Obviously, the landscape of the real estate market has changed significantly in the past seven months.  As a result, developers all across the country have been struggling to satisfy their construction loan requirements and achieve performance benchmarks.

A developer must pre-sell at least 50% of his inventory to secure a construction loan from a lending institution.  A vast majority of the time, the bank will require the 50% of pre-sales to be individual buyers for diversification of risk to obtain a construction loan. 

Because the market has softened, speculators or investors have backed away from purchasing preconstruction real estate.  As a result, developers are having to market directly to the End User.  When the market was rich with investors… developers could pre-sell 50% of their inventory within weeks.  Since developers now market directly to the End User, it’s more of a challenge for them to unload inventory.  This is a major dilemma because End Users like tangible things.  They don’t want to wait 1-2 years for their new property.  As a result of having to market directly to End Users it can take a developer up to two years to pre-sell 50% of his inventory.  

This is how we solve this dilemma:  We negotiate with the Developer prior to the pre-sales announcement and purchase anywhere from 25-50% of his inventory.  This allows the developer to open day one, for public sales, and call the local press and say the following: "We’ve only been open for an hour and we’ve already sold 50% of our entire inventory."  In addition, Our firm will allow the Developer to use some of our Partner’s names for marketing purposes.  We will provide him with 20-30 names who are financial authorities in the real estate world. 

Most real estate buyers do not perform the proper due diligence on their purchases.  Some people don’t do any at all.  They just take the advice from a local realtor or some other advisor and assume they are experts.  This is where people make their biggest mistake.  But when someone who is nationally recognized and an authority in the real estate world is willing to take their own money out of the stock market and place it into one of our selected projects… people automatically tell themselves, "How could I possibly do more due diligence than a national leader in real estate?"  Since we are able to expedite the construction loan for the developer by cutting the up-front expenses of marketing a new development, we are able to negotiate favorable terms due to the buying power of the group.