A shiny new condo building in NYC has a lot of appeal. It’s a chance to separate yourself from the chaotic, congested streets outside. A cosy cocoon in a pristine, air conditioned building with the type of amenities you would otherwise have to brave the weather for makes new condos real winners. Although these condos usually come at premium price if you know the right questions to ask they may also represent a great opportunity.
What is the advantage of buying in a new development?
There are also many advantages in buying in a new development. If you can work directly with the sponsor there may be room for negotiation with price, closing costs, cosmetic upgrades etc. If you can negotiate your equity upfront your resale will net you an instant profit even if the market doesn’t appreciate much. Also, one obvious advantage is that that the condo is new. In theory, everything should be in great working order. All the appliances should be top of the range, the technology in the building will be top notch. It should also be environmentally friendly with a great LEED rating. The heating and cooling systems will be energy efficient.
It’s good to look at your purchase holistically. How much are you paying for your square footage as opposed to buying the same square footage in an older condo? If it’s the same price to buy a much larger condo in an older building and simply renovate you might want to consider that, especially if the location of the older building is important. Also, factor in the amenities. If it costs $1000 a year to buy a monthly gym membership as opposed to being in a condo with a gym and paying a premium, is that a trade off you are willing to make for condo without a new gym?
What percentage of units have already closed in the building?
This is an important question to ask. Often, to encourage sales, a brokerage might put a sign on the door of some units stating “Under contract” or “Contract Signed”. This could just be a tactic to encourage further sales. If there are a number of units which have not yet closed the sponsor may be willing to do deals. Don’t take a sales agents marketing speil for granted.
Who controls the condo board?
If the sponsor owns the majority of units when you move in, they will control the condo board and make the decisions on cost, maintenance, common areas and rules. These are not always in the best interests of the owner occupiers.
When can the residents elect their own board?
If the offering plan states that the condo board is in control for a long period of time that may not always be in the residents best interests.
What is the percentage of the condo that can be used for investment purposes?
It’s normal for a condo building to allow 20 percent of the units to be owned by investors. If your strategy is to buy for investment the first question you should ask is “how many units are available for investors?”
Is a mortgage contingency allowed in the sales contract?
This is more of a question for co-op purchases as they often do not allow a mortgage contingency to be part of the contract. Thus, if you are not able to get financing, you may risk losing your downpayment. However, in a highly sought after condo this may also be in the purchase agreement. In this case you will need to have back up cash to close.