Chicago deal of the day: Are free upgrades the way to go?

Click for larger imageThe developer of the South Loop high-rise, 1349 S Wabash, is offering $3,000 in upgrades to buyers of one-bedroom units, and $5,000 in upgrades to people who purchase two-bedroom layouts for buyers who sign a contract before March 28. This isn’t a good sign; we only told you about this project in November, and already developer See Wong is throwing out incentives. In general, when assessing offers of upgrades, it pays to consider a couple of things: Upgrades can enhance your condo’s look and increase its value when you decide to sell. But if you intend to stay in the condo longer than a few years, it may be worthwhile taking advantage of the cooler market and asking the developer to cut a few thousand dollars off the purchase price. The lower the base price, the more you save over the duration of the loan.

Upgrades are easy incentives for developers to offer because they usually purchase cabinets, countertops and other such finishes in bulk at wholesale prices, so giving away upgrades doesn’t hurt their bottom line as much as price reductions do. A developer may tout an upgrade “worth” $5,000, but that’s likely the retail price, and the developer probably paid less at wholesale for the item. Developers can sometimes disguise upgrade giveaways as marketing costs and write them off as tax deductions.

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