Closing Costs of New Developments

When you go to sell a condo unit (as a resale) the seller pays the transfer taxes.

Normaly new condo sellers will try to get buyer to pay for their lawyers fees ($1000-$2000), costs of getting a 421-A tax abatement ($1000), cost of the offering plan ($1000) and a condo management fund ($500-$2000). Sounds excessive? I think it is, but remember it's all negotiatible.

In the boom days, they could get away with it. You would be foolish to not try to negotiate it these days, especially in LIC/Williamsburg. They'll definitely give that away before a price concession.

At what point are these closing costs disclosed and negotiated? After the offer has been accepted? or do you include seller concessions with your offer?

Never done this, but typically, you take the offering plan for like a week so your attorney can review. Probably at that point I would put my price offer in writing and clearly waiving all those extra fees.

Closing costs are detailed in the offering plan.

I would negotiate everything regarding concessions/closing costs up front when discussing price at the initial stages of bidding with the brokers. You probably won't even have a chance to look at the offering plan until your bid is accepted with the developer's broker, and it may be hard to renegotiate once you have an accepted bid. You might end up having your deal fall through in the phase between having an accepted offer with the broker and a formal purchase agreement drawn up by the lawyers and signed with the developer. (If that happens, you would end up out-of-pocket for legal fees that never become relevant.)

Same goes for mortgage contingency. Would specify everything (mortgage contingency and that you want seller to pay transfer taxes and the other closing costs you negotiate) as part of the initial bidding so that it is reflected in the initial offer sheet put together so that it doesn't look like you are trying to re-negotiate a new deal once your bid is accepted.

closing costs should be included with your offer. give your price and sponsor pays all closing costs. its worth a try. if it doesn't work have them lower the price to equal the closing costs. just remember closing costs in a new condo can be about 20k for a 400k apt.

The major difference in closing costs for new developments are transfer taxes (1.825% of purchase price above 500k and 1.4% for under 500k) and buyer paying sponsor's attorney fee ($1500 - $3000). These are the 2 item most negotiate when it comes down to closing costs. It may be included in the original offer or in a counter offer. sunny.hong@bankofamerica.com

sunny: do you do mortgages in miami?

Thank you everyone. It sounds like I need to view the offering plan before making an offer. I was expecting the transfer tax and sponsor's attorney, but I'm leery of the other closing costs that a sponsor may try to add.

Freezer is right. You can probably get the developer to pay their attorney and the tax. And read the plan carefully before you do your walkthrough - all the building details, even the appliances are listed there, and you should make a checklist and take it with you.

Lofty is right. When I was serious about a place, I read the offering plan cover to cover so that there would be no surprises. Have a lawyer look it over as well, but these days I'd want to read it myself too. RE attorneys really only read certain sections, not cover to cover so they probably won't know if you're getting crappy appliances or if apt square footage is calculated with common space, etc. You have to do that due diligence yourself.

Sponsor will probably pressure you saying the offering plan is due back in a week or something so don't be surprised.

apt23 - yes, I do loans in Miami, however, if it's a condo then it must already be Fannie Mae approved.

I totally recommend carrying an offering plan full of stickies to the walkthrough. Just to see the realtor blanch.

Can you get the offering plan of a new development before making an offer?

Usually you get the offering plan for review, then you sign the contract. So in this case, you'd probably submit offer instead of signing contract.

So you have to have an accepted offer before getting a copy of the plan??

I thought an offering plan was available from the sponsor prior to offering so long as the person is willing to pay for it.

jose, you're right, if you're willing to pay for the plan -- usually $150-$250 -- you can review it prior to an offer. Some buildings will buy the plan back from you if you return it quickly and don't mark it up.

ali r.
DG Neary Realty

Thank you Ali!

I have gotten offering plans whenever I was interested in seeing them. At no cost. Before even putting in an offer. Be wary if the offering plan is not available.