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Monday, November 17, 2008

New York condo price protections: Sign of things to come in southern communities?

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    Condo developers in New York City have run into the perfect storm.  Buoyed by foreign money and a wild-west mentality at the turn of this century, developers figured they could not go wrong by buying up and renovating existing hi-rise buildings or plowing over older buildings and putting up new hi-rise condos.  Many of those projects began selling units earlier this year, just in time for the financial market meltdown and the massive job losses on Wall Street.
    Real estate is all about supply and demand, and right now in New York City, as it is in most markets nationwide, there is too much of the former and
Like Wall Street, real estate markets abhor uncertainty.

too little of the latter.  Stories are rampant of Wall Street workers walking away from their contracts and their down payments.  The few buyers on the streets are in a state of high-anxiety about future price drops.  Who wants to put down $1 million on a place whose market value could slip to $800,000 in a matter of months?  Just like Wall Street, real estate markets abhor uncertainty.
    Developers holding dozens of unsold new condos have to do something more than offer a few upgrades in kitchen appliances or a part of closing costs in order to entice the nervous.  According to an article in the Real Estate section of the Sunday New York Times this weekend, those developers are beginning to mimic electronics and other retailers with a series of "price protection guarantees" that anyone contemplating property in the southern U.S. might do well to consider.  The way it works is straightforward and contractual:  If you sign up to pay $500,000 for a unit, for example, and the same (or almost the same) unit elsewhere in the building sells for $475,000 before you close, you get the lower price.
    The guarantee is a little easier to execute in a condo complex where units are essentially the same size and configuration than, say, for properties in a golf community.  But if two parties to a real estate transaction agree, you can write just about anything into a contract (short of violating local zoning laws).  For example, if you are interested in a lot adjacent to a golf course but want some price protection, you could negotiate a clause with the developer that would reduce your purchase price if another lot on the golf course sells for less than yours (on a dollar per acre basis).  Barring that, you could try for a contingency that says if similar properties sell for less than the price you signed up for before your closing, you can back out of the deal. 
    If you are that relatively rare person in the market for a home or property, don't be afraid to get creative.  You have all the leverage, and you would be foolish not to push for the best possible deal.    

Read 4178 times Last modified on Monday, 17 November 2008 07:35
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Larry Gavrich

This blog was conceived and is published by me, Larry Gavrich, a former corporate communications executive who founded HomeOnTheCourse, LLC, in 2005.  Our firm advises baby boomers and others seeking a lifestyle in which golf is a major component.  My wife Connie and I own a home in Connecticut (not on a golf course) and a condo at Pawleys Plantation in Pawleys Island, SC, on a Jack Nicklaus layout.  We began our search for our home on the course more than 15 years ago, and the challenges of the search inspired me to research golf communities and write objective reviews of them.

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