Cohousing-L Mailing List: Development Phase - early participants paying less

[Thomas Lofft (tlofft]

Muriel wrote:

It seems logical that the founding members, who take on all the financial 
risk and put in unbelievable amounts of time and suffer huge stress and 
angst over all of it, should get a significant discount, or to put it 
another way, later buyers should pay a significant surcharge. We discussed 
this in the early stages and were going to do it. But it turned out that 
our greatest motivating factor after a couple of years was the desire to 
sell all of the units and not have to keep living in an unfinished 
community in a perpetual construction zone.

So, in the end, the later purchasers paid more only because it was then 
costing more to build. We didn't charge more for the lots, because we so 
much wanted the last ones to be sold and built out. It seemed 
counter-productive to that effort to make the little houses on tiny lots 
even more expensive than is typical around here.

Potential buyers didn't seem to appreciate that they were also getting 
1/33rd of all the amenities, the common house, the acres of woods and open 
space, and of course the community, which came along with the small house 
or duplex unit - they focused on the purchase price of their house-and-lot.

We built-and-sold for almost 4 years from the first move-ins to the last, 
but I would guess that similar pressure to sell all the units would hold 
for a project where everyone moves in at the same time, or in two 
stages. What have other communities experienced with charging more to 
later purchasers?

Muriel
Shadowlake Village Cohousing, Blacksburg, VA
 
To make a point, 'settlers', or buyers who buy and move in after all units are 
completed, are actually getting 100% of all the improved facilities, utilities, 
paving landscaping, common house, etc. and only sharing it with as many other 
households are included.  The classic title description may call this "a 1/33rd 
undivided interest in the common areas..."
 
The later buy-ins are also having to pay accumulated interest expense on the 
capital investment of borrowed money to pay for the land, infrastructure 
development and all the carrying costs of permits, development fees, impact 
fees, government mandated upgrades and excesses, annual property taxes, 
insurance, legal expenses, etc.
The corollary is that all early invested partners gave up the opportunity value 
of all other possible investment of their equity funds. This is an actual 
financial cost of not getting any financial return on the use of their money 
that is invested in the project. By making these investments, the pioneers did 
much more than avoid carrying borrowed money charges (interest accruals) on the 
invested amounts; they actually made the community happen!! No risk, no reward! 
Carpe Diem!!
 
If all 33 buyers were present at day one, and all had cash in hand to 
capitalize 100% of project costs, better discounts could have been negotiated 
with contractors and vendors, all interest could have been avoided, and delayed 
term carrying costs could have been avoided.  He who hesitates pays extra.

At Liberty Village, MD, original lot costs were in the $50-55k range in 
1998-2000. The last lot sold in 2003 was $75K. Current lots are available for 
$80-85K, accounted for by accumulated interest, utility, maintenance, landscape 
upgrade, legal, insurance and other expenses on the vacant lots over the past 
10 years. carrying platted land is much more expensive than agricultural 
woodland. Similarly, construction costs have increased as the cost of lumber, 
concrete, petroleum, copper, labor, etc. continue to increase.  Home values 
have also increased, and hopefully, most incomes have as well, at least up 
until 2008.
 
Tom Lofft
Founding Partner
Liberty Village, MD