$100k price drop guarantee

With more and more noise in the news lately about falling sales and prices in the Vancouver real estate market developers are getting creative.

When even the real estate industry predicts prices to be lower in the future how do you sell new condos?

How about offering a $100k price drop guarantee?

Crabman points out that’s what the Kimpton in North Van is offering.

It’s not entirely clear how it works, but lets assume they don’t mean that they guarantee prices will drop $100k in the next two years.

“New guaranteed prices are what you will pay today and are net of the $100,000 price protection guarantee provided by the developer and registered on the title on closing”

Here’s the ad:

And here’s a shot of the sign currently on the building exterior:

This is certainly an interesting alternative to the many stealth price drops that we usually see: free car, etc.

What do you think? If you’re looking to buy but concerned about falling prices would the price drop guarantee make you more willing to purchase?

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VMD
Member
CMHC’s Changing voices: FEB 17, 2011 CMHC: Home prices to track inflation “The existing home market will remain in the balanced to sellers’ market range in 2011 and 2012,” CMHC chief economist Bob Dugan said in a release. AUGUST 14, 2012 CMHC: Average prices, which are down about 5% in Vancouver this year from last year, are expected to climb about 2.6% by 2013, both in Vancouver and across B.C. NOV 6, 2012 The average annual MLS price in Metro Vancouver is projected to end 2012 down 6.4% to $730,000 and then drop a further 0.3% in 2013 The resale market is projected to move from a buyers’ market to a more balanced market by mid-2013 in B.C. We see a pick up in growth in both employment and the economy next year, and that’s what leads to a slightly… Read more »
Joe Q
Guest
Joe Q

Hahaha… Don’t these guys know they’re supposed to obscure the fact that prices are going to drop? Somewhere Cam Muir just spit out his coffee even though he wasn’t drinking any.

Also, the two year window is hilarious. How would you prove the condo has lost 100K in 2 years – by selling. Oh great, if the guarantee is triggered you only took a $99K bath in 2 years. MUST BUY NOW!

Anonymous
Guest
Anonymous

That’s it. I’m getting out of Vancouver and moving to Seattle. Washington State has cheaper real estate, higher paying jobs, AND legalized marijuana!!! How can BC possibly compete with that?!?!

jesse
Member

@VMD: It’s not a “buyers’ market”, it’s a lack of buyers market.

piklishi
Guest
piklishi

Just received an e-mail from Bosa and seems like all the developers started to promote cash credits or other price guaranties. This is what it says :

$5,000 credit on all One Bedroom Homes
$7,500 credit on all Two Bedroom Homes
$10,000 credit on all Larger Two Bedroom Homes

They started selling in May but apparently must be having a hard time with current pricing so giving some discounts maybe will push a bit faster. This is the new building in false creek BTW. I am still waiting for the 50% drop then I will buy a 2 bedroom (currently, applying the cash credit at 578k) .

LOL
Guest
LOL

@Anonymous: Will the COSTCO in Bellingham sell weed?

Ted
Guest
Ted

I think the weed issue is huge for BC real estate. All the years of washing money by buying places, fixing them up with cash and then flipping them into clean profits has also fueled our market in a huge way! The export market just took a HUGE hit and all our production is too much for just BC. Watch for pot prices in BC to fall due to the oversupply. This will in turn hit the producers and the various ways they wash their money.

Ted
Guest
Ted

In regards to the price drop guarantees I’m guessing they are completely worthless. Probably written by the shell corporation that does the development. If the guarantee is invoked there will be no money available at that point and there will be no recourse for the buyer. Happened with rent guarantees in the early eighties.

B.R.A.Z.E.N
Guest
B.R.A.Z.E.N

i’m also one of the people that believe that drugs are one of the pillars holding up the bubble. now that WA has legalized it nammers and caucasians on credit have another revenue stream cut.

everything seems to be working against this market.

boogeybear
Guest
boogeybear

@Ted:

Totally agree with you. The guarantee only is good for the life of the company making it. The company goes broke – the guarantee is useless. But it does signal out, to the smart buyer, those companies that are potentially “con men”.

DOW
Guest
DOW

Another potential loss for revenue for BC.

“Canada’s Resources Minister, Joe Oliver, said Wednesday he is confident the U.S., under re-elected President Barack Obama, will approve TransCanada Corp.’s TRP -2.27% Keystone XL pipeline, according to news reports. “It is clearly in the U.S. national interest,” Oliver was quoted by Dow Jones Newswires. The pipeline would carry Canadian oil-sands crude to U.S. refiners. It was rejected earlier this year, pending further review of its environmental impact”

Mrk3
Guest
Mrk3

@B.R.A.Z.E.N: I agree with that 100%.

data junkie
Guest
data junkie

Don’t be daft, there’s no way Obama is going to approve Keystone XL.

