{"id":3487,"date":"2010-03-22T00:00:20","date_gmt":"2010-03-21T22:00:20","guid":{"rendered":"http:\/\/http:\/\/www.iliaspapageorgiadis.ro\/en\/?p=3487"},"modified":"2015-01-26T20:04:57","modified_gmt":"2015-01-26T18:04:57","slug":"tips-about-buying-new-apartments6-your-developers-mothers-in-law-his-relations-with-his-bank-and-why-they-may-affect-you","status":"publish","type":"post","link":"http:\/\/www.iliaspapageorgiadis.ro\/english\/2010\/03\/22\/tips-about-buying-new-apartments6-your-developers-mothers-in-law-his-relations-with-his-bank-and-why-they-may-affect-you\/","title":{"rendered":"Tips about buying new apartments: 6. Your developer\u2019s \u201cmothers in law\u201d &#8211; His relations with his bank and why they may affect you"},"content":{"rendered":"<p style=\"text-align: justify\">\n\tInvestment in a new apartment is one of the most important moments in the economic life of each and every one of us. Statistics say that we usually buy 1 &#8211; 3 dwellings during our life, so every mistake counts. When the subject is an apartment in a new project, then many questions rise. It is true that new apartments are better than the older ones, but when you invest in a new dwelling, things are much more complicated. Instead of talking to just one person, you will&#8230; network and meet many. All of them are connected to the seller, the developer of the project where your new apartment is located at. <strong>It is important for you to know his relations with all his &quot;mothers in law&quot; (collaborators), because if something goes wrong, you will be the one who will be asked to cover the damages&#8230;<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>First &quot;mother in law&quot;: Your developer&#039;s bank<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tIt was just 3 &#8211; 4 years ago when the banks were almost begging the developers to collaborate with them. Their terms were &quot;amazing&quot; and in many cases the business men accessed funds with very low costs, avoiding any personal guarantee towards their bank. But this is history. Usually the developers you meet today are people<!--more-->who started their collaboration with their bank during better times. At that time they were treated like kings, having relations with top executives, establishing their terms and usually without using too much of their own equity (cash).\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>What did your developer promise to his bank<\/strong>\n<\/p>\n<ul style=\"text-align: justify\" type=\"disc\">\n<li>\n\t\tThe project you see today is the result of the agreement most of the developers signed with their bank during 2007 or 2008. Back then the terms were excellent. Probably your developer had presented to his bank a budget with:\n\t<\/li>\n<li>\n\t\t&nbsp;\n\t<\/li>\n<\/ul>\n<ol>\n<li>\n\t\t<strong>Too many presales<\/strong>. He was expecting to actually develop the project using the advance payments of his clients and the bank&#039;s financing.\n\t<\/li>\n<li>\n\t\t<strong>Very fast presales<\/strong>. Some companies advertised their ability to pre-sell all the units in just few days, or weeks. Many developers and banks created budgets based on these assumptions.\n\t<\/li>\n<li>\n\t\t<strong>Very high prices<\/strong>. Do you remember 2008&#039;s prices? Usually almost double than today&#039;s ones, in every area of every Romanian city.\n\t<\/li>\n<li>\n\t\t<strong>&quot;Sweet&quot; market reports and analyses<\/strong>. Many &quot;major serious&quot; companies were confirming that there is huge demand and that the crazy prices are sustainable, if not low and they would be increased soon enough.\n\t<\/li>\n<li>\n\t\t<strong>The target group was: Rich Romanians and foreign investors. <\/strong>Everyone was convinced that this was the best part of the market and almost all of the developers were targeting sales to these clients.\n\t<\/li>\n<li>\n\t\t<strong>Too many &quot;additional costs&quot;<\/strong>. Tremendous marketing budgets, incredible &quot;soft costs&quot; (architects etc) and many other expenses and fees, except the ones that most people know (cost of land, construction and bank&#039;s interest).