City Centre Flat developments knowingly Oversold
Discussion
In my work as an Accountant attempting to assist various borrowers who have seriously overstretched themselves I have become aware of what in my view could be regarded as a conspiracy that has been going on in property development in recent years.
The result has been massive falls in property values in inner city developments. Quite unrelatred to the general falls in property values.
There is clear unequivocal evidence that the original prices set for these properties and subsequently franked by valuers, solicitors, mortgage providers, mortgage brokers, lending institutions estate agents, and others was massively hyped and overvalued and oversold by huge amounts.
I have now seen examples of buy to let properties where the values have fallen ON ACTUAL FRANKED PRICES AT THE LAND REGISTRY from £170,000 for a one bedroom flat to £75000 upon sale by the lender.
In this particular case the property was originally bought in 2003 with a £35,000 deposit and sold in 2009.
This was during a period of massive growth in house prices and demonstrates
how clearly suspect the original sale and valuations must have been.
The individual concerned is now Bankrupt through this fall in values and in my view this is invidious and in fact fraudulent.
There is a pattern of intimacy in the relationships between the developer, the valuers, the mortgage brokers and the solicitors involved as you would expect there to be. Substantial commissions and fees were earned by the broker, staff of the lender, solicitor, estate agent and the developer made a huge surplus.
In every case I have seen the market rent anticipated on the property has been grossly overvalued and in the case above still not achieved to date.
The service charge on this development was set far too low and has now trebled over a five year period. The original charge suggested could never have serviced this block it was set low to sell the property.
Clearly the original improper valuation, based on a grossly unrealistic service charge, unattainable market rent (still unattainable 5 years later), grossly excessive sale price and over hyped market was responsible for these losses.
None of which was in the control of the purchaser who went like a lamb to slaughter accepting the word of the professional involved.
And who is the ONLY individual who lost out. Bankrupt. Ruined.
I am very interested to know if there are any other individuals who have suffered the same fate.
There may well be a day of reckoning coming.
The result has been massive falls in property values in inner city developments. Quite unrelatred to the general falls in property values.
There is clear unequivocal evidence that the original prices set for these properties and subsequently franked by valuers, solicitors, mortgage providers, mortgage brokers, lending institutions estate agents, and others was massively hyped and overvalued and oversold by huge amounts.
I have now seen examples of buy to let properties where the values have fallen ON ACTUAL FRANKED PRICES AT THE LAND REGISTRY from £170,000 for a one bedroom flat to £75000 upon sale by the lender.
In this particular case the property was originally bought in 2003 with a £35,000 deposit and sold in 2009.
This was during a period of massive growth in house prices and demonstrates
how clearly suspect the original sale and valuations must have been.
The individual concerned is now Bankrupt through this fall in values and in my view this is invidious and in fact fraudulent.
There is a pattern of intimacy in the relationships between the developer, the valuers, the mortgage brokers and the solicitors involved as you would expect there to be. Substantial commissions and fees were earned by the broker, staff of the lender, solicitor, estate agent and the developer made a huge surplus.
In every case I have seen the market rent anticipated on the property has been grossly overvalued and in the case above still not achieved to date.
The service charge on this development was set far too low and has now trebled over a five year period. The original charge suggested could never have serviced this block it was set low to sell the property.
Clearly the original improper valuation, based on a grossly unrealistic service charge, unattainable market rent (still unattainable 5 years later), grossly excessive sale price and over hyped market was responsible for these losses.
None of which was in the control of the purchaser who went like a lamb to slaughter accepting the word of the professional involved.
And who is the ONLY individual who lost out. Bankrupt. Ruined.
I am very interested to know if there are any other individuals who have suffered the same fate.
There may well be a day of reckoning coming.
Something is only worth what someone will pay for it. With a different roll of the dice, you could have been helping the owner minimise his tax liabilities as the market soared and he was raking it in. Anyone who goes into property investment without knowing what they are doing is always likely to learn the hard way
Elysium said:
Real estate valuations are based purely at the market.
The fact that the market subsequently crashed is not the fault of the valuers. If anything, this situation is the fault of the buyers. They defined the value, based on the amount that they (collectively) decided to pay.
Not sure on that one. New build two bed town houses were about £20k over 3 bed semi's in our village. No amount of "guarantee", or thrown in furniture justified that as they were also on the main road and had no garden. Room sizes were a joke as well.The fact that the market subsequently crashed is not the fault of the valuers. If anything, this situation is the fault of the buyers. They defined the value, based on the amount that they (collectively) decided to pay.
rich1231 said:
tonks is spot on here.
However if those advising a buyer colluded to inflate a value for example and knowingly did so then there might be some room for a tiny slim chance of some sympathy.
I remember seeing some of these 'property magnates' on TV boasting of how they made their millions. 10 buy to let flats, rent income £100k a year, payments on the £1.75 million mortgage only £85k, and the capital will double in a year.However if those advising a buyer colluded to inflate a value for example and knowingly did so then there might be some room for a tiny slim chance of some sympathy.
The clever ones took their profits and made a killing. Others appeared on TV whining about the unfairness of it all.
