Personally speaking, the experience of purchasing a pre-sale property in Brazil was frustrating, depressing, infuriating and no doubt the biggest financial mistake of our lives.
In 2000, my husband and I decided to buy a pre-sale property in Brazil. The development was beautiful, the location was perfect, and the builder was established and very well known in the real estate market. We thought we were doing the right thing, and that it was a good investment opportunity. We had to put down a significant down payment and we financed the remaining balance directly through the builder, which was a common thing to do at the time in Brazil.
From an investment point of view, we did our homework; we researched the builder, we checked the area development, so we could have an idea of the property appreciation and we visited the construction site regularly to make sure the project was on schedule and was going to finish on time.
At this point, you might have an idea of what happened to us. Well, we were scammed. The builder declared bankruptcy in 2001. Of course, we panicked but ended up suing the builder. After a significant amount of money spent on lawyers, we won the case and we are to this date still waiting for our money. If and when that happens, the money will likely buy us enough cement or bricks to start a new project due to the insanely high inflation rate in Brazil.
It took us a very long time to recuperate from this financial and emotional episode. My husband and I promised to one another to NEVER invest in pre-sale properties again. We had decided that this type of investment was a big scam and that we would NEVER repeat this mistake again, we were firm: Pre-sale property never again!
The world goes around and around! With time you forget, and you heal. We ended up moving to Canada. It was a hard and complicated transition and we were super happy and grateful. New life, new language, and a totally different culture. We came to stay, and we had to build our lives again. With no jobs and a lot of time on our hands, we started to learn about the real estate market in our area. The construction business was very strong and everywhere you looked you would see something being built. Curious and unemployed, my husband and I started to visit construction sites and learn about construction, market value, areas, and types of properties. We discovered something very interesting. In Canada, when a bank finances a new development, 60% or more of the units have been sold and the builder has the bank’s support to take the project up to the conclusion stage. If anything goes wrong with the project, the law obligates the builder to refund the money to all clients. In Brazil, the law says the same, but the difference is that here in Canada, the law works.
After a lot of learning and asking questions about how things work here, I looked at my husband, and my husband looked at me and we decided: Let’s buy a pre-sale property again? It was what both of us wanted to do and thank God we did!
Buying pre-sale property is a very good investment that can give you good returns if you know what you are doing.
Is it risky to buy a pre-sale?
My answer is always the same; things stop being risky only after we die. Is it a good investment to buy a pre-sale here in Canada? Yes, but it will depend on the price that you pay, the area growth and the real estate market.
Do I need to have an income here in Canada to buy a pre-sale property?
To secure the unit you want with the builder, you won’t need anything other than the deposit. However, once the property is ready and you need any financing from a bank, you must qualify for it with the bank’s guidelines.
What is the most important thing to know if I am buying a pre-sale property?
Definitely, there is a lot of important information that you must know. You are not buying a pair of shoes, but in my opinion, the most important tip I can give anyone is to have a good contract. There is an “assignment clause” that you should always read, understand and clarify. Knowing the terms of this assignment can protect you from significant costs down the road. The second most important thing to consider is the help of a real estate agent. I do not recommend signing a pre-sale contract without your realtor. Remember that the staff you speak to at a pre-sale event or showroom work for the builder and have their employer’s best interest in mind.
Any questions or suggestions, please don’t hesitate to send me an email. It will be a pleasure to talk to you.
Andreia Guariento is a Mortgage Broker Specialist working throughout Canada.
https://andreiabrazil.com / Facebook: Andreia Brazil Mortgage Broker / [email protected]