\n\t<\/li>\n<\/ol>\n<ul style=\"text-align: justify\" type=\"disc\">\n<li>\n<ol type=\"1\">\n\t\t<\/ol>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify\">\n\t<strong>What happened afterwards, why his bank is worried today<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tWell, things did not turn out as they were expected to be. Many different reasons led us to today&#039;s situation, but more or less your developer&#039;s bank noticed that:\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>The presales didn&#039;t happen or they were cancelled, at least 80% of them<\/strong>. Either the developer rose the prices too much and the market did not follow, or the construction was slow and the clients found an excuse to cancel, or the clients simply could not afford to buy this property anymore.\n<\/p>\n<ol>\n<li>\n\t\t<strong>Many foreign investors<\/strong> (who paid 10% advance, hoping to resell with 20% profit, doubling their investment) <strong>failed to resell and preferred to lose their advance<\/strong>.\n\t<\/li>\n<li>\n\t\t<strong>Presales became &quot;impossible to happen&quot;, not fast for sure. <\/strong>So your developer started fighting with his bank, as he could not deliver what he promised.\n\t<\/li>\n<li>\n\t\t<strong>Prices collapsed, as no sales occurred. <\/strong>And the bank remained watching the figures dropping week by week&#8230;\n\t<\/li>\n<li>\n\t\t<strong>The &quot;market reports&quot;<\/strong> based on which the loan was given soon <strong>became useful just for recycling purposes&#8230;<\/strong>\n\t<\/li>\n<li>\n\t\t<strong>The target group was proved to be wrong. <\/strong>&quot;Prima Casa&quot; was the final proof: Middle class should be the main target group, with prices half than the ones of 2008. (And what happens now to the projects designed for &quot;different clients&quot;?)\n\t<\/li>\n<li>\n\t\t<strong>The additional costs were the first expenses which were &quot;brutally&quot; cut.<\/strong> Why do you need an expensive campaign, when you failed in all the other domains? Or if you want it, pay for it from your pocket&#8230;\n\t<\/li>\n<\/ol>\n<p style=\"text-align: justify\">\n\t<strong>Result: Today in most of the cases the banks are the real bosses, not the developers <\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tI don&#039;t present the banks are &quot;poor&quot; or the developers as &quot;bad&quot;. This is a new world and the &quot;power game&quot; is played under new terms. Everyone tries to protect himself how he can, the periods of arrogance and easy money are history.\n<\/p>\n<p style=\"text-align: justify\">\n\tSo all these created a shock to the market. In the beginning, the panic caused many problems, but sooner or later every bank developed a special &quot;team&quot; of people who started dealing just with Real Estate problems. Every developer was asked to re-negotiate everything from the very beginning. Some lucky ones were in better situation than others, due to more real sales, or advanced stage of work. Projects on early phase were simply frozen.\n<\/p>\n<p style=\"text-align: justify\">\n\tThe results of all these incidents are clear:\n<\/p>\n<ul style=\"text-align: justify\" type=\"disc\">\n<li>\n\t\tYour developer simply follows the orders and approvals he receives by his bank. Sometimes he is unable to negotiate the price, because he simply can not decide upon this.\n\t<\/li>\n<li>\n\t\tWhen the building is finished and the apartments are ready, it is easy for him to sell to you an apartment using the credit of any bank you like. If not, you will have to choose his bank and then you will discover that &quot;there is one solution for everyone&quot;, don&#039;t expect &quot;custom made&quot; services.\n\t<\/li>\n<\/ul>\n<p style=\"text-align: justify\">\n\tBe careful with:\n<\/p>\n<p>\n\t<span class=\"list\"><strong>Possible advanced payments for future projects<\/strong>. You must be very sure that they will be delivered and this is something that only your developer&#039;s bank can guarantee to you.<\/span>\n<\/p>\n<p>\n\t<span class=\"list\"><strong>Your apartment&#039;s property title<\/strong>. Make sure that your lawyer will be by your especially if you buy an apartment in a project with problems. If the developer is in trouble, there is a possibility the bank to block his resources and him to be unable even to pay the costs at the Land Registry, in order to deliver to you the apartment&#039;s property title.