Beware Of “Below Market Value” Deals

suckers

Important note: this is the summary of an article written by V Sanjugtha on August 29th’s issue of the Focus magazine (http://www.focusmalaysia.my/). It’s behind a paywall at Focus’ website, but I reckoned that it’s too important not to be shared far and wide amongst Malaysians.

I have therefore taken the liberty to summarize the main points of the article, and I have also added my own commentary below (in italics). Please share this article among your friends and family through email and Facebook, thank you!

Beware Of Below Market Value (BMV) Deals

  • As properties are getting more expensive, some property gurus have jumped at the opportunity to sell promote seminars on “below market value” (BMV) deals
  • Buyers are willing to pay hundreds or even thousands of ringgit to learn where to find BMV properties
  • One participant said, ” We are taught to distribute flyers, place advertisements, utilize social media.” (KY: you don’t need to go to a $1,997 seminar to learn that)
  • Unless the property is sound with good cashflow, buyers can get into serious debt obligations
  • If a property transacts at a lower price than the market, there’s usually a reason
  • It’s perfectly OK to look for BMV properties, but buying properties through syndicates is another matter
  • Business model of syndicates is to get investors to fund en bloc buys and then sell individual units at higher prices (KY: this model could probably work when the market is on the uptick, but is a recipe for disaster when the market if flat or falling)
  • In the primary market, gurus’ method of “no money down” involves getting 10-20% discounts from developers, and 80-90% loans (KY: gurus get kickbacks for promoting those properties – which are typically duds with price hiked up by 12-25% to compensate for the “discount”)
  • In the secondary market, gurus preach about finding distressed properties at least 10% below market value, and then “press” the desperate seller to give a 15% discount (KY: don’t be surprised if there’s more shady business in the background… gurus and gangsters in collusion?)

(BMV Deals Are) Just A Myth, Says Siva

  • Siva Shanker is the immediate past president of the Malaysian Institute of Estate Agents (MIEA)
  • For a property to be sold below its market value, there must be a valid reason
  • Often times, BMV properties are a “myth” which are used as bait to lure people to expensive property seminars
  • Legitimate BMV deals are few and far between (KY: they do exist, but don’t expect them to be handed to you on a silver platter. As someone wise once said, beware the naked man who offers you his shirt!)
  • BMV property scams prey on the ignorance of property owners which are usually “from the lower financial stratum of society” (KY: I won’t necessarily agree with this because a majority of seminar goers are from the middle class with cash to spare to build up a small portfolio of properties)
  • Property developers are often blamed for high property prices, but in reality property clubs and syndicates which are at fault
  • Property investors out to get rich quick have created the environment in which property gurus peddle their wares

As you have seen, I’m not alone in my doggedness in exposing property gurus and their devious money grubbing schemes. However, we may be fighting a futile fight because these shysters will always exist in some form or the other as long as there are “get rich quick” opportunity seekers out there, but if we can avoid another Barry-like case then it’s all worth it.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. Thanks Khai Yin for sharing these important points to take note of.

  2. KY, correct me if i’m wrong… when the developer launch a project and later they pitch in their ads that they sell their unit 5-10% below MV + rebate , they already markup the price early…

    But with the current property cycle, i think developer starts to worry and rush to unload their unsold unit…. so, is this will make developer a DISTRESS SELLER ?hence they will sell it even lower?

    Sorry for bad grammar..

    • Depends on loads of factors, really. It really differs from developer to developer – but the rule of thumb is that the bigger players (with lower gearing, or some niche developers) tend NOT to unload their unsold stock at firesale prices since they can weather the down cycle and wait out for the uptick.

  3. Well one green development at ara damansara did just that. They hiked up their prices a year ago and now now offered a rebate which is still above the original launching price. Ha

  4. good point, i’m an investors that look for BMV properties on secondary market. the research i do before i commit is crazy (spending weeks/months doing research before i commit). so yes i agree that (for secondary market) if you want to look for BMV deals please do a lot of research before commit and i also agree that BMV properties have problems (if not why the hack people want to sell you BMV?) but for me i don’t see it as a problem as long as i put my mind to fixing the problems because at the end of the day i got a BMV properties (by the way, most of the time the BMV properties problem is not related to fixing the properties, is more on the owner personal problems)

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