…I find that selling units to actual home buyers is the more desirable alternative to developers facing tough decisions in this marketplace. Too often developers choose one of two other options leaving condo buyers frustrated to financially ruined. Those choices include:
- The developer retains control of the un-sold condos and rents the units. With a building half-full of renters, and the developer in control of a sizable percentage of ownership, owners face financial uncertainty when the time comes to sell their homes. Strict lending guidelines make it virtually impossible for a new buyer to get financing on a condo in a building where one person owns more than 10% of the association. Add to that the transient quality that the new development acquires as a rental property rather than as a stable condominium building.
- The developer stubbornly refuses to react to the market; steadfastly holding on to pricing that is clearly out of touch, and eventually loses the remaining units in foreclosure. Worst case: you need only drive by the Lincoln Park Lofts, formerly The Ashton Lofts located at the corner of Ashland, Fullerton and Clybourn. Two poor home buyers purchased and moved in two years ago, and after the developer’s remaining units were foreclosed upon, were stuck living in an empty building with no other neighbors to help pay or care for the crumbling building.
The only validity to Mr. Senne’s argument is that previous buyers are hurt by the price reductions. We can’t argue there. It’s not fair for the prior buyers to bear the burden of the lower prices. But those lower prices are not the fault of the developer, they are a function of the marketplace. To ignore the reality is to simply kick the can down the road.
– @properties Realtor and “Windy City Guide” Bob Darrow, responding to a recent press release from developer Bill Senne about “Emerald‘s integrity” in a market filled with price reductions and auctions.
According to the release, Senne and his development team “remain committed to their pledge not to trim prices, sacrifice quality or ditch amenities” while competitors continue “to burn their initial buyers” by slashing price points or converting their condos to rental apartments. The homes at Emerald, 123 S Green St in the West Loop, are currently priced from the $270s one-bedroom / one-baths to the $620s for two-bedroom / two-bath penthouses.
Darrow — whose employer markets two developments called out by name in Senne’s release, and who is promoting reductions as high as 16 percent at one of his client properties — counters with the metaphor of pricing as a throttle: “if you want to go faster, drop the hammer on pricing and more sales immediately follow.”