Olive 8, one of the Seattle hotel/condos combos has recently announced that they will be offering new buyers a price guarantee. The developer feels so confident that their project is offering high quality and outstanding value in the market place, that they are prepared to back it up with a price guarantee to new buyers. The agreement says that if the same floor plan within Olive 8's remaining inventory sells for less than the current price prior to closing, the buyers who contracted for a higher price home will benefit at closing with the equivalent discount to their price. According to the developer, the low price guarantee assurance is offerred to help shore the confidence of those who are on-the-fence.
Seems like a great marketing strategy — will be interesting to see whether other projects follow suit.
Construction for Olive 8 has been progressing nicely. The hotel floors have been poured and condominiums floors are being poured at the rate of one every seven days.
Related posts:
Olive 8 and 5th & Madison Update
Olive 8 Auction Results
Olive 8 Going Auction
Olive 8 Update
Olive 8 Hard Hat Tour
Hotel Condo Shoot Out
Olive 8
I read about a similar guarantee in San Francisco a few months ago. It’s a decent marketing strategy, but it just means that Olive8 won’t lower their prices until construction is complete and completed units have been sitting on the market.
The guarantee allows Olive8 to sell a unit for less _after_ all of the pre-construction buyers have closed, since the guarantee only applies up to the closing of the pre-construction buyers.
I have thought about buying one of the remaining x09 units at Olive 8, although I think they’re overpriced and will probably lose a big chunk of their views when the 1913 5th Ave building goes up.
A simple income analysis could have prevented some of these unfortunate people from buying. In Seattle, from 1976 to 1981, I was able to buy new condominiums at an average 7.45 price-to-rent ratio (based on data contained in my book: How to Invest in Condominiums). These condos when rented yielded an immediate positive cash flow. In 1986 I purchased my last investment condo with a 14.2 price-to-rent ratio. It had a negative cash flow. Too many buyers were willing to pay much too much driving up price-to-rent ratios to about double from where I stared to experience a negative cash flow. How could they take on such incredible risk? In my book I warned how over-priced condos in downtown Seattle were, already in 1998!
Current, depressed, 2009 prices are still 20% higher than they were in 1998.