Saturday, March 8, 2008

Thousands In New Zealand Lose Investments & Homes

Recently in New Zealand thousands of real estate investors took heavy losses from unscrupulous marketing of an intermediary firm Blue Chip. The NZ Herald mentioned that many of these people have lost the invested estate and their personal homes as well due to collateralized mortgage failures. Families and spirits broken, they will remember this lesson in the ages to come.

The ongoing travesty began to unfold a few weeks ago as realistic questions rose regarding actual bidding prices of residential properties peddled. Brokerage firms like Blue Chip rely on heavy price discrepancies to make a profit. In other words they must convince buyers to fork over prices well over what the firm believes is liquid (i.e. where many buyers exist), and vice versa with the sellers; the surplus becomes brokerage house’s income. Therefore, their primary interest conflicts heavily against the clients. The business model reeks of problematic schemes.

We can then resolutely conclude that property values pushed by brokers imply nothing but deceptions. According to the NZ Herald, many investors had risked their own homes all in good faith via advice from Blue Chip employees. They never bothered to even visit the physical locations or scrutinize price bids from private interests.

No absolute value exists for anything; it is just an estimate of however much the next buyer will likely prepare to shell out. So it basically hangs at the mercy of the local supply and demand shifts.

If the investors had only spent a few days to research how much value the next wave of estate buyers had realistically determined, many could have avoided this sham. Yes it might feel embarrassing becoming a victim of this sort, yet the actions of Blue Chip employees suggest misrepresentation, borderline criminal.
The people should be outraged, and Blue Chip or any other associated businesses must pay.

Notwithstanding the foregoing, it still remains better to take preventive measures than focusing on past mistakes. Verify EVERY number pushed by any person interested in selling something, because more often than not the figures expressed or implied do not match with mathematical reality. Learn what it really means to take “calculated” risks, and you will avoid many shenanigans like the above.

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