Vue Charlotte Pricing Negotiable?

I remember when I bought my unit, I was told that the price of the unit was not negotiable. I am one of the types that hates to bargain. I know some of you love it. I don’t have the stomach for it. So I bought my unit at the published price. To tell you the truth, I appreciated that the prices were not negotiable because then I didn’t have to worry that another person got a better deal than I did for the same unit. I may be naive and you stronger negotiators out there really were able to create some savings for yourselves.  But in all I would like to think we all saw the published prices for our units at the time we bought and paid that price.

So what about now? What about as we go to close? I have said repeatedly and will do so again that the Vue is not under any obligation to negotiate the final price. We all signed contracts and are legally bound by them. But what if the fair market value of the units have come down by let’s say 15% and the Vue introduces the possibility of some pricing flexibility? Will the Vue adjust the units across the board, or will it all be a 1:1 negotiating free-for-all to get a better price? You know what my preference is…publish a new set of prices, so that I don’t have to worry that my neighbor is getting a much better deal than I am. Some of you poker players are probably cringing at the thought of not being able to bargain.  In the end though, we all have to live together and we are all going to be able to see what the other paid, so why not reduce the surprise factor?

The appraisals are going to be key, and I know the buyers and the Vue are awaiting to see what those are. What we can do in the meantime is look at a comp to see how other units are priced compared to ours. While there is no true comparable building in Charlotte, there seems to be one that several brokers feels is close enough. We’ll look at the comps in that building in a post later this week.

Please share your comments on pricing and the Vue.

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2 Responses to Vue Charlotte Pricing Negotiable?

  1. Jim Smith (not my real name, but a real buyer) says:

    My wife and I are contracted to purchase a unit at the VUE. We signed this contract in 2006 and have been struggling, like everyone else, with how we should proceed. I have walked by the VUE construction site at least twice a week for the past 4 years watching with interest (what my wife would call obsession.) We are as emotionally tied to this investment as anyone could be, and I’d like to add my thoughts to this forum.

    From the standpoint of this blog, it is important to separate the needs and aims of investors from those of homeowners. Here are my thoughts as to moving forward:

    If you were an investor:
    1. You contracted to either flip, or rent and then sell when the property appreciated.
    2. You made a bad investment. It is very difficult to get a loan approval in today’s lending environment for investors; you will need a large down payment or all cash. Even with a reasonable price reduction, it is very unlikely that you will be able to flip your property and cover your initial investment and transaction costs. Unless something drastically changes, it seems unlikely that the appreciation at the VUE over the next 5 years will cover your costs. It was just a poorly timed investment. I hope you made money in other properties that you flipped, and you can emotionally move on.
    3. I would doubt that MCL is going to make enough adjustments for you to make this even a break- even investment. It has just been a bad time to be an investor in real estate, and you got caught in it.

    If you are a homeowner:
    1. You contracted on your unit to live in a building of the caliber and with the amenities of the VUE.
    2. You may be somewhat disappointed that there have been some reductions or perceived reductions in the quality of the building or appointments. You also realize that this is a building that is still in a class of its own in Charlotte.
    3. When you buy a home you hope it is a good investment (or at least not a bad one), but you are buying it so that you have a place to live that suites your lifestyle. When you buy a home, you fix your “rent” for as long as you own it. You can customize it the way you would like, and there is a strong emotional component to owning your own home.
    4. Having said that, you still don’t want to pay (much) more for your home than the market reflects.

    So let’s look at the personal financial aspects to this purchase. I will do the math on a $1,000,000 property to make the numbers easier. If you contracted to buy this property, you have a deposit of $150,000. Let’s take 2 different scenarios.

