Wednesday, July 4, 2007

Is Marketing A Contract?

All the new construction marketing hype has gotten me thinking: "are lifestyle promises a contract?"

Can you in fact come back to a developer and claim they didn't deliver what they promised?

The other night, we went for dinner to where we thought we were going to receive 5 star food with 5 star service. The place we chose made that claim. They had the 5 star rating on their website and advertising materials. They promised fresh food with ideal wine pairings. Let's just say they didn't deliver.

Now I know from having worked in luxury resorts in the past that promises lead to expectations. I know that when expectations aren't met that the customer is usually always right. I knew the other night that had I wanted to complain to a manager that the wait was too long, that the service was terrible, and that we didn't receive any bread with our meal, we could have at least received a discount on our meal if not a re-invitation to try them again on another night of our choosing, on the house.

We didn't complain. Instead we left upset that we'd wasted a considerable amount of money on a night that we tend to only permit ourselves once or twice a year. We won't go back and if anyone ever asks we'll tell them never to go there either.

So does this rule apply to real estate? If we make a purchase, say at Aquattro or at The Falls or any of the other myriad places that promise a new lifestyle with our luxury condo, what recourse exists for us when our expectations aren't met? Can we demand a discount, or our money back? I know that when I make a deposit I don't pay the remainder until closing. I also know that closing includes my satisfaction that the unit I purchased meets my expectations. I also know I can withhold payment until the work is completed to my satisfaction. Fair enough, we can do this with any property we buy.

But we didn't buy at Aquattro for the quality. Sure that was a part of it. But we got taken in by the promise of a stunning view of Mt.Baker over the city skyline. We expect our lives to be enhanced by neighbours without a care in the world. We expect our BMW to be the cheapest car in the secure underground parking lot. And we expect the weather to always be sunny and warm, the breeze to always be fresh and lightly scented with fresh blooming roses and the people who live in our building to be younger looking 50-somethings dressed for a ball or the spa; after all, that's what the marketing promised us.

Can I hold back some cash because my neighbours smoke, or they drive a Hyundai? Can I ask for my money back altogether because it rains in November, or the clouds block my view of Mt. Baker more often than not? Just asking is all...


House Frau said...

I was wondering if I buy one of those condos would I loose my baby weight. Everyone seems so thin!

Would I never get angry? Would I have great clothes? Would I have a great life?

This reminds me of the hype in womens magazines. We all fall for it. Finding the perfect dress that will change my life. If I buy this skin cream I will look like Cindy Crawford (even Cindy Craword does not look like Cindy Crawford - saw her in France).

It is so bizarre - selling a lifestyle! They used to do that in the 50s, 60s and early 70s with suburbia. Getting people out to the burbs in this big housing developments. They did this in Toronto - Don Mills area (which has the ugliest 60s houses in the world that no one will touch now).

Aleks said...

I think that whenever I see the "Care free living" sign for Centennial Walk. I don't know what definition of "care free" they're using that encompasses a $300,000 mortgage, but I doubt it's the one from the OED. My definition would involve living mortgage and rent free, and maybe have nanobots in my blood so I never get sick.

hhv said...

For $300K, they should toss those nanobots in as incentive... who knows, if the condo glut happens as predicted, maybe they will :)

vg said...

sorry to change the topic but I just posted on PB's site,just heard on Global that BMO is saying two interest rate hikes coming this summer. If this doesnt stop the insanity then we will definitely be setting up for a 50% crash, you can't keep having panic buying at these levels without the bottom end completely falling out like in 81,same scenario, and no you don't need 19% rates,7-8% would be the equivalent. Spin that one VREB !

Anonymous said...

Unfortuneately, when it comes t real estate, we are dealing with contract law. Unlike, a toaster which you can return before 30 days if it is sub standard. The only recourse for real estate is the courts.

My thought has been that if the government wanted to protect the consumer of real estate - then a mandatory cooling off period of two weeks should be legislated. If the purchaser changes their mind during that period the deal is over. This would stop the "HIGH" preasure tactics that are too common today. Short closing times, 24 hour clauses etc. Any agent caught circumventing the rules would be fined and censured with their name and agency disclosed to the public in the newspaper.

Sounds too harsh - I don't think so!


Anonymous said...

vg, just curious how will the 7-8% of upcoming interest rates be equivalent of 19% interest rates of 1981?

Anonymous said...

We don't need 19$ interest rates to feel the same effect as early 80's. The debt level new buyers are carrying is so high, 2-3% changes are enough to sink households.

greg said...

It's leverage -

19% on something that cost you 4X earnings, while painful, is not nearly as bad as 8% on something that cost 8-9X earnings.

Don't forget, if you bought with a rate of 4% a few years ago, your payment just doubled, if you refinance at 8%.

12% to 19% is not a doubling of your payment....

Anonymous said...

Interesting article in today's Vancouver Sun on the assignment market:


vg said...

"vg, just curious how will the 7-8% of upcoming interest rates be equivalent of 19% interest rates of 1981? "

greg's explanation is bang on. Your working with larger sums as in 4 times the price of an average bungalow at the peak of 1981, which was around $100,000. Factor in the average wage didn't quadruple since then either and a 3-4 % renewal increase would be a killer.

Was just talking with a coworker today who got stuck in that 19% rate for one year and it almost put him under,if they hadnt gone back to 15 % range the next year he woulda been toast.

greg said...

People who can't make the increased payment but have so called equity, can get a lower payment by increasing their amortization by 5-10-15-20 years.

A lot of equity could disappear quickly if this happens, a kind of reverse wealth effect, if you like.