New York City New Developments
The New York skyline continues to change and evolve, and one thing we’ve seen a lot of in recent years is New Construction Condos. There are brand new properties that, in many cases, are still under construction. The purchasing starts early with these and for excellent reasons. If you’re interested in acquiring a cond in new construction in New York City, then Elika Real Estate has a dedicated team of buyer’s agents that focus exclusively on these properties.
Did you Know? – You may not be able to close on the apartment unless the NYC Department of buildings issues a temporary certificate of occupancy or the building department certifying a building’s compliance with applicable building codes and other laws and indicating it to be in a condition suitable for occupancy.
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Buying New Developments in New York City
Buying a luxury New Development Condo in NYC can be overwhelming, particularly if you have little knowledge of the reputable developers and construction companies. Buyers often opt for off-the-plan new construction condos, but they can also come with their own set of challenges.
New York’s real estate is also unique for several reasons. Due to steady demand, analysts often rank New York City as a top market for real estate investment. It’s essential to buy a well-built new condo construction developed by a respected developer. When purchasing a great product, you will have a strong chance to profit from it in the future.
Here is what you need to know before buying new development condos as a home or investment property.
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Find the Right New Construction
Let Elika’s experts search, filter, and send you the best available new off-the-plan construction condos for sale. Properties that match your specific housing or investment needs will serve you well in the years to come. New construction can be a tricky segment of the market to navigate. That’s why having a buyer’s agent by your side will be so invaluable.
Our agents can also provide recommendations on other professionals you’ll need later on. If you have specific design and style requests, you’ll need contractors, possibly an architect and an interior designer. Being an early buyer can also make it difficult to get a mortgage as most lenders prefer to see properties that have at least sold 50% of their units. Our agents will help you find the right lender.
With a dedicated and experienced Elika buyer’s agent at your side, you can be sure of receiving only the best in service. Our agents will handle the challenges of finding the right development, work to get you the best deal on your terms, and refer you to other industry professionals you’ll need for a successful purchase.
The Basics of New Developments in NYC
First-time purchasers might not understand the intricacies of luxury new development condos, leading to confusion during the purchasing process. It’s important to be cautious when buying a new development to make sure you purchase a quality product. Some new developments mature gracefully and others, unfortunately not.
Off-the-plan condos can appreciate well when buying the right one. However, much depends on the quality of the product delivered. When purchasing, important considerations are building architecture, location, condo floorplan and size, buildings unit mix, amenities, and services.
The competitive nature of the market doesn’t always work in the buyer’s favor. Many buyers have trouble scheduling a showing, especially when a building launches a sale or getting accurate information on new developments. New developments often sell to friends and family before releasing it to the public. By having the right buyer’s agent with industry connections, you’ll have a better chance of getting in before the public. Getting in early would enable you to select a better unit.
Are New Developments Right for You?
In some buyers’ minds, new properties’ potential complications are easily offset by their distinct advantages. If still in the pre-construction phase, sellers in a buyer’s market are usually willing to offer lower prices to attract buyers. When presented with the opportunity, new developments provide an excellent choice for investors willing to do adequate research to assess risks.
However, for some buyers, the higher closing costs of new developments make them an unrealistic option. You’ll need to decide whether you’re willing to take on the potential risks of off-the-plan properties.
Although the number of new housing units finishing construction continues its steady decline, new developments continue to attract buyers. For a city like NYC, with its high cost of living, that’s not too surprising. Luxury New developments offer a chance to pick up a brand-new condo apartment. If you’re one of the first through the door, you might be able to get a good deal. However, this type of purchase comes with some risks and extra fees that won’t be obvious at first.
Should I Buy a New Construction Condo?
At first glance, it might seem hard to imagine why someone would buy a property that could still be 1-2 years away from being built. But when you look into the benefits of new construction properties, it all starts to make sense. For a start, buying in the early stages provides the opportunity to have the unit customized when the developer allows. Secondly, you may be able to buy at a lower price as developers are eager to get a few contracts signed early on. Early often means buying at Schedule A pricing or better. Developers need these early sales to attract further sales and show lenders that there is progress.
However, new construction condos provide some challenges that will need to be overcome. Elika has the necessary expertise and professionalism to ensure a smooth sale. We’ve helped countless clients close on new construction condos, and that experience shows in our sales history. We know the type of clientele attracted to New Developments. As such, we know how to see to all their needs and concerns.
