Friday, March 23, 2007

"Lowest Price Guarantee?" Park At Courthouse in Virginia. Real or Fluff?

In 2003 and 2004, the demand for new construction condominiums was so high, builders didn’t offer any incentives (either price or upgrades) to the buyers. Now that the market has changed, we’re noticing the builders for these new construction condos are lowering prices, negotiating offers, and even offering “Lowest Price Guarantees.” One particular property, the Park at Courthouse, is offering this guarantee and I decided to investigate to write about it here. My questions were: 1) is the guarantee real? and 2) how can they offer such guarantee, considering the prices are probably lower than most nearby condos to begin with?

Since 2003, the prices of condominiums in Arlington (among many other places) sales prices soared, but only to come back down. Now we know the double digit increase is a thing of the past and the immediate future of condo or real estate market looks cloudy. Regardless ofwhat the experts say about the future of real estate, builders in Arlington have continued to move forward to construct new condominium buildings. One particular building I visited was the Park at Courthouse. Their advertising theme of "Turn back the clock to 2003 prices" seemed very appealing so I took a client there for a visit. As advertised on their website, the one bedroom condos at the Park really started at $328K WITH a parking space, which is generally much lower than existing nearby condos. If I were a buyer, at these prices, I would definitely choose a new construction over a unit that someone else has already christened, given all things equal. But all things aren’t equal for new constructions since there are higher risks with new condos: a) you’re buying at the same time and many others and therefore a larger % of these units are selling at the same time. Simple supply and demand says this should lower the prices considering the current market; which leads us to b) people can sometimes buy at a far lower price than others, which was catastrophic experience for Parkside Alexandria buyers. Not only that, the Park at Courthouse has an appealing "Guaranteed Lowest Price" program (which I'm sure the neighboring condo associations aren't happy with) that screams "I'm Perfect! Guaranteed!"So, I decided to do some research to see if you're truly getting a bargain with a built in insurance policy.

What I found is that the "Guaranteed Lowest Price Program" is a marketing ploy (albeit a good one). Heck Frank got them (the Park) into the Washington Post since he loved the initial marketing idea and thought all new condos would need to go in this direction to sell large quantities. The guarantee instead says the lowest price if the builders decide to lower their LIST prices overall. The key is the word “List” when it should be based on the NET price, including all incentives and upgrades. List is too easy to manipulate in order to look good.
For example:

-Customer A enters and buys a 1 BR unit at $350K and purchases upgrades for $6K to make the total; net sales price at $356K.
-Customer B is thinking of buying an identical unit at the list price of $350K but is unsure. The builder could then offer customer B the unit at the list price of $350K and offer the same upgrade as customer A for free, to make the total netprice at $350K and customer B “saved” $6K.



The problem is that the total list price remained at $350K and the builder actually makes more money with this strategy then to lower the prices of all the units by $6K. I'm not saying that the builder at the Park are offering such deals to everyone, but a good Realtor can identify such situations and a) warn you about their trick or b) try to get you that $6K upgrade for a significant discount. The sales office's argument will be that the builder has already reduced prices twice already, but the average reduction is unknown. They won’t disclose it, I asked several times. How convenient. If I were a builder I would drop prices $1,000 two times, for the mere marketability to say “Oh don’t worry, we have already dropped prices two times, see it is real”, but their Achilles heal is when you say “show me exactly how much”. I think I would rather get the free $6K upgrade then to have the prices reduced by only a thousand dollars.

If you already bought a unit, ask your Realtor, and if you don’t have one, ask a lawyer if what they are doing is legal.


However, even if their “Lowest Price Guarantee” is not real their prices are still relatively low compared to the condos in the area. So, my question is how can they price it lower than their competitors? One of the reasons why the Park at Courthouse can keep the prices lower is by providing very basic features inside the claimed “luxury” condos and all the luxury features count as a paid upgrade. For example, the standard appliances are the typical white regenerators and microwave. To get the, sleek looking, black appliances, you have to upgrade for about $1,000 more (for 1BR unit). Stainless steel appliance upgrade package is $3,500 more (at Home Depot you can start with SS at $2500, but I doubt they will take off the value of the basic white $1,200 appliances and let you put in your own). The cabinets tell a similar story, where the basic cabinets are not as desirable as, nor are they as luxurious as the basic cabinets offered at other luxury condominiums. And, most of the units don’t even offer balconies, which many people feel it’s a must to have a “home” feel. Basically, the overall features offered at the Park are not as upscale as other new constructions, such as the Palestine or even existing newer condominiums. Further, the Park does not offer the same amenities as other condos. The Park does not have a pool, rooftop access, or 24-hr concierge (although they have a 9-5 hour concierge from their adjacent apartment building).
But even if you upgrade all the appliances to match with other luxury condominiums and account for the floor, VIEW, sq footage, the prices at the Park are still lower than other condos, such as the Palestine. My question is then, how can they sell their units for lower than everyone else AND have the lowest price guarantee? We go back to simple and demand. They have larger quantities available and limited number of buyers. This and the fact that guarantee is a weak one at best.


