Attn: Owners of “New Development†Apartments.
I wonder if you can help to offer some advice. My husband and I have been looking for an apartment for the last 18 months. We finally found something that we feel fits all of our criteria, except it’s a new condo development which is currently less than 20% sold. Â We have read Brownstoner…
I wonder if you can help to offer some advice. My husband and I have been looking for an apartment for the last 18 months. We finally found something that we feel fits all of our criteria, except it’s a new condo development which is currently less than 20% sold.
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We have read Brownstoner and various press over the last year or so – and are educated about the risks of purchasing a new construction home – however we are still considering it.  The layout, space, and location really fit our needs.
What is worrying us is:
1)Â Â Â Â Â Â The development is just under 20% in contract. There are no sales records posted online yet as closings will begin in December. We are concerned that if we are early to buy, that prices will drop significantly for future sales.
2)Â Â Â Â Â Â The developer will be releasing another identical complex of buildings in the summer just behind these buildings. (Another 50 odd units.) This is on a less desirable block so we assume the prices will be lower and we’re afraid the extra inventory will flood the market.
3) We will have trouble finding a non-FHA loan that will allow us to close with less than 50% under contract.
4) New Construction stigma? We used to have a strong aversion to new constructions but have since come around a bit. Do you think the attitudes towards new constructions are changing?
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If any new development owners are free to chat, we would really appreciate some advice. Â
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Do you regret having purchased early?
Did the prices/values for the other units in your building decrease after you bought?
Any other drawbacks?
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We started out thinking we would buy in a pre-war or even purchase a 2 family brownstone with a rental but, we’re looking for a lot of space to start a family and can’t afford anything in the neighborhood where we want to live.
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Thanks in advance for your advice!
The development is just under 20% in contract. There are no sales records posted online yet as closings will begin in December. We are concerned that if we are early to buy, that prices will drop significantly for future sales.
-To be honest though it’s very unlikely as the real estate market is slowly picking back up. I signed and closed on a unit this fall literally at the deadlines in order for me to qualify for the housing tax credit. I had the same concerns that if I waited after the tax credit expired that the developer would drop the prices to compensate for the lack of tax credit…which of course did not happen.
The developer will be releasing another identical complex of buildings in the summer just behind these buildings. (Another 50 odd units.) This is on a less desirable block so we assume the prices will be lower and we’re afraid the extra inventory will flood the market.
– Such high proximity of the buildings being so close is very unlikely for them to have varying prices. An appraiser usually comes to evaluate the buildings and prices in the area and makes an average to see if your unit is worth it’s actual price tag.
We will have trouble finding a non-FHA loan that will allow us to close with less than 50% under contract.
– Fannie Mae loans are 51% under contract. If you are in a rush to close, FHA or a non-bank lending institution will usually allow for 33% under contract to close but often with a higher premium.
Second question — New Development owners: If you are paying for your own heat and hot water – what is your monthly bill like? Our apt will be 2 floors and roughly 1500 sq feet.
– So far it hasn’t been bad at all, last month’s gas bill was around $40ish but then I use the stove quite a bit also.
Also – what is the average insurance cost for a condo around here??
It should cost you no more than $40 a month. Shop around, you’ll likely find something below that.
Thanks again everyone for your comments!
DCM – Our offer was accepted. We are very excited. I am curious which unit you have! We are in one of the lower duplexes. When do you hope to move in? Are you waiting until it’s 33% sold, or more?
We are trying to avoid the FHA fees, as we have a pretty decent downpayment. But – in order to take a conventional loan we will need to take a higher interest rate (5.25%) to move in before the building is 33% sold. Currently, standard loan rates are 4.85%.
We want to keep our monthly costs down, and paying the FHA fees in addition to the upfront cost of the FHA loan doesn’t seem to make sense.
Second question — New Development owners: If you are paying for your own heat and hot water – what is your monthly bill like? Our apt will be 2 floors and roughly 1500 sq feet.
