Builder: Guaranteed Lowest Price* WITHOUT THE ASTERISK
The first builder I noticed offering “Pricing Guarantees” was The Park At Courthouse. I thought the idea was brilliant. A promotional plan that would give buyer’s some security in their preconstruction purchase, in case prices dropped.
So in theory, if you bought a place for $400,000 and a few months later, that exact or similar unit dropped to $390,000, you would get notice that your unit is now $10,000 cheaper for you.
This was even featured in the Washington Post (thanks to me) on Dec 2006 Read Article. Supposedly they have already made 3 price corrections for past buyers.
Now comes the MISSING ASTERISK.
1) They won’t say the amount of the price corrections (we asked). This leads me to think that they were probably just token $5k or $10k adjustments and more used for marketing future units. The ability to say “we have dropped 3 times” sounds good. But if you don’t disclose the amount, it is just marketing in my book.
2) Seller subsidies don’t count! Let me repeat that. SELLER SUBSIDIES DON’T COUNT in the guarantee.
Example:
- Joe buys for $400,000
- Builder drops prices to $395,000
- Joe gets a $5,000 reduction
- Builder keeps prices at $395,000 and offers $20,000 in closing costs for newer sales
- Joe gets NO REDUCTION or Extra closing costs. The “guarantee” doesn’t apply!
Joe effectively is paying $20,000 MORE than the other unit, even though there is a “guarantee.”
3) Free upgrades don’t count!
Example:
- Joe buys for $400,000
- Builder drops prices to $395,000
- Joe gets a $5,000 reduction
- Builder keeps prices at $395,000 and offers $20,000 of upgraded kitchen and bath
- Joe gets NO REDUCTION or upgrades. The “guarantee” doesn’t apply!
So what is my point?
1) If you bought here or anyplace similar, talk to a lawyer before you close on your unit. It might cost you $500 or $1000 but save you over $20,000
2) Use a Realtor when you buy units like this. We might not know everything, but knowing something like this can save you $20,000. The builder either pays your Realtor to represent you, or they give a bonus to the sales staff. The cost to you is the same.
3) Make sure your Realtor writes into the contract that the guarantee should be based on NET and include all subsidies and upgrades as provided by an audit (write in the ability to check their books).
Ray, an agent with FranklyRealty.com wrote more about this Park At Courthouse, Arlington Condo
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– Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6
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- 17
- June
- 2007
As a person with much builder experience, builders are no different than any seller in some ways. They don’t “owe” a client incentives that were not in place at time of purchase- period. That this builder is lowering the price should be enough. Under your thought process, all resales under contract (but not closed yet) would have a cma at closing, and get reductions based on up to the minute price changes. I don’t think that that would fly, do you? Their books are absolutely NONE of your, or your customers, business.
You are correct, Laurie. Keep in mind though that the alternative to offering a guarantee, is sitting there and hoping people will buy despite the fear of prices going down. I know of a builder with a 19 unit development that has 0 closed and is now reducing prices. What if he’d had a guarantee? Perhaps he would have closed on some already.
The issue isn’t whether or not you provide a guarantee. It’s that IF you choose to go that route but then hide information, you are in effect not really keeping your part of the bargain.
– Tchaka
Tchaka- one of us missed the point.
I think it’s great that the builder is offering a price reduction if the property goes down. What I know is unrealistic is for realtors or consumers, in addition to the decrease, to also be given the “incentive of the month” after the purchase agreement is signed. No one is talking about hiding anything- if an agent wants sales prices, they can go to the closed properties to find them. Builders do not have to (nor will they, attorney, realtor or not) share recently sold houses with incentives that are none of those people’s business, that’s all. By incentives, I’m talking about the “kitchen upgrade” in March, or the free hardwood floors in February, etc.
No, I wouldn’t quite say you missed the point but I appreciate your humbleness. Incentives do have a value and they certainly do (or should) count in terms of providing a guarantee. The developer is in to make money (rightfully so) and I understand why they would want to keep certain numbers private. I don’t have a problem with that as long as said developer is not giving a guarantee.
In that instance it’s no one’s business, except perhaps the appraiser’s what the actual numbers are. Once you step forward and make a price guarantee, you need to put your money where your mouth is.
Just to be clear, I’m not taking sides on which route the developer should go. If the developer prefers to sell the traditional route that’s perfectly alright.
But I am saying that IF the choice is made to provide a guarantee, then the developer has to back it up fully. As Big Daddy Kane says, “Ain’t no half-steppin'”
– Tchaka
Tchaka- the builder IS (as I’m understanding it) sticking to the price guarantee. What the post suggests is that all buyers should get, before closing, any additional monthly incentives offered. Won’t happen, and was asterisked to alert all that this is the case. Nothing underhanded.
Laurie,
Maybe I didn’t make the post more clear. There is no REAL asterik!
They do NOT disclose this technicality.
They just say “Price guarantee in writing.”
So the buyer THINKS they are getting a real price guarantee, but the builder uses a loophole to continue to drop prices (the intent of the guarantee) via other means. Thus making the advertisement nearly worthless.
I agree with you. IF they really disclosed the asterik, that would be not ideal, but acceptable. But they don’t!
All they say is that you will get the best price. And they define price as the list price, and they don’t say anything about seller subsidy or upgrade allowances.
Unless you have a sharp Realtor that knows what to ask!
Frank
Buying condos is a tricky deal. You look at a big (100) unit building. Say you get a early new construction deal at the beginning of construction for X. At the final week of selling some investor comes in and offers to take whats left. He is gonna get a better deal than you did -of course. Now if the same Condo guy had offered a guaranty -He is not going to disclose that sale. He will offer a credit at closing..whatever it takes.
I would say . And I advise my clients that buying condos is tricky and the P+S agreement is always weighted to the sellers advantage, so have your lawyer read over the agreement very carefully and if you are uncomfortable then walk.
ummmm….don’t you mean “asterisk” (emphasis on the -risk)?
No asterisk?? Gotcha. That’s just plain tricky- my apologies for misunderstanding- I saw the asterisk as disclosure. Yup, your buyer needs you….thanks for the clarification!
Thanks for this relevant ideas.I have always found it easier to buy than to sell until now.Everyday there are new ways to earn huge profits over the Internet with Real Estate.
Frank,
Another Clarendon 1021 unit has entered foreclosure, #615 per the WaPo legal notices this morning. That’s five now and only the first one has shown up as being sold so there’s still four distressed props in Clarendon 1021.
here are the details:
default on original principal amount of $514,000.00, they actually paid 582k at peak. bank’s probably writing off the delta.
1021 N. Garfield #615
public auction at the front steps of the Courthouse for the Circuit Court of Arlington County, Land Records Dept., 1425 N. Courthouse Rd., Arlington, VA on 07/23/07 at 2:00 P.M.
Another good reminder to always read the fine print. Some things are really too good to be true!
What is this I hear about the Park at Courthouse sharing its garage with the AHC complex right next door? Is there any truth to this?
I don’t know about the garage. I do know that their other building Station Square has a for-pay public garage in the building.
Are you under contract at Park at Courthouse?
No, not under contract. Was looking into it because of the very low prices, but am having second thoughts.
Now I am thinking more along the lines of The Palatine or Phoenix.
Get an agent. Any agent (any decent one).
Same cost to you. They don’t give special NON agent deals. What they do do is try more fishy business when you aren’t represented.
This is a good reminder to always read the fine print! Some things are really too good to be true!