A sleek new condo building certainly has its draws, from sensible layouts to gleaming appliances, pristine lobbies and fast, reliable elevators. Of course, those perks don’t come cheap: In fact, new development condos sold for more than three times the median price of co-ops during the first quarter of 2018, according to a Douglas Elliman market report (and about twice as much as older condos).
Not only will you pay a premium to buy new, you'll also take a risk on the unknown and untested, and likely have to wait a while between contract signing and closing, especially if you commit well before your place gets built.
[Editor's note: This post was originally previously published in May 2018. We are presenting it again here as part of our summer Best of Brick week.]
Even if you've bought an apartment in New York before—and even if it was a condo—new development "is a completely different animal," says Debbie Zolan, an agent at Compass with extensive new development experience, particularly in Brooklyn. To boost your chance of getting what you pay for, and head off any nasty surprises, here are the 19 essential questions to ask while shopping for a new construction condo.
1. What's the exact plan for the building?
Before a developer can start selling new condos, the "offering plan," which describes the development in detail, must be approved by the New York state Attorney General’s Office. Details include everything from what the developers will use for the facade to how many trees they'll plant on the grounds. The idea is to protect buyers from any surprises and hold the developer accountable. If they don't deliver as promised, purchasers can complain to the attorney general or sue.
The sales office will have a copy of the plan, which is typically several hundred pages long. Your attorney should review it carefully, keeping an eye out for unusual provisions, costs, and other details an inexperienced eye (yours) might miss.
Often you can "borrow" the sales plan for a few hundred dollars, a refundable deposit before your contract goes out and is officially reviewed by an attorney.
“There are certain things you should take a look at early on,” says Robert Braverman, a co-op and condo attorney at Braverman Greenspun. For example, the offering plan's "special risks" section, which covers things like reserve-fund requirements and terms for purchasing a super's unit. (Read here for more examples of special risks.)
You'll also be able to find out if the developer has reserved the right to refrain from selling any units, Braverman notes, which could mean the building would end up as a hybrid rental/condo if the market takes a turn for the worse.
It's also important for prospective purchasers to check the offering plan for its engineering report, says Alex Kalajian of Solstice Residential Group, a property management company that manages new condo buildings after control has passed from the developer to the owners.
"You want to make sure the building construction details were developed by reputable and experienced architects/engineers and that a licensed professional has put their name to building," Kalajian says. "The offering plan will also contain budgetary reports from the engineers that will lay out the first year’s operating utilities costs—a large part of the buildings operating costs. If the information is missing or inaccurate, it’s a problem, because those budgets will relate directly to your common charges, and, unfortunately, first-year operating budgets, which in our experience are often off by as much as 20-25 percent."
2. What's the "outside date"?
If the building isn't completed by its scheduled date, you can usually get your down payment back. That date is called the "outside date." It will be laid out in the purchase agreement, but it might be worth asking ahead of time, Zolan says.
"Sometimes buyers can negotiate a slightly earlier outside date," she says.
3. What's the developer's track record?
Before you make a deal, find out as much as you can about the developer. Are they involved in any lawsuits? What other buildings have they completed? Have buyers generally been happy? Use Google (an obvious, but powerful tool), and search through Yelp and StreetEasy forums. (More tips here.)
“There are always people who write the proverbial bad review, so you need to do your homework to decide what's a legitimate complaint,” says Julia Boland, a broker with Corcoran who specializes in new development.
Be sure to look up the sponsor—which is the legal entity building the condo, often affiliated with a development firm—as well as the principals of the firm, who will be listed in the offering plan, and their past projects, Braverman says.
4. Any closing costs I should know about (e.g. a super's apartment)?
Sometimes developers will pass on unexpected extra expenses to buyers, including part of the cost of the super's apartment (that tends to come as a surprise to buyers, according to Zolan, and can be well into thousands of dollars). Other potential surprises could be the building's insurance costs for its first year, and attorneys' fees for preparing and filing the offering plan. You want to make sure you are aware of any of these. They'll all be listed in the offering plan.
5. Is the price negotiable?
In first quarter of 2018, the average sales price for new construction fell sharply, and it was the seventh, consecutive quarter with a year-over-year rise in listing inventory, according to Douglas Elliman's report. For the buyer, that means there's room to negotiate. The best way to ask for a price cut is to come armed with information and comps to use as supporting evidence. The more educated you are, the better your chances of getting a lower bid accepted.
