Buying New Development - What You Need To Know
In a new construction generally:
1.Buyer pays the sponsor (developers’) Transfer Tax and Legal Fees
2.Buyer Pays 2-6 Months Maintenance – contribution to the building’s Working Capital
3.If the apartment is more then $1 million the buyer pays 1% mansion Tax
4.Most developers expect non mortgage contingency – At this market you might be able to get the sponsor waive this, but generally if you can not get the mortgage the sponsor keeps the down payment.
What you must take into consideration when you buy a new condo
1.How much of the building is already sold? And does the developer have a relationship with Mortgage Company? Will that mortgage company issue mortgage at reasonable rates to potential buyers. Generally if the developer does not have a relationship with a bank and the building has less then 50% in contract or sold, the new buildings will have a hard time getting financing, especially at this market. So before buying into new construction make certain that your financing will be in place or hire a lawyer that will make certain that your interests are protected.
2.Does the building have certificate of occupancy? If the Developer does not have a certificate of occupancy you have to wait additional time period before you move into your new place, do you have that flexibility?
3.If the building can not sell bulk of the units what can you expect? Most likely the developer will turn the building into rental units; if the financing of the sponsor is dire it could go also into foreclosure.
4.Is there a tax abetment and if so what class of abetment? Is it 10/15/20 or 25 years? When this abetment kicked in? What would be the actual tax without the abetment?
5.Get an experienced lawyer who has done extensive business with new development. In Europe people generally do not get a lawyer when they purchase an apartment, in New York it is financial suicide not to have a lawyer.
.
