This company has so many dissatisfied customers that it employs lawyers full time to scour the internet finding complaints about themselves and have them removed.in August a report about them was on television in the UK, it was shown on the programme 'Inside Out' The full report has been on you Tube for some time. Such is the ferocity of this companies lawyers that recently is has had this report removed from You Tube.
Almost all the forums with message boards relating to international property have been gagged. Several large forums have removed any malicious comments about this company and another has a filter on all messages so that you simply cannot post the name of this real estate agent.
There are so many unhappy and angry customers who feel that they have been lied to by this company that a support group has been formed to help people bring legal action against this company and to lobby for changes in legislation that will stop this company's activities.
'The Great International Investment Property Rip Off' forms the basis of my and hundreds of other peoples complaints against this company. It outlines the process that is being used and points out where they are ripping people off.
It works like this:
I'm using Bulgaria as an example, but there are Real Estate Companies and their Lawyers are doing it in many world wide locations.
Construction costs in Bulgaria are low around 300 400/ sq m. The developers sell the apartment for 1000 per sq m making a huge profit. To move all these apartments they have to pay the Real Estate Agents loads of money so they get paid 10,000 for every unit they sell. This of course is added on to the purchase price. The REAs are getting filthy rich from every unit they sell so they can afford to run fancy property shows where they offer free buying trips all accommodation included.
Mr and Mrs ordinary purchaser who think it might be a good idea to try their luck at some off shore property investment, are convinced by the REA that they will make money from this investment because they are told that property prices are rising rapidly and expected to hit a record 30%, 40% or even 50% capital growth next year.
The REA's install a lawyer (who is also their best friend) in the office next door and tell them they will also make a pile of money by processing hundreds of property transactions every day and doing not much else. On their free buying trip Mr and Mrs Ordinary investor are shepherded into the lawyer's office like Sheep to the slaughter. There is no discussion of an independent lawyer and even less opportunity to introduce one into the transaction.
The REA also installs a finance company in the office across the hallway, who is said to be independent but is actually their brother in law. Mr and Mrs Investor have been told that 'there will be no problem getting a mortgage' but when the time comes for mortgaging their new property there is no mortgage in sight. They can't make the payment, are in breach of contract and loose their deposit.
Because the building margins are more than 100% more and more construction companies enter the market and in an emerging market there is no regulation so they all build like crazy. Soon a Tsunami of supply hits the market but as long as prices remain high builders are ready to pour concrete on 99% of the territory.
Eventually Mr and Mrs Ordinary investor realise that the rental income from their investment is not covering the mortgage and they are in financial trouble. The property is put on the market and they try to sell, but they find they can't sell. The REA's who previously told them Don't worry we will take care of everything for you now don't want to know them. The REA's have no interest in listing this re-sale property, or trying to sell it, emails to the REA's remain unanswered and phone calls are not returned.By now everyone else who has bought these investment properties are also trying to sell and prices hit rock bottom.
Everybody makes themselves a big fat profit except poor Mr and Mrs Investor who are left paying an expensive mortgage for and over priced property.
Why is this scam?
1. It is totally misleading to tell purchasers that a property is a good investment because property prices are rising. The only real test of the value of an investment is the income from rentals. After all if you can't rent out your property then your investment is worth zero. And in an emerging market rentals are an unknown. A good rule of thumb is that your price to rent ration should be about 10 or 12 years. Meaning you should be able to pay off your property from rental income in 10 or 12 years. (all mortgages disregarded) If it is less than 10 years you have a good investment if it is more than 12 years then the property is over valued and you should stay clear of it.in Bulgaria this ration went as high as 20 or 25 years in some areas.
2. This is a good investment because property prices are rising is lie. Price rises that are not linked to rental demand are completely false and misleading. They reflect nothing more than Real Estate Agent hype. If the REA makes a number of sales in an area he will tell his clients that there is a high demand for properties in this area prices will rise. Sure enough next week the developer is putting up the price of the off plan properties. Now the REA tells the buyers demand is high, property prices are rising at a rate of 50% this is a good investment. Mr and Mrs Investor think fantastic in 2 years time I will have twice as much money for doing nothing. They buy 2 units and in doing so force up the prices again but because these price rises are not linked to rentals they are only creating more inflationary hype.in Bulgaria this inflationary hype reached astronomical proportions because the REA's had the added hook that Bulgaria would be entering the EU and when that happened property prices would of course double.in some places properties were 40% or 50% over valued.
3. Your capital gain only means increased wealth if you can sell your property. A year later Mr and Mrs investor want to sell their 2 properties but they find they can't. This is mainly because the REA's don't want to know them, the REA's aren't vaguely interested in making any effort to market them. Why is this? Because they can get 10,000 for every off plan unit they sell when they will only get 1,000 for selling Mr and Mrs Investor's property. Why would they make any effort to sell a unit for 1,000 when they can concentrate their efforts on selling of plan properties for which they get 10,000 per unit?
4. Use of an 'In house' lawyer
On the free buying trip abroad the buyer is out of their comfort zone and they know no one in that country the agent takes advantage of this. He tells the purchaser don't worry we will take care of it for you we have a lawyer we can recommend. The lawyer chosen in this way knows that he better be loyal to the agent rather than to the buyer. He is an in house lawyer of the agent and he has been recommended by the agent for a reason. The reason is that this lawyer will never forget that the buyers come and go, but the agent stays and that it is the agent who decides how many clients the lawyer gets.
In Bulgaria this recommendation masks and illegal practice. According to Bulgarian law Article 40, Paragraph 5 and Article 41 of the Bar association act lawyers are expressly forbidden to use middlemen in order to find clients.
I've had a look around a few international property forums and looks like the Bulgaria is not the only place where this is happening.in Dubai there are acres of construction for investors but no one who wants to rent the apartments. There are problems in Morocco and Cape Verde and so on.
If you have been affected in a similar way you are welcome to join our support group also.
Ella
London
United Kingdom
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