6. How about concessions?
Concessions are perks or bonuses developers will give to a buyer. They don't affect the sales price, but they can save the buyer some money (like closing cost rebates, including transfer taxes, mansion taxes and mortgage recording taxes, and free storage or parking spaces).
Concessions are largely dependent on the market and the neighborhood, but it doesn't hurt to ask. For those buyers looking at the higher end of the market, which includes new construction, concessions are on the rise thanks to increased inventory.
7. What building extras am I willing to pay for?
In an effort to lure buyers, some developers have packed their projects with over-the-top amenities. If your heart is set on that doggie swimming pool, go for it —but you'll be paying for it in the form of monthly common charges, so be sure it's worth it.
"Think about what types of services you really need," says Stephen Alton, a designer and architect behind the interiors of 400 Park Avenue South. "Some—like swimming pools—cost a lot. Something like a wine cellar can be good since there’s almost no maintenance on it, and the developer is just using space that’s already there.”
Also, keep in mind that developers tend to lowball the ongoing costs of amenities in their offering plans. Once the first year is up and reality sets in (and building management realizes that they may need more doggie lifeguards), expenses tend to go up, taking common charges with them.
8. If the development comes with a tax break, when does it expire?
Some new condo buildings benefit from a 421-a tax abatement, and to the buyer, this means a lower monthly property tax bill. It's usually easy to find out whether this kind of perk is being offered. It will be described in the marketing materials, and the sales manager won't hesitate to let you know about it.
The real question to ask is how much you'll be paying in taxes down the road. These tax breaks are only in place for a finite period of time—often 10, 15, or 25 years—and gradually phase out. (In Manhattan, 10-year abatements are more common.) Depending on how long you plan to stay, they can also affect the resale value of the place. Another thing important to note: tax abatements don't go into effect until the first closing.
The 421-a program recently expired, and the newly enacted version does not extend the tax break to all but a few condos, so the pool of buildings with tax breaks available is drying up.
9. What does the model apartment look like?
For buildings that are still under construction, developers often create off-site sales offices that feature sample bathrooms, kitchens and other rooms to give you a sense of finishes, appliances and bathroom fixtures. When the building is closer to being done, they'll often dress up one of the units as a model apartment to show you a version of the finished product.
“In a sales unit, you can see the quality, pretty much, of what you’re going to get,” says Alton. “You can't see the windows or views, obviously, but you get an idea of the finishes." (Here's a crash course on how to evaluate the quality of new construction.)
But remember that it's likely not the same layout as your apartment. Ask the listing agents for specifics on how your kitchen or bathrooms, for example, may be bigger or smaller.
10. Does the design fit my lifestyle?
If you rarely cook, a small kitchen with limited cupboards may be just the kind of sleek, space-saving layout you're after. But for the gourmet family of five, “you may want to make sure you have small conveniences like a place to put a pull-out trash can or enough drawers," Alton says.
Also, pay particular attention to light. “A lot of buyers are not sensitive enough," he says "They just want to know that when you turn them on, they work. But you should also be judging whether there is the right amount of light, that there are lights in the bathroom, or under the counter if that’s what you want. With concrete slabs up above, lighting isn’t going to move, so you need to be okay with what you have.”
11. Can I get a mortgage?
It’s not impossible to get a loan when buying in a new development, but it can be a bit trickier than one for an existing apartment. Banks are wary of lending to buyers in under-construction buildings because of Fannie Mae guidelines. They often won’t issue mortgages unless the building is already at least 51 percent sold and meets certain minimums for owner-occupied units, among other requirements.
“Some financial institutions cannot do new condominium financing until the building has two years of financials with the homeowners paying common charges,” says Robbie Gendels, vice president and loan office of National Cooperative Bank (FYI, a Brick Underground sponsor).
Luckily, New York City developers deal with this all the time, usually by teaming up with a "preferred lender" that will line up mortgages until the building meets Fannie Mae’s specifications, and stay on afterward. And on average, mortgage rates for new developments aren't any higher than for existing apartments, which are currently about 4.5 percent for a 30-year fixed rate mortgage. But, says Rolan Shnayder of Citizens Bank, an institution that specializes in new developments, your rate might depend on your timing.
