Money received in presale is not equity. It is money with an exit door, and the door opens exactly when you most need it to stay shut.
Guy called me after the fourth buyer asked for his money back.
The first one had been two months earlier, and he thought it was an isolated case. The second came two weeks later. The third no longer surprised him. The fourth was someone Guy knew personally, and he told me that last, after finishing the details of the first three.
“Ilan, explain something to me,” he said. “Four people want their money. Say I pay it back. Do you know what happens then?”
“Tell me.”
“The building doesn't shrink.”
He said it quietly, and it was the sharpest sentence I heard that week.
“I'm not building eighty percent of a building. I'm building a building. The same foundations, the same structure, the same elevator, the same yard. Their money was already inside, as cost. I give it back, and the cost stays whole. I'm about to return money and be left with exactly the same invoice.”
Guy had built in Israel for almost a decade before going abroad. He knows construction. He can look at a site and tell what is progressing and what is stuck, and nobody has to explain to him why a contractor is late. When he went out on his first project overseas, the model he took with him was the one he knew. Sell early, the money comes in, build.
The launch went well. Israeli buyers, a good pace, the atmosphere of a project gaining momentum.
Then the project was delayed.
Delays like this almost never arrive as a single blow. They accumulate. Two weeks here, a month there, a supplier who didn't deliver on time, a stage that took longer than planned. None of them alone is dramatic. But at some point Guy looked at the schedule and realized that the gap against what he had promised the buyers was no longer closing.
The buyers saw it too.
The first one to ask to leave did it politely. He wasn't angry. He just said he was no longer sure, and that he preferred to take his money. And from the moment it happened once, it became a possibility that exists. People talk, especially Israeli buyers in the same project, especially when there is a WhatsApp group.
And here the mechanism Guy hadn't foreseen came into play.
Every buyer who leaves takes with him the money that was supposed to build the very thing whose delay made him leave. It is a self-feeding circle. The bigger the delay, the greater the pressure to leave, and the more people leave, the bigger the delay.
Guy's first instinct was legal.
“Go through the contracts and tell me where I stand.”
I went through them. We sat on it for two days afterward, and that conversation was the point where everything was decided.
“I have ground to stand on, right?” he asked.
“There are questions you can argue about. That's not the same thing.”
“But I can tell them no.”
“You can. The second question is what happens the next morning.”
He didn't like the question. People in his position never do, because it doesn't answer what they asked.
I explained what I had seen happen before. A developer who fights his own buyers, in a market where all the buyers come from the same place, speak the same language, and sit in the same groups, doesn't sell the units he has left. Even if he is right. Even if he wins. Especially if he wins.
“So you're telling me to pay so they won't talk about me.”
“I'm telling you your inventory is being sold to a community, not to a market. A community remembers. A market forgets.”
He was silent for a long time.
“And if I pay back four, and tomorrow six more come?”
It was the right question, and I had no good answer to it. I told him so. I said that is exactly the risk, that he was taking it with his eyes open, and that I couldn't promise him it would stop at four.
“So I'm choosing between being right and being a seller,” he said.
“More or less.”
He chose to be a seller. He paid them back.
And then he found himself with a project that had fewer buyers, less money, and exactly the same construction cost he had described to me on the phone.
He stopped. Not because he decided to stop, but because there was nothing left to continue with.
This lasted almost a year. A year in which he built almost nothing and did one thing. He resold the same units to new people, to raise exactly the money that the first buyers' money was supposed to have been.
And the new sale was harder than the first, because now he was selling a project with a history. The first question of every prospective buyer, every single one of them, was why it had stopped.
He chose to answer it straight. Not to embellish, not to dodge. It cost him time and a few buyers who backed out, but at least it didn't blow up inside him later.
In the end he raised the money. He built. He delivered.
When I asked him what that year had cost him, he didn't answer in money.
“It took away my ability to plan,” he said. “For a year I didn't manage a project. I managed the hole.”
I see this mistake among good, experienced Israeli developers who know how to build well. They look at money that came in at presale and see equity. It isn't equity. It is money that sits with you on a condition, and the condition is that trust holds. The moment trust cracks, that money starts to want to leave, and that is exactly when you need it most.
The question I would ask in your place
- If twenty percent of my buyers asked to leave tomorrow, would the project keep moving?
- How much of my budget relies on money that can still get up and walk away?
- What exactly do I tell a buyer in the first month of a delay, and who wrote it for me in advance?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית