What Buyers Need to Know Purchasing in a New Development/New Construction
When it comes to purchasing in a new development also known as new construction, buyers need to be aware of several key differences compared to buying a resale property. From a developer’s track record and additional associated costs, to timing of construction and building details, there are many key factors for NYC buyers to consider when looking for a home.
Developer’s Track Record and Building Quality
One of the most crucial factors when looking at a new development is the developer's track record. Buyers should thoroughly research the developer's past projects to determine if they have a history of delivering quality work on time and within budget. This can be done by touring other buildings they constructed, asking for references from anyone you know that lives in one of their developments, consulting with your real estate agent and reading online reviews.
Buyers should also carefully review the development's plans and specifications. This includes examining the offering plan, floor plans, finishes, materials, and amenities to ensure that they meet their needs for quality and expectations. It's also important to consider the location of the development and its proximity to important amenities such as public transportation, schools, shopping and dining.
Cost Differences and Additional Fees
It's important to understand the cost differences between buying in a new development versus an established condominium. New developments are often more expensive than resale due to modern amenities, updated technology, and the latest design trends, but the higher cost of new development isn't just limited to the purchase price itself. Buyers need to factor in additional expenses such as transfer taxes, sponsor attorney fees, working capital contribution and sometimes resident manager contribution.
Transfer taxes are typically paid by the seller and are based on a percentage of the purchase price of the property, but in a new development, the buyer pays. The amount of the transfer tax can vary depending on the purchase price but ranges between 1.4% to 1.825% for both New York City and State. The sponsor attorney’s fee covers the cost of the sponsor's legal representation and varies depending on the developer. The capital contribution is typically equal to 1 - 2 months’ common charges depending on the condominium. Buyers should be aware of these potential costs and factor them into their budget when considering a new development or new construction purchase. The working capital fund contribution and the fee to cover the buyer’s share of the resident manager’s unit can add up and can potentially be up for negotiation.
Negotiating Closing Costs
Buyers may be able to negotiate a better deal if they purchase early on in the development process, by taking advantage of lower early bird pricing. There is also the opportunity to have some closing costs negotiated when buying in new construction, depending where the market is at any given time. To keep the sales prices for the building high, sponsors are more open to offering concessions than giving a price reduction, which could negatively impact future sales. Transfer taxes and sponsor attorney fees are the most common to be negotiated, but other bargaining chips can include the sponsor covering common charges for a certain period of time, receiving a credit at closing, or including a storage unit or even parking space.
Timeline for Completion and Delays
Buyers need to be aware of various factors that can affect their timeline and potentially cause delays when it comes to purchasing in a new development. New construction project timelines often depend on a variety of factors such as weather, supply chain issues, and building permits. These potential delays could impact the timeline for buyers to move in. There is also the possibility for timing setbacks while obtaining financing and closing on the new property. As there are many parties involved in new construction projects, it's important to have a thorough understanding of the timelines involved in each step of the process. This will allow buyers to plan accordingly and ensure that they are not caught off-guard by unexpected delays.
Project design or features also often take a hit when it comes to reliability in a new development process. While developers generally aim to stick to the original plans as closely as possible, changes may occur due to unforeseen circumstances or due to input from buyers. These changes can also impact the timeline. Overall, buyers need to carefully consider their options and weigh the pros and cons of purchasing in a new development versus a resale property. With enough preparation, support, and resources, NYC buyers can make informed decisions and ensure a smooth and successful transaction.