It takes two to tango.
This type of speculative and marginally fraudulent activity is always a factor when a market becomes a bubble.
As ever, proving that what happened was actually fraud is always very difficult. Usually it is just a case of all the involved parties deluding themselves.
No doubt, some genuine frauds have gone on - but mostly it was people behaving irrationally.
This type of speculative and marginally fraudulent activity is always a factor when a market becomes a bubble.
As ever, proving that what happened was actually fraud is always very difficult. Usually it is just a case of all the involved parties deluding themselves.
No doubt, some genuine frauds have gone on - but mostly it was people behaving irrationally.
Fraud or near fraud or just very dodgy? I know my own view on the subject...
looks like a scam to me.
- Developer advertises house on new development for £250k
- Buyer negotiates a selling price of £230
- Developer insists price shown on legal paperwork is £250k, although lower discounted price is paid under the contract.
- Legal papers sent to land registry show "price sold" as £250k (and Stamp Duty charged on that).
looks like a scam to me.
anonymous said:
[redacted]
Tonksyour view seems to be that there has never been collusion between developers, valuers and solicitors.
I think we all know that there is. The Simon Morris case only fell over because the cost of prosecution was deemed not worth the benefit of conviction.
You are probably 3/4 correct - lots of greedy common folk thinking that there is such a thing as free money , not realising that the free money only exists in the first few years of a boom. The music has stopped and those who didn't get in and out early are paying the price.
But to suggest that there was no element of sharp practice preying on naivety is a bit wide of the mark.
I think the likes of Morris & co will probably get what is coming to them in one way or another.
anonymous said:
[redacted]
Agree with this - it is a small amount rather than the norm.None of which deflects from the OPs assertion that the facts he may have uncovered may point to collusion and fraud.
My advice to the OP would be if you think you have evidence of an offence, contact the police.
Nothing new about developers, agents and "legal professionals" colluding. The only thing the OP appears to miss is that the buyers were also in on the collusion or gave it tacit approval.
A quick walk around the area or a search on the internet is enough for most people to know when values are out of kilter. They chose to go along with.
The buyers gambled and they lost.
pp
A quick walk around the area or a search on the internet is enough for most people to know when values are out of kilter. They chose to go along with.
The buyers gambled and they lost.
pp
Nothing new about developers, agents and "legal professionals" colluding. The only thing the OP appears to miss is that the buyers were also in on the collusion or gave it tacit approval.
A quick walk around the area or a search on the internet is enough for most people to know when values are out of kilter. They chose to go along with.
The buyers gambled and they lost.
pp
A quick walk around the area or a search on the internet is enough for most people to know when values are out of kilter. They chose to go along with.
The buyers gambled and they lost.
pp
Steffan said:
The result has been massive falls in property values in inner city developments. Quite unrelatred to the general falls in property values.
"Your investment may go up or down in value."The property was worth x when when they bought it. It's worth y today. There is no conspiracy, it's simply the market forces at work.
Life's a b
h. Don't buy £175k properties if you can afford the associated risks.The big problem here is not the property developers, it's the buyers seeing great big pound notes in front of their eyes...
A friend of mine bought a flat in a new development just before the recession - by the time it was ready to complete, the Market was already falling - so what did he do? He renegotiated with the developer on the properties value at that time - saved himself about 50k
Moral of the stories - common sense triumphs over ignorance every time
A friend of mine bought a flat in a new development just before the recession - by the time it was ready to complete, the Market was already falling - so what did he do? He renegotiated with the developer on the properties value at that time - saved himself about 50k
Moral of the stories - common sense triumphs over ignorance every time
Steffan said:
None of which was in the control of the purchaser who went like a lamb to slaughter accepting the word of the professional involved.
I hope he doesn't try to take anyone to court. Unless he want to officially declare himself as a mug. Why didn't he do his own research into the market? This "scam" (it's not a scam) goes on all the time at those property investment shows up and down the country.
What a mug. Sorry, I mean, "Aw baby! Poor baby! Bad bankers! Naughty bankers! Greedy bankers!" as that's fashionable amongst the mouth breathers these days.
Your client was just as greedy as the professionals you're accusing of fraud.
Many of us on here have been arguing that the entire housing market is substantially over valued, many others feel it offers fair value and some see further rises on the way (and some think that everyone else's house is falling in value whilst their own is still increasing...).
You pay your money and take your choice, and end up bragging about how much money you have made on your house, or regretting that you didn't get on the ladder when you had the chance, or seriously out of pocket when prices fall, or bankrupt.
Unlike the public perception of the last decade, there are no guarantees and property isn't an upward only investment. It's about time people took responsibility for the consequences of their own decisions.
You pay your money and take your choice, and end up bragging about how much money you have made on your house, or regretting that you didn't get on the ladder when you had the chance, or seriously out of pocket when prices fall, or bankrupt.
Unlike the public perception of the last decade, there are no guarantees and property isn't an upward only investment. It's about time people took responsibility for the consequences of their own decisions.
Edited by RYH64E on Sunday 6th March 11:36
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