Real Estate Agents Offering Homes with $1000 Deposit - Whats The Catch?

RockSand on 04/05/2018 - 09:27

Happy Friday guys,

I've noticed that there has been an increase in real estate agents, or investment groups as they call themselves, that offer very low deposit to purchase your own home. This can be 5% deposit or even as low as a $1,000 deposit.

So apparently the way it works is that they have deals with developers and builders and the builders will take up the loan on your behalf, while you just need to drop in $1000 initially. They also offer further discounted price of properties to attract buyers.

Does anyone have any experience with these type of companies? Whats the catch? I am guessing that you wont have full equity of the property until it is paid off, or that the interest charged will be exorbitant.

Cheers,

Financial

Comments

  • BertieBrown on 04/05/2018 - 09:32
    +9

    There's always a catch.

    • CyberMurning on 04/05/2018 - 10:27
      +5

      and there's always a fish got caught.

  • bobbified on 04/05/2018 - 09:36
    +2

    Read and understand all the fine print. Then repeat!

    No-one offers something for nothing!

  • Cheaplikethebird on 04/05/2018 - 09:54
    +14

    The properties are overvalued and aren't selling.

    • mskeggs on 04/05/2018 - 09:59
      +2

      This seems obvious to me. Could there be any other explanation? (I am discounting the emergence of the property developer with a heart of gold).

    • RockSand on 04/05/2018 - 11:13

      That's what I thought, but it seems like they keep flipping new developments and keep mentioning that they are "selling fast".

      • Cheaplikethebird on 04/05/2018 - 16:51
        +1

        Everything is selling fast if you ask the person selling it to you. Creating a sense of urgency is sales 101.

        I've seen a couple of these offers before, always for housing developments full of cookie-cutter dog boxes an hour commute from the CBD. They'll be worthless once the market crashes.

  • mskeggs on 04/05/2018 - 10:04
    +2

    Be aware that even with a low deposit, you would still be committing to the full price.
    If it turns out the property is worth $100k less by the time it is built, you still must pay the full price, even though there is no bank prepared to lend you the money in such a circumstance. So you will then have to declare bankruptcy and give any assets you have to the builder.
    This is already happening a lot.

    From the Australian last year (behind a paywall, sorry)
    Mar 23, 2017 - Losses on the wave of new apartments are starting to mount with a hefty 60 per cent of units bought off the plan in inner Melbourne since 2011 breaking even at best or reselling at a loss, while inner Brisbane saw 40 per cent of resales tread water or lose money, according to new research from BIS Oxford

  • CyberMurning on 04/05/2018 - 10:28
    +1

    source, company page, or example please? link etc etc? or this is just a story?

  • dasher86 on 04/05/2018 - 11:33

    There's a few companies like these going around doing 'well being'seminars in the hope that they get you hyped up to buy their product.

    Yes the product is usually inflated in cost.

  • tsunamisurfer on 04/05/2018 - 11:47

    This is a typical strategy for getting people to buy their stock without compromising on price.

    They know the market is falling, they don't want to bend on price so they make the normal constraints of property purchase easier to get people in.

    Read the contract thoroughly.

  • Viospeed on 04/05/2018 - 13:18

    Looking to buy a place but not at these exorbitant prices.

  • mbck on 04/05/2018 - 13:36

    The price is too high. U get in and get locked in having to pay the high price.

  • bettina44 on 05/05/2018 - 00:08

    In canberra most off the plan properties are a 5% deposit. It's pretty standard

  • LordSydney on 05/05/2018 - 16:21

    The bold print giveth and the fine print taketh away.

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