THE NOVACK TEAM GUIDE TO NEW DEVELOPMENTS

  • Overview/Process:
    • Typically begin marketing ~1-2 years before estimated completion
    • Imperative to review offering plan to understand finished project specifics and special risks section
    • Offering plan’s ‘Schedule A’ lists asking prices, estimated square footage, and carrying costs of individual units
    • Schedule A amended when/if prices increase commiserate with completion of construction
    • Generally new development sponsors are more likely to negotiate a concession in closing costs vs. a below ask sale in order to avoid undermining the sellout pricing of the building as a whole
    • Sponsor can declare plan effective after 15% of units have gone into contract and must do so after 80% of units are in contract
    • Purchaser typically pays 10% deposit at contract signing and another 5% six months later
    • For a fee, certain lenders will allow purchasers to lock in an interest ceiling today while rates are still at historic lows, and then fund at the lower of current market rates or the established ceiling at the time of closing 6 – 18 months later
    • In order to begin closings condo declaration must be recorded with city registrar and temporary certificate of occupancy must be issued. Sponsor issues closing letter ~ 3 weeks in advance of closing date
  • Pros:
    • Potential for discounted pre-completion pricing if purchased early on
    • Benefit from appreciating neighborhood
    • Completely new building, finishes, and latest design features
    • Unique amenities that are not available in older buildings
  • Considerations/Cons:
    • Limited moderately priced inventory — there is a premium for new construction
    • Uncertain closing date
    • Some components of common space may be unfinished at time of closing
    • Quality and track record of sponsor/developer/architect and an understanding of the offering plan are key since you are relying on their future execution
    • Carrying costs frequently higher than resale condos (often due to amenity package) and may increase beyond estimate provided in offering plan
We appreciate your continued referrals.
Best,
Sybille and Alexander

TheNovackTeam.com

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