"The issues about pre-sales is a real worry," Evans said. "Someone commits to a pre-sale and in two years they go to the bank and say, 'Can I have my money now?' and the bank has no obligation to give them the money."

Phillip Almeida, a director at investment firm Performance Property Advisory (PPA), who advised Carville to cut her losses in Melbourne and invest elsewhere, said the firm was currently advising many other clients – unable to settle due to valuations coming in 10 and 15 per cent lower than purchase prices or because of the tighter lending rules – to forfeit their deposits and buy elsewhere.

"A number of clients have been referred to us but unfortunately it's mostly after they have signed contracts. These contracts are prepared by high-end law firms and are very difficult to get out of," Almeida said.

Carville ran into trouble after her mortgage lender, a big four bank, changed its rules on financing apartments under 40 square metres. The bank wrote to tell her she would need to pay a 20 per cent deposit rather than the 10 per cent she had put down.

Unable to raise the additional $37,500, she said tried unsuccessfully to negotiate with the developer, Ryssal Three, owned by the wealthy Stamoulis family.

"The developer would not negotiate.They sent me a threatening legal letter telling me to settle. I felt bullied."

On the advice of Philip Almeida, she bore the heavy financial loss, dusted herself off and regrouped.

In 2013, she bought an apartment in a small art deco block in Bellevue Hill, Sydney, where she has benefited from the surge in values in the Sydney market. Her apartment, which she bought for $550,000 and rents out at $550 a week, is now worth more than $700,000.


But, she hasn't forgotten the lessons of her off the plan Melbourne disaster: "I have talked so many people out of buying off the plan, many the same age as me, but also the friends of my children."

Her advice: Be smart, do your own really thorough investigations and make sure your financial adviser is not taking kick-backs.

The Financial Review contacted the Stamoulis Property Group for comment, but they did not respond.

Ashley Williams, director of Evolve Development and a board member of the UDIA Victoria, defended the right of developers to keep the deposit if a buyer failed to settle.

"There are genuine costs for a developer if they have to resell an apartment and if buyers pulled out of their contracts en masse because of a change of sentiment – as happened on the Gold Coast post GFC – the consequences for the developer could be dire," Mr Williams said.

A spokesman for Consumer Affairs Victoria said if buyers want to end a contract because they have changed their mind, they would likely to lose their deposit.



"Buyers should exercise caution when buying off the plan, and seek legal advice before they sign a contract of sale. They need to make sure they understand the terms of the contract before agreeing to purchase a property," he said.