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January 15 2004
The standard way for the larger development companies - Keystone Real Estate, Vail Resorts, Intrawest and East/West Resorts - to sell their new products has been, for the past few years, to have what areeuphemistically called "launches."
A launch is a way to get all the unitsin a project sold at once, usually long before the project is built. Inother words, it gets the buyers committed in advance, relieves the developer of most of the risk involved in a speculative project, and if worked right, could be a win/win for everyone involved. "Worked right", however, should mean that, if you as a buyer are committing (usually with a non-refundable deposit) as much as two years in advance of actual closing on a property, you should be getting that property at significantly less than the market value at close. But, keep in mind that launches are designed to create an atmosphereof scarcity. After all, there are only so many units available in this building.
Developers play up the future benefits, including location,value, views, etc. Then, they attempt to take as many as 3.5 reservations for every unit available. That means that if they plan to sell a building with 100 units, their goal is to get 350 reservations. Then, at launch day, priority numbers are picked. If you got picked at No. 1, you could select any unit in the building. But, if your number was much lower, and the unit you wanted was already gone, you might pass. The developer figures the number of "passes" there will be and knows how many reservations he will need for the launch to be successful.Unfortunately, a launch that is successful for the developer may bea big loss for the buyers. Launches have been so prevalent in some of the newer developments - The Village at River Run in Keystone; Main Street Junction and Station in Breckenridge; the new projects at Copper Mountain - that in many cases, the developments have been overbuilt and/or the promises or projections have not been met by reality. That means that buyers have not experienced the rental income that was projected for them or they have not been able to resell their units with the profits that were anticipated.
Keystone, for example, has had a plethora of units sell in the lastyear at an average of 15% below the original selling price by sellers who bought at launches, but could no longer wait for the market to bring them a profit. In addition, many buyers who originally committed to a purchase had circumstances change (remember the stock market crash?) and were unable to consummate their purchases.
In those cases, nearly all those buyers lost their deposits. I am aware of at least one individual who lost a $100,000 deposit. So, launches are not for the faint of heart. It may be true that"getting in on the ground floor" is important to you. And being an owner of a newer property at or very close to the slopes, with shops, restaurants and activities outside your door, is important to you.
Just be sure that you can afford to stay in for the long haul.
Because the short term may not be as nice to you as those friendly sales agents may want you to believe.