DOW
Guest
DOW

@data junkie
what, he is afraid of his approval ratings?
you have no really idea how politics works.

Bailing in BC
Guest
Bailing in BC

I want to know if they guarantee that the price will go down $100,000 in two years or if they guarantee that the price will go down $100,000 every year for (at least) the next two years?

painted turtle
Guest
painted turtle

I guess they will sell pot in liquor stores…

According to bc.ctvnews.ca/how-might-legal-marijuana-in-wash-impact-b-c-1.1025789#ixzz2BYak5uDs :
Even if B.C. doesn’t follow in Washington’s footsteps, legalization in the U.S. could still deliver a blow to the province’s drug lords, Heed said.
“You will see the proceeds that criminal organizations are making here in B.C. by delivering the product to Washington State decrease substantially because they will no longer be able to reach the black market,” he said. “In fact, [they will] have eliminated the black market.”
http://bc.ctvnews.ca/how-might-legal-marijuana-in-wash-impact-b-c-1.1025789#ixzz2BYak5uDs

data junkie
Guest
data junkie
@DOW: Considering I’m a former lobbyist, I have to laugh at you saying I have “no idea how politics works”. Honestly, aren’t there enough reasons to predict a large correction in Vancouver property prices without grasping at straws like what direction Alberta’s pipeline might go in? For starters, even if they built Northern Gateway instead of Keystone XL, it wouldn’t create very many jobs in B.C. Secondly, the Kalamazoo spill has made XL an unpopular political hot potato in some states that Obama literally just won, so I doubt he’s going to turn around and piss them off by giving a shady, incompetent company authorization to run thousands of miles of pipe through ecologically sensitive areas, at least not without serious modifications to the plan. Honestly, I suspect there’s going to be a lot more emphasis on domestic production. XL… Read more »
DOW
Guest
DOW

marijuana possession is still federal offense in US so i don’t know how all this will sort it out.

space889
Member
space889

The way I read it is that the price you pay already includes the $100K price drop guarantee. Or in other words, you are buying the place at a price that’s $100K below current market price. So the guarantee is pretty much not even a guarantee for anything.

And just for Patriotz, before you go spewing about market price being what the buyer is paying to buy the place by definition. Please re-read what I said and remember other people don’t care about what your definition of market price, they have their own and they make their decisions based on their definition, not yours.

Reality Check
Guest
Reality Check

Doesn’t the $100,000 guarantee IMPLY that prices may go down more than that? If they are so sure prices won’t go down by more than that, give a 100% guarantee forever. No?

Rookie marketing dept.!

It’s like that condo complex on Fraser Hwy in Surrey that has a big billboard with a number on it which states how many condos are left. It’s been stuck at 68 for months.

DOW
Guest
DOW

@data junkie
“it wouldn’t create very many jobs in B.C.”
it is not so much about jobs. it is about royalties that Alberta would have to share with BC. Mucho dineros, my friend. Listen more carefully to Mrs Clark next time she talks about it.

@data junkies
” the Kalamazoo spill has made XL an unpopular political hot potato in some states that Obama literally just won”

Are you color blind? Did you watch last night election? From north-south, border-to-border it is all red states.

Not much of a name...
Member
Not much of a name...

@Reality Check: I think the only guarantee is that previous buyers are guaranteed that they’re already down $100k.

VMD
Member

good call on whoever suggested to short Rona (was it Ham Solo?)
Rona profit drops on lower sales
“Rona saw its progress interrupted in a quarter marked by a decline in the Canadian hardware-renovation industry as a whole,” the Boucherville, Quebec-based company said. “The drop in sales, coupled with more intense competition, put pressure on gross margins.”

– the housing downturn still has a long way to go..

Bailing in BC
Guest
Bailing in BC

@space889:

By Joves, I think your right! I think what they are saying is that they have dropped their prices $100k from the “market price” (Yes, the one that they couldn’t move these condos at). So if you bought for $100k less than “market price” you wont lose any money if the “Market price” goes down. The only problem is if real market price goes down then the “market price” will be a price at which you won’t be able to move your condo. Evil bastards!

jesse
Member

There’s always ONE developer that breaks ranks and tries these “guarantee” schemes. Happened last time — in The Year That Shall Not Be Named — and I think condohype had a few examples headlined before s/he stopped posting.

All these are schemes to get around the crux of the issue, that prices are too high. But if there’s anything I’ve learned from the Sweatered One it’s that prices are to be dropped only at the uttermost end of need.

There are other schemes too. Care to help me formulate a list? Here are some to start:
– “Fire sale” prices, a giant weekend sales push well below market price
– 2 for 1 deals (buy a condo, and get another condo in Ohio for free)
– Developer pays your mortgage and strata fees for the first year

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