<\/span>\n<\/p>\n<p>\n\t<span class=\"list\"><strong>Quality of construction<\/strong>. I know a developer who has succeeded to deliver several projects, but with one small problem: There are no straight walls in any of them (!) <\/span>\n<\/p>\n<p>\n\t<span class=\"list\"><strong>The controls on every single detail<\/strong>. After all these happened, some developers tried to save money from wherever they can. Don&#039;t consider anything &quot;obvious&quot;. Check carefully everything and don&#039;t sign fast. <\/span>\n<\/p>\n<p>\n\t<span class=\"list\"><strong>The proposed loan<\/strong>. Even from one bank to another, &quot;Prima Casa II&quot; terms are not the same. Yes, the State gives the same to everyone, but some banks charge more than others. Especially the ones which have to recuperate losses by your developer.<\/span>\n<\/p>\n<ul style=\"text-align: justify\" type=\"disc\">\n<\/ul>\n<p style=\"text-align: justify\">\n\t<strong>To cut the long story short: When you hear about &quot;troubled financing&quot;, be ready to discover &quot;compromises&quot; in the quality of construction. <\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\t(Exception: Some (few) projects had finished before we entered deep into crisis, so the quality of construction is good, it was also paid very expensive too).\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>On Monday, 29<sup>th<\/sup> of March:<\/strong>\n<\/p>\n<ul style=\"text-align: justify\" type=\"disc\">\n<li>\n\t\t<strong>Finished project or under construction? <\/strong>\n\t<\/li>\n<li>\n\t\t<strong>Advance payment: Why they ask it, why they need it.<\/strong>\n\t<\/li>\n<li>\n\t\t<strong>What is your developer&#039;s relation with his architect?<\/strong>\n\t<\/li>\n<\/ul>\n<p class=\"list\" style=\"text-align: justify\">\n\t<strong><a href=\"http:\/\/www.iliaspapageorgiadis.ro\/en\/2010\/02\/15\/tips-about-buying-new-apartments1-bad-quality-of-construction\/\" target=\"_blank\">Tips about buying new apartments: 1. Bad quality of construction <\/a><\/strong>\n<\/p>\n<p class=\"list\" style=\"text-align: justify\">\n\t<strong><a href=\"http:\/\/www.iliaspapageorgiadis.ro\/en\/2010\/02\/22\/tips-about-buying-new-apartments2-how-to-deal-with-the-banks-and-their-hidden-costs\/\" target=\"_blank\">Tips about buying new apartments: 2. How to deal with the banks and their hidden costs<\/a><\/strong>\n<\/p>\n<p class=\"list\" style=\"text-align: justify\">\n\t<strong><a href=\"http:\/\/www.iliaspapageorgiadis.ro\/en\/2010\/03\/01\/tips-about-buying-new-apartments3-what-should-be-the-criteria-to-choose-an-apartment\/\" target=\"_blank\">Tips about buying new apartments: 3. What should be the criteria to choose an apartment?<\/a><\/strong>\n<\/p>\n<p class=\"list\" style=\"text-align: justify\">\n\t<a href=\"http:\/\/www.iliaspapageorgiadis.ro\/en\/2010\/03\/08\/tips-about-buying-new-apartments4-old-buildings-do-talk-what-do-they-say-about-the-apartment-you-want-to-buy\/\" target=\"_blank\"><strong>Tips about buying new apartments: 4. Old Buildings do &quot;talk&quot;. What do they say about the apartment you want to buy? <\/strong><\/a>\n<\/p>\n<p class=\"list\" style=\"text-align: justify\">\n\t<strong><a href=\"http:\/\/www.iliaspapageorgiadis.ro\/en\/2010\/03\/15\/tips-about-buying-new-apartments5-introducing-the-7-mothers-in-law-many-possible-problems-to-protect-from\/\" target=\"_blank\">Tips about buying new apartments: 5. Introducing the 7 &quot;mothers in law&quot;: &nbsp;Many possible problems to protect from<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investment in a new apartment is one of the most important moments in the economic life of each and every one of us. Statistics say that we usually buy 1 &#8211; 3 dwellings during our life, so every mistake counts. When the subject is an apartment in a new project, then many questions rise. It [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":59454,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[216,17,204,236],"tags":[],"_links":{"self":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/3487"}],"collection":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/comments?post=3487"}],"version-history":[{"count":0,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/3487\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/media\/59454"}],"wp:attachment":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/media?parent=3487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/categories?post=3487"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/tags?post=3487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}