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Do you remember the good old days of pre-construction condominiums?

I do!

I remember when, among other things, you could purchase a pre-construction condo with a mere 5% Deposit.

And that was it.

No further payments.  Nothing due in 30 days.  Nothing in 60 days, or 90 days, or 180 days.  Nothing in a year.

Nothing upon occupancy, and nothing until the condominium was set to close and you obtained a mortgage of 95% for the remaining amount.

That was a long, long time ago.

It may as well be an eternity, based on how deposit structures work today, not to mention pricing.

When you could buy a bachelor condo at The Met for $99,000, with only 5% down, the comparable unit across the street in a 15-year-old building was worth $150,000.

Your profit was already factored in, irrespective of market appreciation.

That was the reason to buy pre-construction condos back in 2004, not to mention that absurd 5% deposit structure.

I remember when deposits hit 10%.  It was only a matter of time, really.

And when the Financial Crisis of 2008 shocked the world (except for Canada, of course…) developers started looking for 15% deposits.

Back then, the posted deposits weren’t always carved in stone.

I bought into a development in 2005 where deposits were 15% total, with 5% payable at 30 days, 180 days, and 365 days, only I was able to get away with a 10% total, providing 2.5% after 90 days, 180 days, 365 days, and 730 days.

The prices were so cheap that it wasn’t about the cash flow needed after 30 days as opposed to 90 days, but rather I was questioning whether the development would get off the ground.  Plus, why pay the extra 5% if you don’t have to?

Somewhere along the way, developers started to require 20% deposits, and I think that was a direct result of the 2008 Financial Crisis and the banks wanting to know that buyers could actually come up with a 20% down payment well in advance of actually needing to close.

Keep in mind, this was back when you could still purchase a resale property for as high as $999,999 with only a 5% down payment.  Not deposit, folks, but down payment.

We’re talking about buying for just shy of $1,000,000 and putting down only $50,000, and obtaining a mortgage for $950,000.

Today, we have a sliding scale that requires 5% on the first $500,000 and 10% on the next $500,000, meaning a 7.5% down payment on a purchase of $999,999.

But I’ll do you one better: there was a time when you could purchase a resale property over $1,000,000 with only 5% down.

And yet all the while, pre-construction condominium developers were requiring deposits of 20%?

That made no sense to me.

I mean, it made sense from the developers’ viewpoint, but not if I were looking at this as a buyer.

Today, the deposits are almost exclusively 20%.

They might be structured differently, and once in a while, the structures might be negotiable, but the 20% typically needs to be submitted within the first 180 – 360 days.

That is, until now.

As you likely assumed from the title of today’s blog, there’s a new game in town!

Maybe this isn’t so new, but it hit my inbox the other day and I found it rather interesting.

These “offers” are being provided by a registered real estate brokerage, so I can’t share everything or the brokerage and/or agents could have a RECO claim against me.

So let’s just start with the subject line in the email:

David, Easiest sell you’ve ever done with our BULK PRE-NEGOTIATED DEAL

While they were able to format their email blasts so my name is included, we’re not off to the best start when it comes to grammar since this reads “sell” instead of “sale.”

They also seemed to get their keyboard stuck on CAPS LOCK, or, maybe they just thought that was classy.

Then this caught my eye:

And to think, this whole time, I’ve been unaware that buying pre-construction condos in Mississauga on the installment plan was going to take me to the promised land.

There’s a lot of selling in this email, and I have to think there’s a certain demographic they’re trying to attract.

The colours, the fonts, the verbiage – it reeks of low-end sales tactics, all around.

I’ve seen high-end pre-construction sales and classy brouchures, salesmanship, and sales people.

But this is something different:

It sounds way, way too “salesey” to me, but what do I know?

There’s a buyer for everything!

Maybe some people won’t question the concept of “pre-negotiated bulk deals” or how they work, what the discount is, and who’s at the helm.

I hate the message here.  Whether it’s the different colours, fonts, or the words being used, it’s just gross.

But the best is yet to come.

Consider that, to some extent, all pre-construction sales are on the “installment plan,” since you pay 5% within 30 days, then another 5% at 180 days, and so on.  But when I think about four payments of 5% staggered across one year, I consider this more of a “deposit structure” than an “installment plan.”

When I think “installments” or “installment plans” I think about three easy payments from the infomercials.

And if you’re selling real estate, you don’t want to be associated with Ron Popeil’s Pasta Maker…

If you’re my age, you will freely admit that you’ve watched the entire infomercial, start-to-finish.

“Set it, and…….”

So where’s the comparison as far as pre-construction condominiums are concerned?

It’s in this section of the email, here:

And that, folks, is where we’ve officially gone from “deposit structures” to “installment plans.”

You might be quick to point out that this can work for some people or that it’s more advantageous.

Instead of paying $24,000 in 365 days, some might prefer to spread those payments out and provide a deposit of $2,000 per month.

However, I would then argue that the people who are doing this are the ones that don’t trust themselves to come up with $24,000 at the end of the year, and thus they choose to pay $2,000 per month.  And as a result, I would argue that these people shouldn’t be buying pre-construction condos.

Here’s another beauty:

“Easiest Sell You’ve Ever Done” is also not grammatically correct.

But who cares about attention to detail, right?

Especially when you “Dont Need A Big Lump Sum Cash To Invest In Real Estate Anymore,” which is, ironically, also not grammatically correct.

Raise your hand if you remember eight minute abs.

Any hands raised?

Eight-minute abs was huge back in the day!  The idea of getting ripped abs in only eight minutes had huge appeal and this spawned all sorts of television shows, books, workout videos, and merchandise.

If you were lucky, you had this videocassette at home:

Boom!

Nothing beats 8-minute abs.

Nothing!

Except, wait…

…what if there was a way to do it even quicker?

Like, perhaps:

Good lord!

You can’t do abs in seven minutes!

Eight minutes, fine.  No problem.

But seven minutes?  Who comes up with this?

So, imagine my shock and awe as I’m sitting in my office on Sunday afternoon of the long weekend and I open up an email.

Fresh off the idea for this blog post, with the offer of buying pre-construction condos for only $2,000 per month, I’m presented with this:

Damn, Gina!

Only $60………per day?

That, folks, is how you beat 8-minute abs.  Er, I mean, that is how you beat $2,000 per month.

And best of all, it’s a “FIRE SALE.”

Because when you think to yourself, “safe, long-term investment, no impulse, no gimmicks, well researched and well-thought-out,” you can’t help but feel all your boxes are checked when you read “FIRE SALE.”

And the math on the investment is totally sound:

I think there’s supposed to be an equals sign instead of that second plus sign, as in a 5% deposit + 5% cashback = 10% instant equity, but who really knows when it comes to this development and sales team.

Not only that, if somebody told you that after providing a 5% deposit, you would get 5% cashback, would you believe it?  Or would you be smart enough to know that they’re simply charging 5% more for the end product?

The definition of “equity” seems to be escaping these folks, even if the 5% cashback came from a money-tree.  It’s still not right.

In any event, this seems to be the way that the pre-construction condominium industry is heading; at least with the less popular, tougher-to-sell projects out there.

The developers are allowing certain brokerages and agents, who aren’t “in-house,” to advertise their projects and this is the end result.

But I’m not complaining.

Because how else would I be able to write a blog post and include references to eight-minute abs?

Somewhere, Harland Williams and Ben Stiller are with me…

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