sprouting legal, technical and other problems that hounded them from the start, so the project remained undeveloped.
Glance at the lessons to learn from this occurence.
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