Be Careful Of Property Associations

Someone posted this in my forum and I found it rather interesting, so I thought I would write about it since there’s a lesson to be learned.

“I became a member of the Property Association in June 05 at a cost of £1600 plus VAT. The Property Association make deals with house builders and sell the off plan flat/houses to their members. They do various deals around the country and overseas. Their usual trick is to tell their members via very convincing emails about various developments, and leading people to believe that there is an instant equity. I was foolish enough to believe them and purchased an off plan 2 bedroom flat near Newcastle, in June 05, to be completed in July 06. There was 12 flats for sale and all were bought by members.The initial info from them was also mentioning that a similar flat had sold in the area for £134,000, so I thought we were getting a very good deal with our purchase! Because there was no Post Codes I could not research anything on the Internet. We were also told that the flat was 4 miles from Newcastle and in a regeneration area.

My sympathy goes out to Dan, the guy who wrote that. But there’s plenty to be learned from this unlucky experience.

I’ve noticed a lot of those property association companies merge from under the woodworks over the years and I can safely say that they’ve never appealed to me. Not because I thought they were a dodgy outfit (although I do now), but more because I wanted to have a more in-depth involvement with property myself, as opposed to getting someone else to do the work for me for a shit load of money. What these property association companies basically do is approach developers, and strike up an agreement. They usually say, “we’ll sell 20 apartments for you, if you give us a discount on each flat”.

If you plan on going down the route of using a property association, just be careful, especially with off-plan proposals, as you never know what you might end up with. And don’t be fooled by the “instant equity” bullshit; equity can NEVER be guaranteed. If they’re so positive of instant positive equity guarantee, tell them to put it in the contract. I’d like to hear their responses to that…The fact is, you can’t actually value a property accurately until it’s been built.

I don’t mean to name and shame (I do really), but here’s an example of a property assciation company here.

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Geoff Wilkins wrote, on Nov 28th, 2007

	I wanted to add that we have also fallen foul of the property association ( aka eurproperty) scam. We agreed to purchase an off plan property in Manchester through them in June 2006 ( for completion in Sept 2007). The advertising clearly stated that the property was valued at 183k and that they could get a 15% discount down to 155k. For this information they charged us 4.5k; but we thought that was worthwhile if we were getting 28k instant equity. We exchanged contracts and paid our deposit to the developers, Mayfair Developments. In April 2007 we had a valuation for mortgage purpose. The valuation came in at 160k. We had subsequent valuations done by local estate agents and they came in at 155k - 160k . At this point we realised we had been conned. We have rescinded the contract but both the property association and mayfair developments have refused to refund the money we have paid them. We are out of pocket by 12k so far and have been told we may be sued for another 9k by the developers.
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The Property Amateur wrote, on Nov 28th, 2007

	Hey Geoff, Sorry to hear about your experience. Sounds awful. I think the important message is that you can’t really value a property until it’s been built, so equity can’t be gaurenteed. I hope things work out for the best. Kind regards.
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