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First, you will visit a posh sales office to view a dollhouse-sized replica of the building with amazing, digital, 3D renderings of the finished apartments.
Next, you will tour a model apartment with exquisite staging by a famous interior designer, and then experience an actual "hardhat tour"
of the building site in progress (where you can make certain that the unit of your dreams doesn't face a brick wall).
Now that you're head over heels and ready to swing the bat, here are 7 little-known curveballs to look out for:
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1. SQUARE FOOTAGE - The developer is allowed to deviate up to 5% from the promised space in the offering plan, regardless of how or why it was reduced. (In a 1,500 square foot apartment, that’s a 9x8 home office space…GONE.) Luckily, today we are doing far fewer sales from floorplans, and more sales once the building is framed out. So I take my own measurements - and do not rely on the provided floorplans.
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There is also no set threshold for cubic foot deviation. Meaning there is nothing obligating the developer to deliver the CEILING HEIGHTS promised or preventing them from installing ductwork or soffits that will reduce the usable space in the home. Even if you were sold 11’ ceilings but receive 8’ ceilings instead, this is not necessarily an "out" from the contract.
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2. FINISHES - Remember those sample bathroom walls clad with glittering bookmatched marble from a fairytale village in Sardinia? What you saw in the model unit is only what they intend to use. But the developer can make substitutions as price or availability dictate, and it may be substantially different than you what you envision.
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3. AMENITIES promised (bowling alley, hammam, doggy wash, etc.) might not actually get delivered, despite being listed in the offering plan. As often occurs, if you purchase your apartment prior to the offering plan being legally declared effective, the developer has the right to make alterations and exclusions as they see fit.
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Also, these common spaces are typically the last to be completed. So even once you close and move into your brand new apartment, prepare to live adjacent to a pseudo-construction zone for the next year +.
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4. TRANSFER TAXES - When an existing apartment is being sold, it is the responsibility of the seller to pay the city and state transfer taxes which are a significant 1.825% (or 2.075% over $3 million) of the purchase price. However, in a new development, this is the BUYER'S RESPONSIBILITY.
Transfer taxes can be negotiated in making an offer on new development, even in today's competitive market. Covering the transfer taxes (as well as some other creative items we like to ask for) allows the developer to negotiate without showing a lower sales price in public record. Having a broker negotiating on your behalf who is intimately familiar with new development is essential to getting a fair deal.
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5. REAL ESTATE TAXES - If the building is still under construction on the day it is assessed, the taxes listed on the offering plan will go up significantly by the time the building is operational. As part of your due diligence, your real estate attorney will give you a more accurate sense of what the taxes will be going forward.
COMMON CHARGES also typically increase after the sponsor relinquishes control of the board to the owners, which happens after a specified percentage of units have sold, or after a set number of years.
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6. DELAYS - Whatever timeline the sales team gives you for closing, assume it will be the following quarter at least. It's not just construction or the supply chain that can cause you to be late for that very important date...
There is always the legendary zeal of city bureaucracy to contend with:
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The offering plan must be declared effective before closings can begin. This requires 15% of the units to be in contract.
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A separate tax block and lot must be assigned to each individual unit, so legal ownership can be transferred via deed.
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Prior to closing, a temporary or permanent certificate of occupancy must be obtained for the project.
These boxes can only be checked with the involvement of government entities.
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7. Some new development offering plans may PROHIBIT AN OWNER FROM LEASING OR SELLING their unit for 12 months post-closing. Plan accordingly.
In larger buildings that have not sold out, you could still be competing with original sponsor units when you go to sell 5 years later. In theory, you would have gotten a much better deal on your unit having purchased pre-construction. This may or may not be the case depending on the market and how motivated/negotiable the sponsor is to sell the remaining units.
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Now that you've negotiated your contract and
patiently waited for your new home to be ready, prior to closing you will attend a PUNCHLIST
WALKTHROUGH of the apartment accompanied by a representative of the sponsor, with a roll of blue painter's tape in hand to
mark any defects that the sponsor will be responsible to fix
within a "reasonable period" after closing.
Generally, that time is not specified in the contract, which can become a point of frustration once you are already closed. However, there are a host of tweaks that can be negotiated into a contract to protect you from this and other possible mayhem - and that's where our team
comes in, along with a seasoned real estate attorney who also specializes in new development.
Although buying in a new development may seem daunting, some of the most spectacular buildings in Manhattan are either brand new or new conversions of historical buildings, with services and amenities that are unmatched, and buying early is the way to get the best units and (usually) the best prices. So remember that where there is risk there is also great reward, and we are here to guide you.
And if a picture is worth a thousand words...
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555 West End Avenue, SOLARIUM
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1 Prospect Park West, Unit PHA
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515 West 18th Street, Unit PH2203
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58 St Marks Place, Unit 1105
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10 Riverside Boulevard, Unit 30C
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75 Kenmare Street, Unit PHA
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© Compass 2022 ¦ All Rights Reserved by Compass ¦ Made in NYC
Compass is a licensed real estate broker. All material is intended for informational purposes only and is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to the accuracy of any description or measurements (including square footage). This is not intended to solicit property already listed. No financial or legal advice provided. Equal Housing Opportunity. All Coming Soon listings in NYC are simultaneously syndicated to the REBNY RLS.
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