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| Tower Miami - Your Miami Real Estate Source |
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JACKSONVILLE, Fla. -- Sept. 11, 2006 -- In a time rife with speculators and moderate construction costs, developers nationwide took reservations for their condominium towers years in advance, requiring buyers to make only a several-thousand-dollar deposit to reserve their purchase.
Now that both the real estate and construction markets have changed, developers nationwide are taking a different line: No reservations accepted.
At The St. Johns, a condo project being developed in downtown Jacksonville by Hines, buyers will be asked to go straight to contract, putting down a deposit worth 10 percent of the purchase price. The decision by Hines, which is an international developer, mirrors what other companies are doing nationwide as construction costs rapidly fluctuate and speculators leave the market.
Developers, who thought they had a good handle on where building costs would be in a year, found that their projects could cost millions more than expected. Along with the project costs, price ranges and reservations went out the window.
For example, in Miami, the developer of downtown high-rise the Everglades canceled reservations and resold condos for higher prices to make up for rising construction costs.
"Many developers were falling for the short-term gains that appeared when speculators did go through to closing," said David Parker, president of real estate consulting firm Parker Associates. "Now, it can come back to slap you in the face."
Walter O'Shea, a Hines vice president representative in Jacksonville, said the developer chose to skip the reservation period in order to be able to give buyers specific pricing up front.
Instead of a several-thousand-dollar deposit on a reservation, buyers will pay a deposit on a contract worth 10 percent of the purchase price. The condos start at $325,000 and run up to more than $2 million. Hines has finalized plans and is locking in agreements with its subcontractors to ensure costs don't get out of hand.
The large deposit also makes it less likely that buyers will pull out of a contract before closing.
Parker said he has advised his clients, which do not include Hines, to go straight to contract for years but that they're often eager to test the market early, sometimes long before they have specific unit plans or estimated construction costs. As a result, predicted price ranges can be thousands of dollars off the mark.
Phase Two of Berkman Plaza is also taking buyers to contract, said sales manager Ed Bonneau. Berkman did have a two-month reservation period, during which sales agents netted about 50 reservations.
"Typically, developers take reservations when they don't have all the unit details or costs together," he said.
Of the reservations, the agents have put more than 15 under contract so far. Berkman, whose developer was approved for incentives from the city, has already gone under construction.
Hines officials think that the new method won't negatively affect the briskness of sales once they open in mid-September.
Although going to contract might deter some of the speculators who were rife in the real estate market at its peak, O'Shea believes investors, who are planning to hold onto a property for several years before reselling it, won't be scared away by the new policy. Speculators seem to have left the market altogether anyway, he said.
"The more certainty you can offer buyers, the better," he said. "I think buyers understand why we're doing this."
© 2006 The Florida Times-Union, Joe Light; via ProQuest Information and Learning Company; All Rights Reserved.
[Now Condo builders are opting for solid contracts ]
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