Also – what is the average insurance cost for a condo around here??
We bought a unit in a new development and are happy we did. There will be a few teething problems, but it should work out if you have patience. If you are not under contract yet you still have room to negotiate. The sponsor is looking to keep contract prices as close to list as possible, because the contract prices get recorded on Streeteasy and other places. Ask for free stuff, like a parking space (even if you don’t have a car – you’ll be able to rent it to another owner), have the sponsor pay their own closing costs (we had to pay the sponsors closing costs), a storage unit (if they’re selling for extra). Make sure you have the loan locked in and the money you’ll need for closing in a money market account, not invested in stocks. We bought our unit in March of 2008 and closed in December 2008, between contract date and closing date, the stock market tanked, if we had left our closing costs money in the market, we would not have been able to close and we would have lost our deposit and we’d still be living in a crappy 400sf apartment somewhere.
We bought new construction in the Prospect Heights area, and it was incredibly stressful, but ultimately worth it. The prices in our development did ultimately go down a bit, but we honestly didn’t mind because we just wanted them to sell (we were only the second unit in contract and had to wait six months to close).
But, we love having new construction–everything is new and clean. The rooms are spacious, plenty of closets and storage, plenty of natural light, and the apartment is user-friendly. We also got the choicest unit in our building (private yard) and knew we wouldn’t find anything similar at our price point.
Bottom line is that if you can afford to wait (our lease was expiring) new construction is still doable. Interest rates will remain low for some time. Just be sure to get a financing clause in the purchase agreement.
OK you have chosen not to mention the development but based on what you did say I think its rather easy to figure out–in fact I am under contract in the building and have been for some time now—as far as only 20% being under contract– take a look at the competition with the exception of the gates– few are above the 10% range.
Additional units entering the market should only be a concern if you are looking for a quick flip if not the market will stabilize in time and absorb the additional units. Why the aversion to FHA loans– based on some of your concerns– I think that an FHA loan would be more attractive– as far as construction quality that’s always a risk– best you can do is try to be very thorough in your review–
That said I have seen several units in Clinton Hills/Bed Stuyvesant and this development stood out– so welcome neighbor
How long has the building been on the market? Seems that it has not been around long, if closings are starting this month. And if they are only 20% under contract, I’m willing to bet they don’t even have their CO. So maybe you can try to leverage that to get them to cut you a deal.
And another development going up in the summer? What makes that block “less desirable?” (Lack of trees, further from bus/subway, etc.?)
I was in your situation just last year. I believe I was the 2nd or 3rd in contract, and the 2nd to actually close. I even stayed away from the FHA ARM (though I still have the tax abatement), which is what you seem to desire. I wouldn’t call the neighborhood posh by any means, but it had a lot of ammenities that I wanted. If you want to talk more, just ask away on the thread.
Great advice .
Yes, chat and find out information. Having once sought to buy in a new renovation (old brownstone-type building, but new renovation and conversion to condos), and having walked away, I’m aware of how much you can find out about the risks in the process of buying a new condo from a sponsor/developer.
But, once you’ve found out, only you can determine your own risk tolerance. Say prices go down after awhile – will that bother you if you are in the place you want? (For some the answer will be no, for others yes.) Yes, the market will flood in your exact area when things come on market. If you plan to stay put for a number or years, that may not be a factor for you. Are you unwilling to take an FHA loan? – they’ve become quite common and popular these days, and I hear they are assumable (a plus when you go to sell.) Then there’s the whole “what if the sponsor has to rent out a bunch of apartments because they can’t sell” risk.
My point is that, beyond getting information about all the risks, which you need to do, you need to determine your view of what risks you are willing to take – no one can do that for you. Assume the worst for each risk you learn about, and ask yourself if you’d be willing to live with that outcome. Your answers will differ from others.
In this one building, 48 total.
Supposedly the buildings next door that are part of the same project will have a completely different condo board, financials, etc. The second set of buildings is identical, and will have an additional 48 units.