    The first is that the unit is worth only $850,000 today, a 15% reduction. In a vibrant real estate market, MCL could sell this unit for that price. MCL certainly would not reduce the $1M that a contracted buyer agreed to as they will STILL net $1M if you walk and they sell it for the 850K — your deposit ($150K) plus their sale ($850K). Unfortunately for them, this is not a vibrant market and they may have to sit on this property for quite some time before selling it especially since $1M units are the slowest segment of the Charlotte real estate market today (and the lower priced units are the most numerous on the market in uptown). That is where our bargaining chips come in. It is crucial for MCL to sell a good percentage of their units within the first 6 months to a year or new buyers will have a very difficult time getting any mortgages. (This is due to FNMA and GNMA requirements for percentage of occupancy in a new condo project). And as a result, MCL will have a difficult time selling the remaining units. It is not a great time to be selling any real estate, so MCL may very well negotiate to some degree to get a bona fide buyer to closing.

    The second scenario is that the unit is worth only $750,000 today, a 25% reduction. MCL will certainly have to reduce this for a contracted buyer as the buyer would be better off walking and purchasing on the market at 750K. Still a better buy even after losing their deposit. The issue here is what is the price you should pay? McLean’s comments regarding finding “appraiser after appraiser after appraiser” until he gets the appraisal he wants was certainly not helpful to any of us in the commitment department.

    If you are a homeowner who has contracted to buy a unit at the VUE and still wants to and can live there, (this has taken years to be build and many buyers’ lives and financial situations have probably changed) the issue is going to be at what price? If the appraisals reflect the true Charlotte market — and not just the misleading early cash sales — we will get a better idea of what our condos are actually worth. Early cash buyers do not reflect the true market as they already have a large deposit invested and are actually purchasing at their contracted price less their deposit. I would think we all should expect to compromise with MCL; we contracted for a high price and, if the market had continued to soar, we would not expect them to raise the price we should pay for our units. If we would have expected to take all of the gain if the market went up, we cannot expect them to take all of the loss when the market goes down. (The definition of an investment, right?) If the market had dropped only 5%, I doubt we would even be having these discussions. Since we have had such a huge drop in real estate prices, the price where everyone eventually closes will have to take into account the new market AND their deposit. I think we are all going to share in this pain.

    Finally, I don’t think that the VUE is a guaranteed success in the short term. If they are not able to sell all or most of their units, it is not clear what will happen to the HOA expenses, or maybe there will be a fire sale of the remaining units a year or two from now. Will the building, once open, be kept to the standards that we all expect?

    MCL is under no obligation to lower the price I contracted, but I am under no obligation other than to lose my deposit. What are my wife and I going to do? Hopefully negotiate a new, fairer price with MCL — probably not as low as we would like it to be, but not the price of our original contract. At our contracted price, we will not close, as we would rather take a loss now and then reconsider and re-evaluate the VUE in a year or two as I think everything will be much clearer then. When all is said and done, though, I think that MCL will negotiate with us and we will be able to close. After all, the market is what the market is. I hope to see my new VUE neighbors in a month or so, but if not, I expect we will move into the VUE in the next 2-3 years.

  2. Vue Buyer says:

    Las Vegas is not the same as Charlotte, but… The brand new City Center condos are beautiful and they have now discounted their condos by 30%.

    The LV developers have sufficient profit margin that they are willing to cut their prices to get the first wave of buyers through the door. Clearly at the Vue interest has stalled, that is why they are stuck at 60% sales. By january if sales fall to 30-40% because people cannot close or choose to walk… anything could happen

    In my mind, it seems smarter to drop the price across the board by some fixed amount to help maintain their 60% presale number, condo fees etc. Obviously it helps me. I am sure that they know it needs to be done, they are just waiting for all the information to come in.

    They will wait to see how many people cannot get a mortgage or go through with the closing before offering deals if any. They need to figure out the bigger loss… loss of income from failed closings vs across the board price reduction vs 1:1 deals. The last of which is a slime ball move and leaves a bitter taste in my mouth.

    I am not sure if I will proceed or walk away. Right now, I think my loss will be greater if I proceed. There is no way my unit is worth what I paid or what is still owed after the deposit. I don’t need to be underwater from day one.

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