ENDORPHINS

People become emotionally tied up in a residential real estate purchase.  Real Estate agents just ‘love it’ when someone shows all the hallmarks of being in love with a property.

Your brain turns to mush and all sorts of uninhibited emotions take over as you stare quietly into the magnificent view, run your hands tantalisingly over the smooth marble finishes and imagine yourself surrounded by admiring friends as they ooh and ahh over your clever and astute purchase.

Remember the sound when a needle falls off an old fashioned vinyl record?  That’s the sound that careers through your head as the realisation you’ve been duped arrives like an unwelcome freight train in the middle of the night.

Sophisticated marketing, in my experience, relies on three things, two international and one very Australian;

1.    Greed
2.    Fear, and
3.    Bullshit baffles brains.

Greed. A basic human instinct. Buyers of real estate are greedy for capital gain and growth, prestige, getting the best value for their money and so on.  A competent real estate agent or marketer will feed that greed.

Be aware, put your shields up and walk away if you feel pressured.  It’s like writing that nasty email to your phone company or utility provider. By all means write it, but jam your fingers in the drawer before you send it, go for a walk and come back an hour later. On second reading you will always look like an idiot.

Fear.  Another basic instinct.  What on earth would a buyer be afraid of?  Well, in a rising market, of missing out on a ‘once-in-a-lifetime’ opportunity.  In a falling market, paying too much or missing out on a better deal elsewhere.

If fear is tending to drive you to make a decision, any decision, see ‘Greed’ and run away.  If fear has frozen you, good. Go home, have a cup of tea and a lie down.  Once rested and calm, re visit the situation and make your decisions out of harm’s way.

Bullshit baffles brains.  A typical Aussie crudity but nevertheless an effective description of how snazzy marketers work.  I’ve seen the most highly qualified people completely sucked in by a clever mouthed agent who’s managed to get their signature on a dastardly worded and conditioned Contract in less than 30 minutes.

Locally, in Surfers Paradise, one the World’s best known habitats of the dangerous creature “Bullshitist Maximus”, hapless holidaymakers are dragged off the footpath (sidewalk) into very snazzy looking Offices with beautifully made models of amazing high rise buildings replete with pools, Jacuzzis, gymnasiums, shops and plazas and signed into the ‘opportunity of a lifetime’ in the blink of an eye. Those poor people were just walking around rubbernecking, ice cream in hand, and next minute found themselves the proud owners of a holiday apartment, along with a huge mortgage which entangled the family home 1,000 miles away.

Agents call these clients (behind their backs of course) ‘Ice Cream Lickers’.

Wood ducks more likely.

An example from my files.  Friend of mine, sadly passed on, asked my advice on buying an Apartment ‘off the plan’ in a new development. He saw it as an amazing investment opportunity.  I strongly advised him, over coffee, to stay away from high rise holiday-let complexes, especially when they weren’t even built and therefore had no track record.  I said to only buy only once the dust had settled and the ‘Market’, not the developer, had decided how much they were worth.

I added that people would often default on their ‘off-the-plan’ purchases and there may well be opportunities down the track to pick up a nice apartment at a substantial discount.

In LARGE NEON!  Mate, if you really, really like the idea of buying in this particular development, slam your fingers in the drawer and WAIT.

Can you see the fear and greed at work here?

The bullshit was in the marketing material.

I’d never seen, and haven’t since, such outright lies on a set of documents. The paper was heavy weight, with gold embossing liberally applied. A massive set of documents were hand delivered by a 25 year old woman who could’ve come straight from a Miss World competition.  It was as if my friend had just flown in on his $20 million Lear Jet and was about to be ‘high rollered’ into a $10 million Penthouse.  It was ridiculous, over the top and its appearance and mode of delivery set alarm bells ringing.

Its content was worse.

The promises made, with not one disclaimer to be seen, was that the apartment would attract a gross rent of $300.00 per night with an occupancy rate of 85% and a cost of ownership of 15%.  I tried to argue the toss with my friend and to do what anyone in their right mind would do…compare apples with apples in the current market.

Tourism was down, as were occupancy rates. The apartments were nice, but not 5 star. The so-called ‘furniture package’ they’d bought to go with the apartment was lovely but I could’ve done it using a local interior designer for $30,000.00 less. A local 5 star hotel could be booked for half the price with more facilities and room service thrown in.  It just didn’t add up.

He bought, and had to mortgage his house to do so.

But fear, greed and pure love had taken over and I was powerless to do anything about it except sit back, watch and wait.

It didn’t take long for the gold to lose its shine and the cracks to appear.  Sales stalled and some folks failed to complete their purchases.  Re-sales started to pop up and the price reductions were in the hundreds of thousands of dollars.

My friend panicked and sold his house, taking a large stress induced loss as the sharks circled.  He and his partner moved into the apartment.

The interest rate on their massive loan had jumped 4% and reverted from an ‘interest only’ loan to ‘principal and interest’ just as they moved in. The dodgy financier refused to budge so they were now in over their heads.

They were eventually forced to sell the ‘Luxury’ apartment and move into a rental.

Total loss – a ridiculous amount of money and the stress of it all took his life.

I spoke to many people about their ‘off the plan’ purchases in this building, and others.

Their nightly gross return, as the building managers desperately sold ‘room nights’ to online brokers and airlines direct plummeted. Not $300.00 but $90.00.  Occupancy rates.  Not 85% but over the year, 35%.  Cost of ownerships ended up at nearly 60%.

Fear, greed and bullshit…

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2 thoughts on “ENDORPHINS

  1. Highly energetic blog, I liked that a lot. Will there be
    a part 2?

    • Hi there in South Africa and thanks for your comment! Part 2 and 3 and more will be blogged as soon as I can work through my Notes. ACE #2 is at 800 words on its way to about 1,200 I think…may post it in the next couple of hours…

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