Builders offer buyers price guarantees

Below is an article I found interesting about what a major developer is doing to promote buyer confidence:

The Orange County Register, updated 2:45 a.m. PT, Mon., Feb. 18, 2008

Faced with plummeting home sales and reluctant buyers, some homebuilders are offering a plan designed to take the worry out of buying when prices are falling.
At least three companies in the region are offering price guarantees.

One plan promises to lower the amount a buyer pays for a new home if prices drop after they buy, but before they get their keys. Another lets buyers back out of deals and get their deposits back if their home is appraised for less than they paid.

How it works
KB Homes’ North Los Angeles division began offering price guarantees in January through May. If the base price of a buyer’s home is less at closing than they paid, the company will honor the lower price.

Steve Ruffner, KB Home’s president for the five-county division that includes Orange County and the Inland Empire, said his office will roll out a price protection plan at the end of the month for its Clementine condo project in Placentia.

It will appear at other projects in KB’s Southern California/Coastal Communities division within the next 90 days, he said. Ryland Homes offered a similar plan. Although its sales event ended, Ryland will honor the price guarantee should a customer ask for it, Barlow said.
Capital Pacific Homes’ plan is being offered at seven Inland Empire developments in Corona, Murrieta, Menifee, Beaumont, Winchester and Victorville. It also is available at one development in Lancaster. The company is looking at extending it after the Feb. 28 expiration date, Hernandez said.

Under Capital Pacific’s program, buyers can back out of deals and get their deposits back if the home loan appraisal issued about 30 days before closing shows that the home value is less than the price tag.

“We don’t have oodles of rules,” he said. “It’s really simple. You get your money back.”