Collecting cheques before project launch (A signal of interest, NOT a signal of purchase)

You might have read about this time and again in the papers - that when a new project is about to launch, agents marketing the property 'leak' the news that they have been collecting cheques from many buyers eager to get their hands on the property before anyone else does. The project then looks like it's in great demand.

While that's true to some extent, seasoned property punters will tell you to take that with a pinch of salt.


What's really going on then?


Some of our less savvy friends assume that these cheques mean that units are already being purchased. That isn't the case at all simply because prices for the development are seldom released so far in advance.


What these collected cheques are for is the option fee, which is made out to the developer, usually signed by the potential buyer and left blank. When a unit is chosen and price decided upon, the agent simply fills out the option amount and the unit is booked. If the buyer decides not to buy, the cheque is returned or torn up.


This practice of "collecting cheques" has been going on for years. For the developer, it's a means of gauging how popular their project is. For the buyer, there is a chance to be the first in line for the unit of their choice (though there is no guarantee).


For the marketing agent, it's a brilliant marketing tactic. Firstly, it gives the illusion that the project is in great demand. Secondly, it sends would-be buyers into a kiasu frenzy with a "buy now or others will take it" message. (I've had agents show off signed blank cheques to me.)


This thing is, this "cheque collection" tactic can be manipulated in a variety of ways. It could be an outright fabrication - since there is no way to verify the data other than what "sources" say - though we don't think that is the case.(And please, we aren't accusing anyone of doing so, so keep your lawyers at bay.)


The next and more often used strategy is the "Send cheque for VIP preview" method. Basically, if one needs to view the showflat before the public does, all one has to do is to write that cheque, send it to the agent and voila! - special VIP access.


So dear readers, do take reports of cheque collection with a very big pinch of salt. When a lot of cheques are collected, it means there is a lot of interest in that project. Let's be clear, cheque collection is a signal of interest, not a signal of purchase.




[ this article is extracted from H88.com ]