Buying In Newly Built Condo Building
My sister finally found an apartment she loves and can afford. The issue is the building is just being finished up and it does not have a Certificate of Occupancy yet. We are the first ones to make an offer on an apartment there. What things we need to be mindful of going through a…
My sister finally found an apartment she loves and can afford. The issue is the building is just being finished up and it does not have a Certificate of Occupancy yet. We are the first ones to make an offer on an apartment there. What things we need to be mindful of going through a purchase in the new building? What conditions we need to provide for in the contract? Do we need to have an engineers inspection? What about ensuring that everything works in the new building after people move in? What contingencies I need to stipulate? What questions I need to ask the seller?
Any advice in this matter would be greatly appreciated.
What Marion said. Go over everything with a fine toothed comb. Find a lawyer yourself (don’t use one the developer sent you to) and make sure you / she understands everything.
Plenty of people buy new construction condos without incident but plenty of people don’t, too.
DO NOT buy into a Gino Vitale new construction building!! You’ve been warned.
As said above, definitely read the offer plan carefully – I was looking at a Condo and their offer plan had two interesting provisions. The 8 story property bordered a neighboring 2 story house. If that house was ever rebuilt into something taller, the Condo apartment owners would be obligated to board up their windows that faced the new property. Also, the seller agreed to manage the property for the first year for free, but following that, maintenance would increase drastically (by $50-100/month)if the condo were to hire a managing agent. In addition, the estimate of real estate taxes after 421a expiration was inaccurately low.
Since your sister would be one of the first ones purchasing in the building, she might have to wait a long long time before being able to close (some mtg lenders require at least 50% in contract). I’d suggest putting a clause in the contract that if x% of units aren’t in contract by such and such date, she can get her deposit back. Maybe try to negotiate the deposit down to 5% instead of 10.
Has your offer been accepted yet? Many of these things can’t be done until it has. Also, with new development, the turnaround time allowable to return a signed contract is shorter, and there’s a lot less room for negotiation. Your lawyer should be looking at a lot of these things. Also look at the contract to see who is paying the closing costs (transfer taxes and attorney’s fees usually borne by the seller are often pushed off on the buyer in new construction – this may be a negotiating point). If you’re getting a mortgage realize it will be a long time before you can close – you’ll need a TCO and over 1/2 the units in contract generally speaking. Is there a 421a abatement at all? Has it been approved? Finally you should provde for an increase of up to 25% in budgeted common charges after the first year of operations – most of the numbers in offering plans are sheer fabrications. And yes, there will be problems to be corrected after you’ve moved in. Be very careful of new construction and get a good lawyer. Good luck.
This is extremely helpful, Marion. Thank you!
What is the building built out of? What neighborhood is it in? I know many people who have suffered from new construction and it is not something trivial. Lots of lemons out there! Rand Engineering is a great resource who I’ve worked with. I would have them perform an inspection on the unit, if possible. It’s worth the money.
Measure carefully the rooms to assure plans are accurate, check every outlet, check that all appliances and bathroom fixtures work, have an engineer inspect, READ the offering plan carefully, confirm 421a eligibility, bid below offering as developers are eager to get 15% of units sold, read DOB site for sign offs on mechanicals and items needed to obtain a TCO, check ACRIS to see if this development has taken longer than 2 years and see who the construction lender is and whether there was a foreclosure, etc. This is the biggest investment of your life so due diligence is in order. Too much more to go over so try to have a sit down with a r.e. professional. I am a retired r.e. professional who happens to be a broker and had long experience in development, renovations and been active in cooperative and condo buildings I’ve resided in….
Good luck,
Marion
Congratulations! I am currently in the process of buying in a new construction condo building. I strongly recommend having an engineer’s inspection performed. Also make sure that you are aware of the financing requirements. 30% of units must be sold/in contract in order to obtain a FHA loan, and 51% of units must be sold/in contract to obtain a conventional loan. Also go to the Dept of Buildings website to see how far along the sponsor is in the process of obtaining the C of O. It can be a lengthy process. Good luck!