A Richmond developer is offering an unusual promotion to sell its condos – pay 30 per cent in a downpayment, move in and start paying off the rest of your mortgage, along with strata fees, etc., two years later.
“The housing market hasn’t been great recently and one of the reasons for that is people don’t want to take out a loan when interest rates are so high,” said Dave Pei, listing agent for ViewStar, a finished residential development on No. 3 road that’s offering the promotion.
“So, we are offering this incentive to allow buyers to not take out a loan until two years later, so they don’t need to worry about the current high interest rates.”
Pei added that the developer will also cover all the fees associated with the unit during the two years, including strata fees, property taxes and utility bills. Although buyers are expected to pay back those costs, along with the rest of the purchase price, in two years.
Thomas Davidoff, a real estate professor at the University of British Columbia, said developers have come up with different incentives in this buyers’ market to try to sell existing units. Buyers can take advantage of the incentives but should keep in mind hidden costs.
“In this case, buyers are basically borrowing money from the developer that’s interest free for two years, so that's quite attractive,” said Davidoff.
“It could be that the developer is in a rush to get occupants. That's because if you have an incomplete strata, that can collapse because who's gonna pay for everything?”
Davidoff said another reason for developers to offer incentives on existing units could be to avoid cutting the listed purchase price of the units to avoid angering the existing buyers.
“So to avoid letting new buyers in at a lower price, the developer may prefer to provide an incentive which, again, is quite valuable,” he said.
However, Davidoff said the original unit price could be above the current market value, so buyers need to see if they are actually saving money. If they get “a deal” on the interest but overpay for the home, they could be further behind.
“If the property market continues to not perform well, or if you're buying these units above market price, you do run the risk of not being able to finance the remaining 70 per cent, because the bank would worry the property isn't worth as much,” said Davidoff.
He said buyers should do a financial calculation to compare how much they are saving with incentives offered by developers, with how much they’re paying for the unit in relation to the market price.
“They should figure out if that's worthwhile,” he said.