There you are, in the cozy sales office looking at the plans of a beautiful, soon-to-be beachfront condo complex.
The enthusiastic sales rep is making it sound perfect.
Everything looks and sounds great, and for buying in before completion, you get a huge discount.
Heck, as it looks, you could probably double your investment in less than 2 years time.
As the sales rep pauses, you think to yourself, “Worst case scenario, I’m “stuck” with an oceanfront condo.”
So you buy, pay a hefty deposit and fly back to your country, eagerly awaiting the inauguration.
But there’s one thing the sales rep didn’t tell you that you really need to know.
In most parts of Latin America, what happens behind the scenes in these construction projects is way different than what happens in the US.
In the US, what typically happens is the builder will buy the land and make the building plan. Then they begin to sell units.
The money they receive from their sales goes into a secure escrow account that the builder can show the bank in order to help get financing to finish the project. Only upon completion of the project does the builder get access to YOUR money.
Down here in Latin America, it’s a little different.
Financing from banks is almost non-existent. So as the builders sell units during construction, they use that money, your money, to fund the project!
Even worse, often, they will tell you your money is in a secure, third party, escrow-type account, but really, the day after you paid, that money is in the builder’s pocket.
So what happens if the project goes bankrupt and can’t finish?
You lose your money.
But what normally happens is that the builders just wait it out if they run out of funds, which means years could pass without you getting your property.
The best way to avoid this is to buy into a project of a large, reputable, solvent company and not to pay a large deposit. Instead, pay in small intervals marked not by dates, but by specific completion points of the project.
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