Stephen G. Kliegerman
President of Development Marketing
By: Tara Lynn Wagner
Buying a condo in its pre-construction phase can feel a little bit like taking a leap of faith, especially in the current economic climate where there's no guarantee that prices will not go down while your building goes up.
Those worried have the option of the price protection plan, a sort of insurance policy for buyers hesitant to put money down on a floor plan today only to have the floor drop out of the market before they can move in.
"If the developer were to drop prices on a similar unit in the building, that buyer who bought today would get the same percentage decrease in their price that the developer will be offering six months from now," explains Stephen Kliegerman, executive director of development marketing at Halstead Property.
Experts say the plan is proving to be quite popular. Christine Blackburn, senior vice president of Douglas Elliman, says roughly one-fifth of the units at the Clermont Greene in Brooklyn are under contract, several of which were signed after the price protection plan was put in place.
"I think it just carries them over from the time when they're signing the contract to when they're actually moving in, to make sure that their investment is a sound one and they're more comfortable," says Blackburn.
The plan also makes developers more comfortable. Kliegerman says so far Halstead Property is offering the plan at two pre-construction projects, with more projects in the works.
"Our sales people have been told by the developers that if the buyer's concerned and says to you that they would buy but they're not sure what's going to happen a couple of months from now, that we can write this into their contracts," says Kliegerman.
Price protection in and of itself is nothing new. For years, many retailers have had a similar policy. If a customer bought a sweater and then it went on sale within the next two weeks, the customer could be refunded the difference. But with home price protection plans, the protection is for longer than a few weeks and the refund could be thousands.
"We could be talking about $5,000. We could be talking about $10,000," Blackburn says. "I haven't seen prices decline much more than that to date, so that's probably a number that we're going to be looking at."
"The bottom line is that this is probably, for most people, the largest investment of their lives. They're not going to buy it just because it's a gimmick, and we know that," says Kliegerman. "They're going to buy it because it's a quality product, and they know that if prices drop they're protected."
Sunday, December 07, 2008