If you are looking for a new home for yourself or your family, you have probably already come across the term consortium or real estate consortium. But do you know what it is? What does this term mean? How does this modality work?
The time has come to buy your dream home for yourself or your family, but you are still planning for it and would like to know the options on the market for payment methods, right?
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We are very used to seeing advertisements and advertisements from builders and developers selling properties through financing, using FGTS or using other credits such as SBPE, but there are other ways besides these to buy a home.
The Real Estate Consortium is one of them!
There are a number of rules for this type of property purchase and a good tip is to know the advantages and disadvantages of the real estate consortium before entering it.
In this post we list the main characteristics, advantages and disadvantages of the real estate consortium in Brazil, so you can plan and conquer your own home.
Read on to get access to all this content!
What is Real Estate Consortium?
The Consortium is nothing more than a different form of real estate credit, which has a different bureaucracy than other forms of real estate credit that exist on the market.
In a very basic way, it works like this: a group of families interested in buying their own house get together, then they contribute monthly for a certain time to form a common fund, as if it were a savings account.
There is a consortium administrator who will take care of the entire collection process and at the end of the process the families receive their homes in their own name.
There is also the possibility of being a raffle winner throughout the process and may be awarded with the payment of the house in cash.
Below we list the advantages and disadvantages of the real estate consortium for you to plan and analyze if it is worth it for you and your family. Good reading.
5 advantages of the real estate consortium
1 – You don't need to enter
One of the main benefits of building a real estate trust is the possibility of not making a down payment.
Unlike what happens with real estate financing offered by banks, in the consortium the property is 100% in installments. When signing the contract, you pay only the first installment.
2 – Interest exemption
Again, unlike what happens with traditional real estate financing, the consortium does not charge interest.
However, there is an administrative fee, insurance and possibly other fees that are included in the amount of the installment.
3 – No bureaucracy
In a common housing loan, bureaucracy is something that can scare many people, while in the real estate consortium the whole process is very quick and easy.
Credit analysis is usually faster and simplified. Consortia generally accept credit-constrained taxpayers without a steady job.
4 – More credit options
By opting for a consortium, you can choose from several types of credit plans and adjust the installments to your income. The letter of credit can be either the total value of the property or the partial value.
Another advantage is being able to choose from a huge variety of consortia a plan with an ideal time and value for your budget.
5 – Possibility of using the FGTS
The possibility of being able to use the FGTS is still little known to most people, but be aware that it is possible to use the balance to place a bid. In addition to this possibility, you can also use the FGTS to pay off installments (delayed or not).
5 Disadvantages of Real Estate Consortium
1 – Administrative fee collection
Although no interest rate is levied in any type of consortium, an administrative fee is charged in return. This rate varies a lot from one company to another, but in general it is 15%.
In addition to the administrative fee, the consortium charges other fees. See below what they are:
- Reserve fund – is a rate that varies from 1 to 2% and exists to protect against adverse circumstances and defaults by participants.
- Insurance – As with the real estate financing made with the bank, the consortium also charges insurance. The function of insurance is to guarantee the maintenance of the group in case any member does not participate.
- Adhesion fee – upon signing the contract, the consortium member will have to pay the adhesion fee. The value is on average 2% of the total value of the letter of credit.
2 – Fine for withdrawal from the real estate consortium
If you decide to cancel from the consortium, it is important to know that you will not necessarily have all the money that was already invested back. In general, contracts provide for withdrawal and it is only possible to redeem the amount after the end of the consortium.
In the case of real estate consortia, this can take years to happen, as most of these contracts are from 150 to 180 months.
3 – Luck and bad luck throughout the process
For you to win the sweepstakes depends on you placing a high bid, higher than the other participants. Another possibility is to make bids to increase the odds and thus be contemplated beforehand.
4 – Need a lot of patience
To participate in a consortium you need a lot of patience as you may have to wait a long time to win your own home.
5 – Risk greater than that of financing
You assume the group's risks and the group assumes its risks, and that is what administration of the fund and its fees as well as the payment of an amount to a reserve fund are for.