Buying On Paper: A Success Story
Updated: Feb 2, 2021
In 2012, we were approached by Africa-Israel, one of the largest developers in Israel, to do pre-sales in Savyoney Arnona, a new 200-unit project located in the Arnona section of Jerusalem.
We liked the project as it was situated in an “up and coming” neighborhood, the handsome buildings had upscale touches, the floor plans were well-designed, and pricing was reasonable. Most importantly, we felt comfortable associating with the developer due to its sterling reputation in the industry.
The developer was awaiting receipt of the building permits to begin construction, and desired a successful sales kick-off event to generate market momentum. We grasped the opportunity and were excited for our clients to “get in on the ground floor” and cut great deals while the developer was particularly hungry to sell.
The existence of a bank guarantee – an insurance policy assuring completion of the project should the developer go bankrupt – gave us confidence that our clients were protected from downside risk while enjoying the opportunity to profit from the project’s upside potential. In addition, the developer was contractually obligated to pay rent should the occupancy date be postponed, which is exactly what happened: the project was delayed by a number of months and the developer, honoring its commitment, sent monthly rent checks to the purchasers until project completion.
We traveled to the US and pre-sold eleven units at great prices. To give you an idea of savings, sales prices for the last remaining apartments were sold at prices over 25% higher than the first batch of sold units.
Pre-Sales Are Not For Everyone
After the pre-sale event was over, we continued to sell apartments in Savyoney Arnona. Interestingly, some clients preferred waiting until the delivery date was within a year of contract signing. A number of other clients wanted to better understand the demographics prior to purchasing, to ensure that they would be comfortable living in the complex.
On the topic of demographics, a client who purchased an apartment in Savyoney Arnona gave me one of the best compliments when he asked me, “do you know the greatest value that you give your clients?” After rejecting my first two guesses “honesty” and “fighting for best price,” he explained that, while both of those qualities were true, my greatest value was that I was creating special communities. Through our network, we were bringing in wonderful families to buy together and be the nucleus of the next amazing community. Thankfully, we have been able to create great communities in numerous subsequent projects, such as Bustan Baka and Ramat Baka. In addition to adding to the buyers' "quality of life," the excellent ownership roster has increased market demand for apartments in these projects, which helped raise their resale value.
Based on our successful experiences in selling in new projects, we have built a reputation in the industry as pre-sales specialists, and we are constantly on the lookout for the next great development project.
We are currently working on a number of exciting projects, which we hope will soon become available for sale. If you have the temperament to buy “on paper” and the patience to wait a few years to receive the keys, opportunities abound. However, choose carefully, as not all projects are created equal. The key, in addition to location and price, is to work with a developer who cares about their reputation. When challenges arise (and they always do - it's part of the reality of buying on paper), a developer with pride of craftsmanship will do the right thing and properly address the issues.
Gedaliah Borvick is the founder of My Israel Home (www.myisraelhome.com), a real estate agency focused on helping people from abroad buy and sell homes in Israel. To sign up for his monthly market updates, contact him at email@example.com.