CFAH

Six months ago the sales office at The Palms (555 4th Street) was advertising “Only 8 Left!” and 3.875% financing. Two months later five new condos magically appeared on the MLS. And since then, four more units (#705, #814, #833, and #907), 2.875% financing (no details on the terms), and a few reductions (from $39,200 to $56,200) have come to be as well (along wih the words “BUILDER CLOSEOUT!!”).
Apparently Only Eight Condos Left At The Palms (555 4th Street) [SocketSite]
The Palms Finds More Inventory And A Resale Hits The Market [SocketSite]

Comments from Plugged-In Readers

  1. Posted by tipster

    And when these sell, all the units the builder is renting out will be sold…

  2. Posted by Dude

    To tie two threads together, this proves my point about how “special financing” or lowering your interest rate 1% means nothing when properties are 20-30% overpriced.
    Look at #841. Originally priced at $1,039,000. Let’s say I bought it with 10% down at 7.0%. Ignoring HOA fees and insurance, my mortgage payment would have been $6,221 per month. But now, conforming limits rise to a million. Or rates get lowered. Or the developer offers “special financing” or some other gimmick. If I can refinance at 6.0%, my payment falls to $5,606 per month, or a $615 monthly savings. Yay! That’s worth about $34,000 in today’s money (assuming I live there for 5 years and reinvest at 4%).
    Unfortunately, #841 was just reduced by $39,200, rendering a 1% rate discount completely ineffectual. And given that it hasn’t yet sold at $999,800, the real value is likely even lower.
    My belabored point is that those considering buying because mortgages may get 50 basis points cheaper (or the developer offers you “special financing”) are falling into the typical “howmuchamonth” trap. Your monthly payment reduction is trivial given that prices are absurdly high and observably coming down. Remember Satchel’s comments about being “trapped” in a depreciating asset?

  3. Posted by Tom

    So who is the builder/marketing company on this and what other projects do they have in the city that one may be leary of?

  4. Posted by John

    Those special financing normally last only one or two years long. It is like an adjustable.
    If it last ten years, I would jump on it.

  5. Posted by Tipster

    One or two years? So the whole thing is a scam for people who are bad at math, and will lose interest after they hear the payment for month 1. What a savory industry!
    Great post, Dude. Thanks for putting the numbers together. I assume the numbers are much worse if the buy down is a teaser rate that expires after a year or two.

  6. Posted by palms_rez

    Two comments regarding this building (since I live here).
    1) I don’t know what is up with the whole sales pitch with the changing number of units left. Honestly, it seems like very sloppy marketing.
    2)Regarding the buydown, we bought our unit when it was 3.875%. The sales person walked us through very precisely how it worked. Year one it’s 3.875%, year two it’s 4.875%, years three through five it’s 5.875%, and then the ARM re-adjusts. We walked through multiple scenarios for exact payments on different units and with varying down payments. So once you talk to the team here, they are very up front on what the offer is and how it works.
    I realize this is a different topic from if the pricing is correct, but wanted to get it out there that, in my experience, the buydown was presented very clearly.
    As for the marketing strategy, I’m as confused as everybody else.

  7. Posted by movingback

    Thanks, palms_rez. Tipster, maybe you should get some facts before making erroneous assumptions. When I recently visited The Palms the financing options were very clearly explained to me as well – there was no gray area or misunderstanding. Nothing unsavory about it as far as I can tell.

  8. Posted by John

    This is no difference from “one/two months free rent” when you rent at some of those apartments.

  9. Posted by S&S

    @ palms_rez: Just curious, no jab(s) intended, but are you happy with your purchase overall? Taking into consideration the price you paid, the size of your unit, the quality of the unit as a whole, the amenities? If you had the chance to do it again, would you still buy in The Palms? If not, where?
    I ask because I thought about buying a unit in the presale stage, but I thought they were WAY overpriced. Just want to know how someone who actually lives there feels about the complex.

  10. Posted by Arman

    I love our place at The Palms. got the 2-1 buy down and knew exactly what we were doing (we also like our unit, 2/2 split with exterior view of the city). We walk to work downtown. we are 1-4 blocks from everything we need (Safeway, Whole Foods, Walgreens, ramp to Bay Bridge or to 280 and Target in Daly City), MUNI, etc. but we aren;t right smack dab next to AT&T park, MUNI, etc. as to make it all messy during commute times or game day. Plus, we have Coco500, Fringle, bacar and — soon — Orson all next door. Seems kind of piddly to talk about a handful of units left — as it;s about 97% SOLD. Our wing is full. I do wish the sale center would leave as I heard a japanese restaurant is looking at the space.

  11. Posted by palms_rez

    My feelings about living here are pretty aligned with Arman. We also have a 2/2 split and face the city. I love the location and walk to work myself, too.
    However, the size of this building and its layout mean that there are a lot of different experiences to be had. There are units facing the courtyard, Twin Peaks, downtown, or Mission Bay. There is probably more noise toward the front of the building, especially with the Club Tabu on the weekends (but I’m near the back so never hear anything).
    We are very pleased with the finishes and think that we got a pretty good deal, relatively speaking, compared with other places we looked at. Plus, our particular unit has a ton of closet space…..big plus!
    We’ve had a chance to meet a few of the neighbors and the people I’ve talked to are all very nice.
    Yet, no place is absolutely perfect, is it? Things I would have changed are 1) higher ceilings (even if only by 6″) 2) an exercise room with some natural light and 3) a usable outdoor area. The last of these three is the one I wish we had the most. The Palms Park (as they call it on the MLS) is really not a place to enjoy the weather and read a book. I don’t want a pool, but some lounge area (like on the roof) to use on a warm, sunny day would have been good.
    Also, it will be nice when we finally get that restaurant, if it ever happens! I too wish the sales team would skedaddle for that reason.

  12. Posted by palmsguy

    I own a one bedroom at The Palms and bought early in the release schedule. I WISH I had gotten the buy down deal. You always have the option of doing a refi…just with any other loan…this just lowers the cost of your loan for the first few years. As always…you should do your homework when getting ANY loan.
    I also think there’s no shady business behind the remaining units available at The Palms. As I understand it the units are released, and sold as the developer sees fit. Often the guy that develops a project will decide to keep a portion of the project and sell them at a later date. For example- The builder keeps 10 units, then changes his mind and decides to sell off two of those…the remaining number of homes will increase by two since those are considered first time sales…not re-sales. There’s nothing shady about that is there???

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