Timing Is Everything
The reality of buying new construction in New York City is that if you wait until the construction is complete, they may be already sold out. New construction condo developments in Manhattan have waiting lists before preconstruction sales even open. The reason is two-fold: the inventory for new construction condos is very limited and the preconstruction opportunities in market value of new construction condos. Developers are once again offering buyers the opportunity to “lock in” at today’s prices months or years before units are planned for delivery.
The Offering Plan is the Law of the Land
The offering plan sets out the developer’s obligations regarding the size and construction of the condos and amenities to be delivered. All renderings and advertisements should be checked with the offering plan because whatever is not included in the plan is not required to be delivered by the developer.
Negotiating Tricks in New Construction Condo Developments
New construction condo prices are publicly recorded causing developers to strive f to record the highest price possible price. Negotiating the sale price is therefore less effective than asking for “off-deed” concessions. Due to the high demand for new construction condos, the attempt to negotiate the sale price will cause the developer to automatically dismiss your offer and move onto another buyer. Typically, developers entertainment multiple offers, so knowing how to approach the situation is critical. Off-deed concessions include the payment of attorney fees, pre-payment of common charges, covering your contribution to the reserve-fund, free upgrades, free gym membership or any other perks that an inventive broker can come up with.
Many new buildings offer property tax abatements that range from 5 to 25 years, meaning that you will owe no property tax or only a specified fraction each year until the program expires and you rejoin the highly taxed herd.
A few points about abatements:
The longer abatements tend to be located in emerging neighborhoods like Upper Manhattan and certain parts of Brooklyn.
Make sure you understand the phasing-in schedule: You may owe zero taxes for 10 years, then 25% of “normal” taxes in year 11, 50% in year 12 etc. A rapid phase-in can be a financial shock.
Make sure you have a realistic sense of your actual tax burden once the abatement expires. The dizzyingly high number that the offering plan says will be your tax at the expiration of your abatement is based on current tax rates and assessed property values. Your actual number in 7, 14, or 25 years is likely to be much higher as tax rates and assessed values continue their inevitable climb.
Yes, they are back, but be careful here. If the unit is not going to be delivered for a year, then a financing contingency expiring 45 days after contract signing is not very helpful. Even if a loan commitment letter is issued, with a preliminary appraisal done on plans and specs, the letter will almost certainly expire prior to actual closing, leaving the buyer exposed to financing risk in the event the bank won’t renew it. Moreover, interest rate locks typically will not extend from contract date through closing, giving the buyer the reality that they are not only exposed to market risk on price, and financing, but also to a fluctuating and potentially rising interest rate environment.
Be the first.
Buying early gives you the most choices in terms of floor plans, views and exposures, Orrigo said.
Plus, it’s the best time to get a “deal” since prices often rise before a building is finished as developers release units in successive batches.
“Sometimes you’ll see 10 increments in pricing,” Orrigo said.
Understand the fees involved.
Buyers in new developments pay costs that sellers typically pay in re-sales, like the 1.825 percent transfer tax, the sellers’ attorney fees and costs for the buyers and sellers brokers.
Purchasers also pay into the “working capital fund,” which are startup costs for the building’s operations. This is often a few months worth of common charges, Goed said.
Note the gains.
“In most cases people are making money on their apartment the day they close,” Goed said, reiterating, “The unit on the market today might be available tomorrow on a lower floor for a higher price.”
Know the building’s timeframe.
If you’re buying a $3 million apartment and have to put 20 percent down while the building is under construction — which might be a year or two — you have to be willing to sit on that $600,000.
“In general, 20 percent is going to be required from when you go into contract and when the property is delivered. Granted, it’s a down payment,” Orrigo said. “But you have to factor that in the calculation.”
Ask about finishes, pet rules, ceiling heights, whether windows will open and if you can control your apartment’s thermostat, Duncan advised.
Find out about subletting rules, which will help give a sense of whether there will be a lot of investors or owners, McArdle advised. A building that has a lot of investors may as a result have a more transient population. If you plan to rent out your own apartment, that could be a big plus.
Don’t bother asking about custom touches. Buyers often ask about custom touches like sound systems or a shower instead of a bath, Goed said. But few developers will allow that. “It’s infinitely more complicated for a developer to make that change than hire a contractor after the building is finished,” Goed explained.Tags: condo, highrise, manhattan, newconstruction, newdevelopment, newhomes, newyorkcityrealestate, nycrealestate, propertyvalue, realestate, realestatetax, taxabatement
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