If you’re already looking to buy, Elika can provide you with preferred access to Schedule A family & friends pricing and expert, unbiased advice. Our agents will ensure that you understand the pros and cons of one building vs. another and help you find the ideal New Development for your lifestyle or investment needs. Purchasing a new construction can also be risky if you don’t know the red flags to consider. Our agents will look closely into every project to see if anything could pose a risky investment. We’ll then pass on our advice to you and help you make the best decision on your terms.
Finding mortgage financing with your bank for new developments can be difficult if 50% or more units have not been sold. Most well-known developers secure pre-approved lenders. In this case, the pre-approved lenders would serve as the best option when financing. A building without pre-approved lenders is a red flag, and we urge caution before considering it any further.
Advantages of New Development Condos Include
Versatile Modern Floor Plans
If you want to design your floor plan, you’ll have more options and save money off a remodel by purchasing property off-the-plan. While most developers do not allow for customizing your floorplan, you will have a selection to choose from. It makes finding the ideal floorplan easier in a luxury new development if you get in early. Buying off-the-plan can be scary, but having the foresight can yield great results.
Better Value Overall
Although you’ll need to pay higher closing costs and a down payment of about 10%, or sometimes 20%, for an incomplete apartment if you invest early, you may have already offset the higher costs with capital appreciation by the time your building is, finished. On average, 3-5 pricing amendments are filed before the development is sold. Thus, the earlier you buy, preferably from Schedule A, the better your chance is to make the most profit before completion.
As the owner of an off-the-plan property, you’ll be the first person to live in the space. For many buyers, this exclusive benefit is well worth a premium. However, this advantage does not translate if you decide to sell your property.
Of these advantages, the tremendous long-term value of off-the-plan properties is undoubtedly the most compelling for most buyers. Incomplete apartments quickly appreciate as they near completion. As a result, buyers looking to invest often consider off-the-plan properties before considering resales.
Research the Developer/Sponsor and Sales Team
Reputation says a lot about what you’re getting into with new development. Look at the past buildings by the developer/sponsor; are they well known? Have any of them faced significant problems? The name behind a development says a lot about the building. A big name will increase demand and the price – while a developer with a history of poor or cheap construction is a red flag to stay away.
For comprehensive research, make sure there are no Better Business Bureau complaints filed against them. Ask your real estate broker about their reputation and even visit a few buildings to see how they’ve stood the test of time. A low-quality development and developer is a waste of your money.
Understanding Off-The-Plan New Construction in NYC
Off-the-plan properties are not entirely built at the time of their purchase. Many New York buyers, especially foreign investors, prefer off-the-plan apartments for a maximized return on investment. They also prefer purchasing a property without the board approval requirement of some resales.
Off-the-plan condominiums often provide an excellent investment. While new developments have higher prices initially than resale properties due to high-quality amenities and finishes, buyers who act quickly and purchase Schedule A pricing in the right building can potentially see quick gains in property value.
Known as the “off the plan,”; low inventory drives up sales of residences that have yet been built. Some buildings sell more than 75 percent of their apartments before halfway done with construction. Those who wait for the building to be completed will miss out on the more popular floorplans and views.
Buying off-the-plan means that you also purchase at Schedule A pricing. It means you’re buying at the lowest price. Although luxury new developments are sold at a premium, resale prices are typically amended higher as they sell inventory batches until entirely sold.
If the market is active, invest in a pre-construction condo that you can move into within a year or two. If you have a flexible timeline, it’s worth waiting to get a floorplan you want and at a better price. However, this tactic is riskier because you have to trust the developer and market even more.
Ask How the Square Footage Is Calculated
Square footage has become a controversial measurement as of late, with some measures varying by 10-20 percent. In one case, the seller’s bank did two appraisals; one said the apartments were 1,634 square feet, another said 1,741. Usually, it’s in the broker’s and developers’ best interest to exaggerate the size because that means a more significant sale.
Regulators have found that some developers add common areas like hallways and elevators to the square footage or measure the exterior walls’ distance instead of interiors. Using these tactics – which aren’t always illegal – can cost buyers thousands of dollars.
Risks to Buying in an Off-the-Plan New Construction
There are risks and additional costs associated with off-the-plan developments. For instance, buyers might have to wait as long as two years to move into their properties after contract signing. It can mean additional temporary housing costs, which can quickly add up. Some buyers also have trouble finding financing during these wait periods, mainly if the development is below occupancy.
Perhaps most importantly, you don’t know what you’re getting with an off-the-plan construction. You’ll receive an offering plan and demonstrations that detail the builder’s plan for each space and room. Through this, you’ll have the necessary information you’ll need to visualize the specifications of your apartment, but you may have trouble gauging less tangible qualities.
