There's always an asterisk

Some builders are offering price guarantees to new home buyers -- assurances that they will be protected from falling prices not only up to closing, but for a year, two years, or more.

Reno, Nev.-based Pacifc West says its guarantee is good until all the homes in a development are sold.

"Our Life-of-The-Project Price Guarantee is the best in the industry, bar none," the company claims. "Unlike other guarantees that last 30 days or 90 days, ours lasts for as long as your community is selling new homes. If we do reduce the base price of your home model in your community below our guaranteed pricing, we'll write you a check for the entire differece."

Companies offering two-year guarantees include Signature Properties, and CNH Homes, while Cornerstone Homes offers a 12-month guarantee.

The fine print in such offers may specify -- as does Pacific West's "Life of The Project Price Guarantee" -- that they expire when the last home with the same floor plan in a development is sold, or, more ominously, if "all such floor plans are withdrawn from sale." And, of course, if a builder goes out of business, well...

Bill Sumski, managing director for Paladin Pacific LLC, noted the trend at the annual Fisher Center Real Estate Conference in San Francisco this week (see Inman News story). Sumski that while builders are slashing prices to compete with foreclosure properties, buyers dry up when the market is headed down. "There is a great fear about making a large purchase right now," he said.

You might recall another recent Inman News story about an outfit in Utah, EquityLock Financial Inc., that sells 15-year contracts as a hedge against falling home prices. The contracts, which aren't available in the riskiest markets, are being marketed to developers and builders for 1.5 percent to 2 percent of a home's sale price.

Signature Properties is offering its "Live Secure" guarantee on homes in some California markets where prices have fallen hard, including Sacramento and Oakland. Pacific West says it's offering its "Life of the Project" guarantee in Reno and all but one of its projects in California, and has already seen a boost in sales.

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