Today, the Brazilian experience involved an apartment sales pitch.
As promised, we attended the open house from the fruit juice postcard we received in Vila Madalena (see Another Strange Marketing Strategy). The strategy grew stranger still. First, the address on the postcard was across town from where we received it. Second, Vila Madalena is a charming neighborhood with cafe’s, cool botecos and trendy boutiques.
Here is the loveliness of the neighborhood where we were headed:
When we finally arrived at the address… there was no building. Just kind of a showroom. Where the building will eventually be is a parking lot.
Inside the place was full…
…of real estate agents. Yes, there were more than 30 people in the place and we were the only potential customers. We found out later than the developer didn’t have its own sales team, but the room was filled real estate agents from a variety of companies. It seems that our postcard should have had the name of a broker written on it so when we arrived, we got assigned to the right salesperson. But it didn’t. So either those young ladies working the streets of Vila Madalena were going to get ZERO commission, or the person who hired them paid for nothing, depending on how the deal was struck. Instead of a real building, they had a model of what the building would look like.
And some display boards.
They randomly assigned us a real estate agent. He proceeded to show us two of the tiniest apartment I’ve seen in a long time.
I hadn’t bother to imagine how 64 and 82 square meters might look, but I’ve seen bigger bedrooms on boats. And how much were they going for? The apartments started at R$450 (about US $260,000). Pleeeeaaase do not tell me that Sao Paulo real estate market is not inflated. (By the way, the two apartments in our Oscar Freire building, seconds away from the yummiest gelato in the city, are still on the market. It’s been more than six months, maybe even eight.)
My husband, always a good sport, chatted it up with the agent while I pretended to speak not a single word of Portuguese and took pictures.
So how were these sales folk expecting to sell tiny apartments in a building that didn’t even exist yet? The financing of this program was the most interesting part of the entire experience.
In order to get a mortgage here, one needs to put 30% down. (This is not so unreasonable. In the U.S., it used to be common that you needed 20% down.) This particular developer is apparently trying to attract those buyers who may not have this money up front (who would do that… only every mortgage company during the subprime mortgage phase.) Their deal is that you can now, at this moment, contract for one of the apartments and make payments for the 30% required over the next 30 months WHILE the building is being built. Essentially, if you had nothing to put down, you would make monthly payments of R$4500 (approximately US $2600). Then, at the time of the actual acquisition, you would have satisfied the 30% requirement. Genius, right? The construction is partially financed by the buyer.
The question I asked aloud later in the car was this – what if, along the course of the 30 months, one finds that they cannot, in fact, make these payments? Do they get their money back? (Do you think I can convince my husband to call and find out the answer?? Probably not.) We speculated that no one was going to refund what you had currently invested, but you might be able to sell your position in the apartment building to someone else. And I suppose, if the real estate market were to continue its upward spike, this is a situation that you might make money in, if a contract were to allow this kind of creativity. Or, of course, lose money. I wonder…
Well, it was quite an interesting experience in the Sao Paulo house market, and I must say… … the juice was darn good.