Condo Developers Sweeten The Bait

Bush Construction has followed a similar strategy at the Park at Courthouse, a 98-unit project one of its affiliates is building in Arlington, but has taken the incentives a step further.

The developer has slashed prices twice since it began marketing the condos in June 2005, said Andrew Viola, one of the company's vice presidents. It has sold 23 units there. Condos originally marketed for $380,000 to $660,000 now sell for $317,000 to $565,000.

Company officials found that even with price reductions, some potential buyers stayed on the fence, waiting for prices to drop further, Viola said. So Bush launched a price guarantee program this summer. The company assured customers in writing that if it reduced prices while their units were under contract, it would give them the lower price up until seven days before settlement.

"It's not working as well as I had hoped," Viola said. "We still don't have people coming through the door saying 'We want to buy today.' We haven't found a price that would make them do that."

But the price was right for Huong Tran.

A few months after she and her boyfriend, Sean Magee, signed a contract at the Park this summer, they received a letter informing them of a price drop and inviting them to rewrite the contract to reflect the reduced rate on their one-bedroom condo. Instead, the couple opted to upgrade to a one-bedroom loft with a larger patio, higher ceilings, more deluxe amenities -- and a price tag only slightly higher than the original unit.

"It's really worked in our favor," said Tran, 26, a systems auditor at a large accounting firm. "The amount of money we saved eclipses any of the free upgrades, free closing costs and other incentives that we saw offered by other builders."

Developers usually hate reducing the base prices of condos because it hurts profit and often angers previous buyers who forked out more money for similar units. Dropping prices is usually a last resort: Developers do it to move their inventory quickly so they can pay off their construction loans and shed the costs of carrying empty units.

"For them, it comes down to taking less profit or not paying off a bank loan," said Michael Larson, an analyst with Weiss Research in Florida. "Lower prices are the third stage after they've tried incentives and then more aggressive incentives."

But bargains and freebies won't -- and can't -- last forever, said Pat Peavley, a regional vice president at the Fairfax office of First Horizon Home Loans.

"The incentives are just about maxed out because there's only so much developers can legally give in order to entice consumers to buy," Peavley said. As for price cuts, "many of the developers are down to the bare-bones amount they can sell for and still stay in business."

Not all developers are cutting prices. Some haven't found themselves under such pressure, especially if they have already secured financing on most of their projects.