For example, you won’t know exactly how the view will look from your 12th story apartment or how natural sunlight will affect your bedroom. You can make accurate estimates, but unless you’re working with an experienced professional, you may still have a few surprises when you walk into your completed property for the first time. Other important considerations include:
They come with higher closing costs.
Unlike most real estate purchases in NYC, sponsors expect the buyer to pay most of the closing costs in a new development purchase. Typically, this includes the seller’s N.Y. State and NYC transfer taxes along with the sponsor’s attorney fees. Attorney fees could be anywhere from $3000 to $5000, while the transfer taxes are even more expensive. At present, the NYC transfer tax is 1.425% for purchases over $500,000. The state tax is $4 per $1000 of the purchase price. For those who are financing, the closing costs range from 5% to 6%.
Also, be aware that you might be asked to pay into a working capital fund, covering start-up costs for the building.
There may be construction defects.
Just because the building is brand new doesn’t mean it’s free of any imperfections. Common problems found in new constructions include warped wooden floors, exterior leaks, and problems with the ventilation, heating, or cooling system. Before signing the purchase contract, make sure you have a home inspection done by a qualified home inspector. If that’s not possible, make the contract contingent on an investigation that satisfies you.
Also, take some time to research the architect, contractor, and sponsor to see if they have a history of litigations from construction defects or other issues. You can learn about who’s behind the project in the Identities of Parties section of the offering plan. Other than checking for previous litigations, check that they each have experience and that this isn’t their first project.
There may be a delay in the closing.
If you need to close by a specific date, then new constructions may not be for you. The average closing time for purchases in NYC is 30-60 days after entering into a contract. With new developments, this can be much longer. N.Y. state law requires that the Attorney General’s Office (A.G.) approve the offering plan before the sponsor can begin marketing the condo units. However, construction does not have to be completed before this permission is granted.
Until the buildings department grants a Certificate of Occupancy, you’ll have to wait before you can move in. Also, the closing cannot occur until the offering plan is “declared effective.” Each case is different, but it’s not uncommon for new construction to take months or even years before they close.
The sponsor may not have enough funds to complete construction.
It may seem surprising, but the Attorney General’s Office does not check whether a developer has enough funds to complete a project. All required for the approval of an offering plan is a disclosure that the sponsor is not putting up a bond and that the project description matches the offering plan.
Being an early buyer in a new construction might seem attractive with a chance to pick and choose your floor plan and views. Just keep in mind that many risks will need to be weighed carefully before signing a contract.
Don’t Ask for Special Amenities.
One of the main problems facing the One57 tower in Manhattan is billionaire buyers asking for custom designs and touches. Instead of marble, they want hardwood floors, or the bathroom needs a tub as well as a shower. It is both complicating and slowing the building process.
Most custom touches or requests to bring in your designers will be denied. First, it could slow construction and the move-in process down, not to mention cost the developer more. Next, when some buyers close and move in, they don’t want to be bothered by construction noise, workers, and dust. It’s not fair to those who accept the finishes as is.
As with all real estate, you buying a new development comes with risks and rewards. With careful research, the right questions, and not overpaying, you have a high chance of owning a great property.
New Development Condo Closing Costs
- Contribution to the working capital of the building
- 1% New York City mansion tax for properties at or over $1 million in value
- NYC Transfer Tax of 1 percent of the purchase price for homes costing up to $500,000 and 1.425 percent of the purchase price for over $500,000.
- State transfer tax; $4 per $1,000; of the developments purchase price.
- The sponsor’s attorney fee usually $1,500+.
Buyers who finance must pay closing costs of five or more percent of the purchase price.
Because of the taxes and closing costs associated with new properties, buyers should always work with experienced attorneys. During a buyer’s market or if the development is experiencing slow sales, negotiating closing costs would be worth trying.
Hire an Expert New Development Buyer’s Agent
We recommend having dedicated buyer agents when buying properties and especially in new developments.
Seasoned agents with industry relationships can help you purchase an off-the-plan condo before the offering; it is released to the public: Schedule A and the ability to choose between the best units within the building.
They assess and analyze those that is, built to outperform the broader market. Buyer agents also work with an established network of real estate industry professionals to offer appropriate referrals when necessary. It includes experienced attorneys who have worked extensively with new developments, a must-have when purchasing. Especially when considering the offering plan, contract, and closing costs.
The qualified buyer’s agents at Elika can help buyers handle the challenges of finding and purchasing high-quality properties worth buying and educated buyers to stand a much better chance of securing the right new luxury condo development for the right price.