May 1, 2008
Two Year Price Guarantee? One Year of No Mortgage Payments? What’s next?
Local developments are showing signs of weakness as the big incentives start to roll out.
The Potrero above Whole Foods in Potrero Hill is offering one year of no mortgage payments on its remaining 25 homes available. The offer is good from May 1st to June 15th. These units have already seen price reductions in recent months, and this is basically another reduction that amounts to anywhere from $40k to $80k in my estimation.
Signature Properties is also offering a price guarantee for two years on eight developments in the Bay Area, including one in San Francisco and the rest in the East Bay. If you buy a home at one of these properties, and they lower the list price within two years, they claim to reduce the purchase price of your property. Of course there is another asterisk advising you to contact them for further details on how that “reduction” (refund?) occurs. With the current and expected price declines in the coming two years, this is a fairly drastic move (but necessary) to move inventory.
gfw said:
For the life of me, I couldn’t figure out what it means to “guarantee” a price for two years. Does a reduction on a similar apartment two floors up count? Is it by the building’s $psf? Anyway, aren’t accurate sales prices pretty hard to get, since they can include all sorts of incentives off the books? Seems like they can sucker you pretty easy…
How about you just pay my HOAs for three years instead?
May 1, 2008 6:06 PM
red said:
Does a later sale count as meeting the guaranteed price if the mortgage payments are paid for a year?
Looks to me like it is really easy to squirrel out of the price guarantee, just stop building the same units, offer upgrades, interest rate buydowns, etc.
The “one year of no mortgage payments” is just dumb, the deal requires 20% down. The buyer would be much better off to take the money off the price and not pay the extra down and the property taxes on top of that. ANY rate buydown from the seller is bad, just jacks up the purchase price and property taxes.
Don’t make the foolish error of thinking the monthly payment is the cost of owning.
May 1, 2008 6:17 PM
david gordon said:
I agree with both of you. I wouldn’t go for it even if I was shopping in this market. And that’s why they require you to call - so they can sell you on the real details of this extraordinary “incentive.”
But I am sure they will pull in a few buyers from this promtion.
And I am fairly certain the Potrero was offering HOA dues paid for a year a couple months ago.
May 1, 2008 8:18 PM
Toady said:
There’s a sucker born every minute. I still shake my head almost daily at some of the real estate decisions people are making. There are still people out there thinking, I’m going to buy, no matter what.
I made a comment in another thread about doing due diligence before you make an offer. It’s called the Internet. Do some research, people.
1522 Dwight in Berkeley went pending today. It’s a nice enough house, but you’re gonna drop $600K to live across the street from a halfway house for recovering heroin addicts, one of whom is a registered child molester with some snappy swastika tattoos?
May 1, 2008 8:34 PM
San Mateo Home Sellers in Trouble said:
yeah, I think those incentives are scammy sounding. Why don’t they just cut the prices now instead of offering some nebulous rebate?
May 1, 2008 11:47 PM
david gordon said:
They have cut prices already on many models. This method does allow them to maintain higher “comps” in the building.
May 1, 2008 11:50 PM
BB_Smurf said:
This also makes sense for the developer if they are a publicly owned company or has to report to investors. The rebates and incentive programs allow them to move more units in a slumping market while still reporting high sales prices to their investors. They can also then spread the losses (assumed mortgage payments, HOA’s, rebates) over the next four quarters, which may or may not fall within the same taxable year.
May 2, 2008 10:43 AM
david gordon said:
All great points, Smurf.
May 2, 2008 11:19 AM
Nate said:
If these concessions/contributions are made, the appraiser considers them in the value of the home thus reducing the value of the home by the same amount. How are they getting past that?
July 8, 2008 2:01 PM