If you buy when the building is only 25 percent sold, your rate will be higher than if you buy when it's 50 percent sold (it can vary slightly, by about 0.125 percentage points), he explains. However, typically, you'd also get a lower price on your apartment, and you could refinance down the road.
As for getting approved, it can often be quicker and more straightforward than getting a loan for an existing apartment because the bank has already approved the building. To see if you qualify, get in touch with the preferred lender directly.
12. When can I move in?
“In a new development, it could be 12 to 18 months before the building is ready to close and you can move in," Corcoran's Boland says. While the sponsor "can give you a target date, even the most experienced developer who runs on schedule can run into delays which are out of their control."
Don’t expect to close on the target closing date, Boland says, so you don't find yourself moving out of your old place before the new place is done. You could also try to negotiate a “drop dead” date by which you'd be entitled to cancel your contract and get your money back if the unit isn't ready. And stay in touch with the listing agent, checking in on the status.
"You'll also be notified when your 30 days away from closing," Zolan says.
13. What kind of retail will the building have?
Mixed-use buildings, which combine residential apartments with offices, hotels, stores or restaurants, are common in New York. It's worthwhile to ask what your developer has planned for any space in the building set aside for commercial use so you don't get stuck with something noisy, stinky, or otherwise unpleasant.
In some cases, a building will prohibit less desirable establishments from opening up. In other cases, the developer could use the space for a high-end gym or grocery store, which may feel like another amenity. But it's possible you'd get stuck with a fast food restaurant or loud nightclub.
14. Who are the neighbors? What's the noise going to be like?
Take a look around the building. Are there empty lots?
“If there are, there will likely be construction, and you need to think about how that will affect your quality of life and, also, your resale value," Braverman says.
In neighborhoods that are gentrifying, this may be even more of an issue. Do your homework and walk around the project at different times to get a feel for the area, what's happening, who's there, and what businesses might be moving in.
Ask the sales office staff as many questions as possible about the neighbors, Brennan suggests. Who lives next door? Is it the owner of the house or a renter? What about things like dry cleaners and supermarkets? Are they close by?
15. What's the source of heat and air conditioning?
Some systems have drawbacks you should be aware of.
“On the lower end of the scale there are PTAC units," Boland says. "While some of these can be attractive and even efficient, others can be noisy, so make sure you turn them on to see how you feel about the noise level. They also stick out into the room so you want to make sure you account for that when you are planning where your furniture goes."
Meanwhile, she says, heat pump units inside the wall "are typically quieter and more efficient, and their placement can permit larger windows. In super-luxury buildings you may have even better systems, true central air systems, with very sleek vents and possibly humidity control to protect your artwork."
Similarly, if forced hot air is something you don’t like and you prefer radiators, be sure to ask about it.
16. What's the soundproofing like between apartments?
This can be a little bit trickier to check in an empty building, and impossible in one that’s not yet completed. But “you can always have a friend go upstairs to the apartment above you and walk around in high heels or with a heavy step to see if you hear anything,” Boland says.
Also inquire about the plan for sound attenuation between the apartments.
“An excellent construction detail is additional layers of sheetrock between apartments," Boland says. You can also ask about how many panes of glass the windows will have—triple-pane windows provide very good sound attenuation—so you make sure noise on the outside, stays outside.
17. What's the experience of residents so far?
If people have already started moving in, they can be a wealth of information.
"If permissible, visit the building during the evenings and try, and reach people in the amenity spaces or even knock on doors," Kalajian says. "You really want to ask someone who's actually lived through a rain storm, used the facilities, turned on the shower and used the garbage disposal."
Kalajian also suggests trying to ask the super if owners have been complaining about anything in particular. Certain red flags can indicate that a building has structural issues, including leaks through the heating/cooling systems and windows, ventilation problems, and mechanical noises or pumping sounds.
18. Can I rent out my place?
Some developers prohibit renting out a unit for up to a year after closing. Others limit the use of amenities to owners. If you may want to find a tenant down the road, double check the building's policy.
19. Are there any special restrictions?
Some buildings will specify that you can't sell your apartment within a certain amount of time, because they want to discourage flippers who may end up competing with the sponsor for unsold units. Ask the listing agents if any rules like this are in effect.
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