Their Price, Your Terms

I sold Brixton Development last August. Coincidentally, this is when the two trend lines (Sales and Inventory) started taking a sharply diverging path. The sales line went from left to right on a small imperceptible incline while the inventory line took off like a fighter jet at the end of carrier ship runway. Of course I didn’t know it then, and I sold Brixton to concentrate more on commercial opportunities, but the trends are crystal clear when we look back on them. It is always very hard to see future trends when you are standing still in a moment of time.

For example, are you aware that most economists are telling us the rate of real estate appreciation is slowing? Indeed, prices, when we look back at this year, will show that there was still appreciation in the market. Of course there are pockets of depreciation (Why is it always YOUR investment!) but the general trend is still up.

I made two offers this past week. Both still in negotiation. The first was a three bedroom plus den, two and one half bedroom, townhouse with a two car garage; brand new and directly from the developer. I did the research and determined that this is well below current market and resale prices (By about $42,000). By the way the developer is willing to replace the white appliances with stainless steel, put in granite counter tops, and give me paint colors. Keep in mind I have no plans to flip. I will hold for three years. Oh, the biggest selling point? A developer buy down on the loan making my payments below what I can rent it for. I will have some negative cash flow the second two years property taxes kick in, but this will be more than made up for by the tax benefits and the appreciation. The deals are out there. In fact this developer has more. Email Holly@ma-realty.com for details. (Hey, if you’re an agent...you should be able to find these on your own - principals only please!)

The second offer I made was for more land for office condos. This project is out near Riverhall and Veranda. The D.O. is in place and if we are able to finalize the contract we will sell Medical and Office condos out there for about $250/sf. Similar to Brantley Commons that we sold out two months ago in one month’s time. Investors will pick these up as income properties. Email me if you have any interest (Gregg@ma-realty.com)

In today’s market, many sellers are concerned more about price than the extras that come along with it. Developers are mindful of previous sales that they made at a higher price and many are willing to cut deals on just about anything but price.

Their price, my terms.

Let me review for you the points that may be negotiated in preconstruction or inventory condos. Keep in mind, in a soft market like we are in now, sellers and developers are more likely to "deal". One of my mentors, Henry Trounstine, used to tell me that he always liked to give customers the "sleeves off of his vest". By this, he meant give the customer something that leaves you with what you had in the first place. I always keep this in mind when I am negotiating. I like to get things given to me that will not cost the seller anything.

Next time you negotiate, keep these points in mind:

1. Purchase Price
Developers may not want to lower the price, because they do not want to sell to you lower than the guy who bought "first day". But you may be able to negotiate a credit at closing. This way the price recorded is the higher one, but you still get a deal.

2. Earnest Money
Just because the developer says 20% or 30% deposit is required, does not mean he will not take less. Also consider putting your earnest money in your own bank (especially if it is a very large amount). Why? Banks love escrow accounts and why not do your bank a favor rather than the developer's bank?

3. Extras
In new preconstruction condos, this is a bountiful area to negotiate in. Some developers will do many things OTHER THAN LOWER THE PRICE. Your agent should know how much room is here. Upgrades, parking spaces, garages and docks are the big items. Lately I have seen granite, paint, upgraded cabinets, and one year mortgage payments!

4. Rescission Period
In the state of Florida, you have a 15 day right of rescission, after you execute a contract. This is by law. This does not mean you can't negotiate for more time.

5. Condition of Property
You may have the ability to negotiate warranties, cleaning and move in condition.

6. Additional Payments
Consider making additional payments that solidify your offer, especially if the offer is weak in other areas. For example, the developer may want 20% earnest money. You may offer 10% with contract and more later.

7. Remedies for Not Completing the Sale
The contract calls for the buyer to lose his entire deposit if he backs out. If you put in more deposits than required, make sure there is agreement on what happens to that extra amount.

8. Title
Whose name will the title be held in? An LLC? A trust? Can you change your mind prior to closing? Make sure this is spelled out in the contract.

9. Assignability
Most developers will not let you assign a contract (the bank will not let them). But ask.

10. Condo Fees
When do you start paying? This is important in a lease back, for example. Same goes for taxes and insurance.

11. Access to Property
Do you have the right to paint, put in lights, etc., before you close? This is an area that is often out of the hands of the developer, but check into it.

12. Changes to Specs
Make sure you know when the deadlines are for color, carpet, tile, etc. You may be able to get these extended.

13. Closing Date
Developers are not going to want to move this - but here again, it doesn't hurt to ask.

14. Financing.
Ask for a buy down. ANY SELLER (Including private ones) can pay points to buy down an interest rate. Ask for them.

Speaking of financing, for qualified buyers (Usually means a credit score of 740): Market America is offering 5.25% 5/1 ARM on Gasparilla Drive, and Condos at Paramount. We also have two points available for buy-downs for all new contracts at The Citadel.

We would love to become your real estate advisor. Call us at 239-425-0771 or email us with your needs. It’s a jungle out there and we can save you money. Visit www.ma-realty.com.

Thanks,

Gregg
Gregg@ma-realty.com
Cell:239-851-5464
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