I am often asked whether it is better to buy a new condominium before or after construction. As you might expect, my most common answer is “It depends”.
I first learned about pre-sale marketing in the mid-80’s when CBC national news featured a story on people lining up outside a Toronto marketing trailer. They were hoping to buy at The Polo Club, the first Toronto condominium to offer much smaller, affordable suites. The project was sold by Priority Registration, a new marketing approach in which potential buyers had to ‘get on a list’ to be eligible to buy.
Priority Registration was the brainchild of Stan Kates. I knew Kates and his then side-kick realtor Marty Atkins from high school, and was asked to bring them to Vancouver by a client who thought this would be a good approach for his False Creek project. I subsequently learned they created their effective, high-pressure marketing system through a combination of design and accident.
People would line up because they were each given the same appointment time. When they became anxious and tried to get into the sales centre they could not, since there was no handle on the door. Kates discovered this idea by accident after a door handle fell off an earlier sales centre. He incorporated it into future projects since it too enhanced buyer anxiety.
Inside the sales trailer potential buyers discovered there were few floor layouts to choose from. This was to speed up decision making. To further enhance anxiety, each sale was announced over a loud speaker; and when people asked for a brochure, they were often told they were all gone, but were offered paper and pen to copy floor plans off the wall.
Kates firmly believed pre-sale marketing was selling a dream, while post-completion marketing was selling reality. “And never try selling during construction” he told me, “Since you’re just selling a mess!”
The program worked well for The Polo Club and Kates. Today as Chairman of Kates Marketing Group, his website notes he is the creator of Priority Preview® Marketing, a trademarked and copyrighted pre-sales system that has pre-sold over 55,000 homes and condominiums in over 500 projects across North America for well in excess of $5 Billion. He obviously likes 5’s!
|The original model of the Bayshore development. Note the pier at foot of Denman that was sadly never built.|
|The very first artist's illustration prepared for the Bayshore development. It turned out very much like the drawing!|
One of Vancouver’s innovative pre-sale programs was the marketing of Bayshore’s first condominium residences from the Westin Hotel’s gracious International Suite. Since living at Bayshore included special access to the pool, health club and other hotel facilities, the developer wanted to emphasize the dream of living in a waterfront residential resort.
|I once purchased the ground floor unit at the front of this building. Unfortunately, I didn't appreciate the impact of the city street light until after it was finished!|
A key advantage of Bayshore’s pre-sale program, and many others, is it allowed buyers to choose from a variety of finishing packages and customize a home. However, this occasionally create problems, especially for the developer. I will never forget one if my buyers who complained about her bathtub. “What’s wrong with it” I asked. “It’s a very high quality fixture.”
“Yes” she said, “but it was supposed to be a shower!”
I pre-sold two Westside projects from my office in the CP Station. I offered free taxi rides to potential purchasers. One day, after handing my Yellow Cab credit card to a driver, he asked whether I was the developer whose office was in the Station. When I told him I was, he advised the older lady in yesterday would probably take the third floor two-bedroom if I reduced the price $5,000!
Another advantage of pre-sale marketing is it allows some buyers sufficient time to sell their existing home. For those downsizing from a house, the disposition of decades’ of accumulated possessions and memories can be challenging. Being able to do so over a period of time makes it a bit easier.
A disadvantage of pre-sale buying is that buyers often do not know exactly what they are getting. While this is less of a problem today with full size model suite mock-ups and computer generated view analyses, it is difficult to foresee everything.
I know. When I personally purchased a ground floor Bayshore waterfront condominium, I did not realize there would be a city street light right smack in the middle of my million-dollar living room view. And I was the Development Manager.
These days I often meet new and prospective homebuyers at Hollyburn Mews, a current project in West Vancouver. While I was tempted to pre-sell since there was much buyer interest immediately following the rezoning approval, I decided to wait for various reasons.
Firstly, I wanted buyers to see and understand exactly what they would be getting. Since the project design was somewhat unusual with a central courtyard separating laneway coach houses from street-front duplexes, even I was not exactly sure how it would all turn out.
Selling after completion also encouraged me to include a variety of small features that I suspected buyers might appreciate, but would be hard to illustrate or describe in a marketing brochure.
This approach also made it easier to know the development costs before finalizing sales prices. Fortunately, the credit union which financed the project did not require evidence of pre-sales before advancing funds, which is often the reason why many other developers have to pre-sell.
While selling after completion means developers generally have to wait longer to sell out a project, it does allow buyers to better appreciate what they are getting. In some cases they can also see who will be living next door, and whether their patio will get sun in the morning or afternoon. This is particularly important if this is a home, not just an investment.
Buyers can also see if there is a street light right outside their living room!