Buying an apartment pre-construction

Re: percentage sold, there is no normal, and even if there had been at one point all bets are off in this market and economic environment. You can read some of the threads on buildings that sold (partially, anyway) pre-construction and are now closing or about to start closing. You could start with the Rushmore, Harrison, Brompton and Lucida. These discussions will probably have references to other buildings and you can go from there. Anyway, there is a lot of discussion about percentage sold, financing contingency, deposits (esp. in the context of walking away from same), getting mortgages, etc.

No two buildings are the same. This discussions are a good start, but you should bottom line scrutinize the developer. My personal conclusion from my own research has been: the more the building spends on marketing/advertising, the more people seem to inevitably complain in public forums. I tracked a few buildings that didn't have all the issues that some of these buildings are having.

Also, the sales person is in 90% likelihood shading the truth on the % sold number. It could be % with offering plan out for all you know.

Dont do it, buy something that is already built and the units are mainly occupied.
Save yourself the headach !!

i was going to say the same thing. there are enough challenges these days to not have to purchase another problem.

thanks for the advice. i have to say that some of the properties seem to be struggling, because they drop prices within minutes of the first conversation...makes me suspicious, and i want to be careful here...

satc75 - why would you want to buy anything pre-construction? I'm not trying to be flippant either - I'm actually curious. Given that there are lots of brand-new buildings in Manhattan that are undersold, why not buy in one of those?

I think if you're looking at a smaller building (like fewer than 20 units), you might be in better shape pre-construction (since the sponsor only needs to sell 20 units and theoretically can actually do that more quickly). For a larger building, I'm not sure it makes any sense to tie up a deposit right now (even with a contingency) since your alternative is to put that deposit money somewhere else while you wait for the market to stabilize.

Lots of buildings are clearly having financial problems (as sidelinesitter mentions above) but even if the sponsor is financially sound (as aifamm alludes to), unless they're literally giving away units (price-wise) or there is something tremendously unique about the building, a financially sound sponsor is not going to equate to sales, which is what you should really care about if you are interested in actually closing on your unit.

http://downtowny.blogspot.com

There are some many unsold new construction buildings that are actually completed - you can tour them, check the construction quality, learn about your neighbors, etc. You better be getting one hell of a discount to take a gamble on pre-construction. Money is the only possible pro that can outweigh all the cons. Lots of it.

I also weigh in on the side of don't bother trying to buy in pre-construction. I'm trying to get in on a new building before it closes and becomes a coop. It makes things much more of a hassle. You have to time the lock-ins on your mortgage, and there are no buliding financials to look at. Sure there is no board, but there also is no guarantee of when this building will close and then, when we can move in. You'll also have to worry about whether your building will ever finish construction, and if you will get your money or an apartment anytime in the near future.

Is it safe to buy an apt that is pretty much finished, but has only sold a handful so far? The building I'm referring to is 303 east 33rd. They haven't opened the model units yet, and have sold only about 5 apts.

safe? that's one of the least safe developments in Manhattan.

please tell me why? i'm sorry, we are new to this, so this discussion really helps!

8 people have now responded telling you to forget it. no one has suggested considering going forward.

satc75, the developer, Toll Bros, is hemorrhaging money (high 8-figures) every quarter. Locally their Northside Piers and 5th St. Lofts are in bad shape. Do some research on them and decide if you want to put your money in an unfinished project of theirs. Add me to the "no effin' way" list.

satc75, some more references on Toll developments in case you haven't seen them. These would tend to support the 'don't do it' theme. At the very least, don't do it until the building is completely finished and Toll has blinked big time on price (a la Northside Piers). That way they, rather than you, eat the change in value in today's market and the building could actually sell, so mortgages become possible for buyers.
http://www.streeteasy.com/nyc/talk/discussion/4834-303-east-33-st
http://therealdeal.com/newyork/articles/fire-sale-on-condos-tax-credits-for-first-time-homebuyers

Here's the thing satc75, and people, please correct me if I'm wrong on this.

If you put down money on the place and in worst case, the developer goes bankrupt, you risk losing your deposit( which will be 10-20% of the price). Or if you don't lose it, you may not get it back for many many months. Assuming the project goes forward, everyone in the building is going to have trouble getting mortgages with less than 20% down - since many banks are leery , or there are rules about providing mortgages to buildings with less than 75% of the apartments purchased. This can work to your advantage if the Seller really needs you and you are able to comfortably pay with cash or can get a mortgage. You may be able to get a great discount. However, they can literally sit on your money for years, and you will have no guarantee about whether your building will ever be finished.

Right now mortgage rates are about 5.9%, but you can not typically lock-in a rate for more than 60 days without paying extra fees. There is a chance, that when this place closes in 2+ years, mortgage rates are at 7% or higher. You should do the math on the extra money you will have to pay. Unless you have a mortgage contingency specifying a rate, you may have to pay much more per month than you originally budgeted.

If you end up signing a contract - make sure you read it extra carefully to determine when you can get you money back, and under what conditions. Also read the horror stories about people who put 10% down, only to find out that they were unable to get a mortgage without 20% and lost their downpayments.

thanks everyone. i think we will lean away from buying pre-construction, or almost "complete".