One other side note – the Park at the Courthouse has 92 or so units and they are really pushing for additional sales with this guarantee. As of March 10, 56 units were still available and this is a concern because, I think there’s a requirement on the % of units that must be sold in order for the builder to transition the ownership to condo association (maybe a lawyer can verify this for me). This could be the builder's final desperate attempt to try to sell the minimum required units for the condo conversion. If they fail, then it's possible they may convert to apartments as other builders have done. The Park at Courthouse already has a sister apartment building built and it would only take minimal work to manage another very similar (maybe identical) building.

Anytime you buy a property, or anything else for that matter, think: Caveat Emptor – Buyer Beware. Before you decide to purchase, you must understand/know all the risks so that you can make the most informed decision. That's why Realtors are recommended and they are “free” and paid by the builder (most builders aren’t allowed to adjust their price for buyers without Realtors. Despite the myths FSBO people may think, Realtors are not here to get paid for the same work you can do on your own, nor are they here to get you a steal of a deal in the most desired neighborhood/condominiums. Rather, Realtors are here to help you find a property, identify the risks and benefits of different buildings, neighborhoods, and then develop a strategy to get you the home you desire for as little as possible. The biggest mistakes I hear people make are from those who have jumped into a decision without the inside scoop. A good Realtor can get you that inside scoop.

- Written by Ray Hwang- Realtor

www.FranklyRealty.com

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6 comments:

frank said...

Good job Ray!

Anonymous said...

Dude, it's the Palentine, I think.

Anonymous said...

Just wanted to get the word out that the Park At Courthoues does not have a condo board at this time and is still under the control of the builder (Bush Construction). As a tenant in the building, it has been a nightmare, from the lack of response due to security issues to them trying to force tenants to remove their dogs. Management sent out a memo late in 2008 stating that all dogs over 15 inches must be removed from the building. However, condo documents stipulate no such size restriction, only that small domestic animals such as cats and dogs may be in the building. Several new tenants report being told that there were no restrictions of any sort when they put in their contract. They offered no grandfather clause for the pets that already live in the building, just that owners must get rid of them. Attempts to meet with the builder have proven futile as he won't return calls or emails and uses the building manager as his filter. A new building manager has taken over as of this week and has yet to introduce himself. This is a poorly run building, and the tenants are itching for the 2 year mark (when they will be able to sit on the board and have a voice) to come in October of 2009. DO NO BUY INTO THIS BUILDING.

Anonymous said...

Hi

I am looking into buying a condo at the Park At the Courthouse. They claim to be best value in Arlington. Anybody has any info to share with me about this place?

FRANK LL0SA Va Broker- BLOG.FranklyRealty.com said...

Yep, know all about it. But things I can't post publicly, email me directly.

Anonymous said...

Anyone that is looking to buy at The Park should be aware of what is NOT being told to you. Here are a few things you should be aware of before making a purchase. The Woodbury and the Fredrick building both offer Section 8 housing. Police have been called to both buildings ( even at one time came out on call).

During the warmer months, teenagers are known to hangout in front of the buildings. There is a community center inside the Fredrick building, therefore a non-stop of people and cars are coming and going. There are a flow of people in and out of the Frederick all hours of the night.

The Frederick building offers daycare. Great for families who have children, not so great for the ones that do not. They use the playground in back of the building. The sounds of screaming kids comes into your unit nicely.

During the summer the playground becomes the nosiest place in the community. Kids are outside all day. The screamers seem to never go home. What a pleasant way to awake when you would like to sleep in after a 15 hours shift.

Rt. 50 is under construction the hours are from 9pm to 5am. The pounding sounds of road work, trucks, large equipment running should offer a you a good night of rest. The construction of the RT. 50 is still under way.


The Parks talks a good talk about the units amenities the onsite gym, study room, and the biggest selling feature--hardwood floors. The gym is less than a gym, the study room does not offer you a quiet place to STUDY due to the noise of people coming and going. Great place to get on the internet, but limited to websites. Hardwood floors, you will not be able to see them since you are required to cover 75% of the floor. The walls and floors are NOT soundproof (yes were told soundproof). I would be interested to see how they put this building together, glue comes to mind.

You are never informed of when construction is going on. Construction in some units have started as early as 7:10am. I have heard construction in my unit from two floors up. The sounds echo as if the construction is taking place in your unit.

Neighbors--not very friendly, there are a few that are friendly, a small few. Complaints of noise are file almost weekly. Noise complaints are the biggest filed, but tenants have filed some of the most ridiculous complaints. If you are not neighbor-freindly this could work for you.

What a lovely surprise you may get when enjoying a nice day on your patio while eating lunch, and the tenants above you begins to water their plants without checking to see if there is anyone below. The term--pissed off comes to mind? Or you go outside to sit on your chairs and the cushions are soaked. Nice!

Let's not talk about Bush/Armstrong...

These comments are a personal view point.