4 ms·

You can buy a house in the US from a developer before it is built. I think maybe the difference is that if something goes wrong you have a good chance of suing

You can buy a house in the US from a developer before it is built. I think maybe the difference is that if something goes wrong you have a good chance of suing the developer. That may also be the case in China. I don't know.

seanmcdirmid 3y ago
You can sign a contract to buy a house from a developer before it is built. No bank will give you a mortgage before the house is built (even if they give you pre-approval), but of course you could pay in cash if you had that and wanted to (taking risk that the builder might go out of business and you will be SOL). Since most people buy homes with mortgages, most homes in the USA aren't bought before they are built.
xenadu02 3y ago
For US residential homes the bank has set milestones where they release funds. If the developer leaves the house half-built they only get half-paid (give or take). A similar thing applies to renovations. Banks can and do refuse to pay until things are completed and city inspections pass the work. Could a city inspector collude with a bank and developer to rip off customers? Sure... but even if that happens it can only be small scale. The odds of the scheme collapsing increases exponentially with every additional city/bank/developer participating. Politically China works differently. I'm sure there are plenty of developers doing good work. That clearly must be the case - not every building is a pile of garbage. But being a more centralized single-party state with state-owned banks the opportunities for shenanigans is obviously higher. It may also be driven by how much local budgets are influenced by new projects rather than ongoing property taxes. There is an incentive to approve projects and it is embarrassing to admit we should be tearing down the new building because everyone involved cut massive corners... that might also scare off new customers for the next project. Better to cover everything up and keep the scam going. For that matter state owned banks from any country are well-known for perpetually extending loans rather than admitting the loan is garbage. This is not unique to China nor news to anyone.

seanmcdirmid 3y ago

You can sign a contract to buy a house from a developer before it is built. No bank will give you a mortgage before the house is built (even if they give you pre-approval), but of course you could pay in cash if you had that and wanted to (taking risk that the builder might go out of business and you will be SOL). Since most people buy homes with mortgages, most homes in the USA aren't bought before they are built.

xenadu02 3y ago

For US residential homes the bank has set milestones where they release funds. If the developer leaves the house half-built they only get half-paid (give or take). A similar thing applies to renovations. Banks can and do refuse to pay until things are completed and city inspections pass the work. Could a city inspector collude with a bank and developer to rip off customers? Sure... but even if that happens it can only be small scale. The odds of the scheme collapsing increases exponentially with every additional city/bank/developer participating. Politically China works differently. I'm sure there are plenty of developers doing good work. That clearly must be the case - not every building is a pile of garbage. But being a more centralized single-party state with state-owned banks the opportunities for shenanigans is obviously higher. It may also be driven by how much local budgets are influenced by new projects rather than ongoing property taxes. There is an incentive to approve projects and it is embarrassing to admit we should be tearing down the new building because everyone involved cut massive corners... that might also scare off new customers for the next project. Better to cover everything up and keep the scam going. For that matter state owned banks from any country are well-known for perpetually extending loans rather than admitting the loan is garbage. This is not unique to China nor news to anyone.