No-fault default, anyone?
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A Georgia developer, trying to scare up takers for some luxury condominiums, hopes to allay fears of job losses and falling home prices with a novel buyer incentive program that goes well beyond carpet and tile upgrades.
The deal is special financing at 10 Terminus Place, a 32-story condo tower in Atlanta’s upscale Buckhead district where the asking price for units starts at $335,000 and ascends to more than $3 million.
Cousins Properties, which owns the development, is providing the financing itself – loans fixed for three years at just 4% annual interest. At any time during that period, buyers can mail back the keys and walk away – no harm, no foul, no damage to credit – and the condo becomes the property of Cousins once again.
Borrowers must make a 5% down payment for the first year, then pay in an additional 2.5% in each of the second and third years -- a far cry from the 20% down payments generally required these days for jumbo mortgages, like most will be at the high-end development.
Alternatively, borrowers who put down 20% can choose to skip payments for a full year – an option designed to give them time to sell another property in a tough market.
After three years the buyers must refinance with another lender or turn the condo back over to Cousins.
In a news release, the company noted that it has become commonplace for developers to auction off blocks of unsold condos or to drastically reduce prices. Such discounting ‘doesn’t help,’ according to Cousins Chief Executive Tom Bell.
‘If you discount 15%, the buyer will wait for you to discount 30%,’ Bell said. ‘Some buyers are trying to time the bottom of the market and I don’t want to chase that ball downhill.’
The program echoes Hyundai’s offer to buy back cars from new owners who get laid off – a plan that General Motors and Ford said today that they would match.
It’s also similar to a recent Toll Brothers Inc. offer to insure buyers. For homeowners who lose their jobs within 24 months of purchasing a Toll Brothers home, the builder will cover six months of principal, interest, fire insurance and property taxes, up to a maximum of $2,500 a month.
Toll Brothers builds higher-end homes on the East Coast and in California, Arizona, Nevada, Texas, Colorado, Illinois, Michigan and Minnesota. In Southern California, the company currently has developments in Yorba Linda, Corona, Chatsworth, Moorpark, Rancho Cucamonga, Highland and La Quinta.
‘These days, people really want assurances,’ said Realtor.com Chairman Joe Hanauer, who has been pitching a separate insurance plan, this one offering homeowners protection against price declines of up to 10% if they resell the home after three years or more.
-- E. Scott Reckard
