risks of new construction?

The prospectus should lay out special risks associated with the particular project. Of course as you mentioned, there is always the possibility that the developer goes bankrupt during construction. The developer could create a shoddy product (I have seen this with well known developers as well as unknown developers). Obviously if the developer cares about their reputation they will try to address the issues. Another risk is that you don't know who your neighbors will be- and since the building is not yet established, it may take awhile to address problem neighbors. If the sponsor remains in the picture- they might not want to support issues that the owners want.

Shoddy workmanship. It's nearly universal with new construction anymore.

I once bought a condo that was newly constructed in Manhattan. My lawyer checked out the developer first and found he had a decent reputation for the quality of the construction and completion of projects. My lawyer insisted on the contract including a contingency based upon the inspection of the apartment and building. He also looked into the control of the sponsor detailed in the prospectus.

The inspector found an issue with the brick work and that the roof was a new style that had never been tested before. Both became a problem within 5 years, but not financially draining.

He also noted that the apartment was built to spec, but the kitchen cabinets were not a great quality. They had to be replaced 10 years later.

As for the sponsor, the prospectus indicated that he could own 20% of the apartments for the first 5 years. He also owned all the commercial properties. Since both properties entitled him to seats on the Board, he controlled it for the first 5 years. After 5 years, he sold 1 apartment to meet the 20% rule. When the real estate market peaked, he sold the rest of his apartments.

The inspector did not discover that plain sheet rock was used throughout most of the bathrooms in the building instead of water proof boards. We only discovered this 10 years later because our upstairs neighbor let water overflow in her bathroom for 12 hours when we were on vacation. The walls around the bathtub actually collapsed.

Did I regret buying into a new building? No. We had to choose between an large pre-war apartment in the coop in which we were living and the new condo. We knew the coop had very old plumbing, rotted windows, a roof that had been patched and patched for years, and very old wiring. To boot, there was a board from hell that awarded all repair jobs to relatives. Nothing was repaired properly. In the new building, everything was eventually taken care of properly because the sponsor did not want his rentals impacted.

As others suggest, beyond the potential issues with your unit it is often issues with the building that could prove most problematic. There are always some issues with a new building that need to be rectified and it can be a shock to many when the promised common fees are actually much higher. If it is an area you love and can't buy an established unit then go for it, but there is much less risk buying a unit that is at least a few years old.

"We knew the coop had very old plumbing, rotted windows, a roof that had been patched and patched for years, and very old wiring. To boot, there was a board from hell that awarded all repair jobs to relatives. "

I'll still stick with a prewar building with good old bones.

It sounds like 100% of your old building's problems stemmed from a board that was irresponsible. Boards can be voted out, you know. That's an easy fix.

in terms of work being done 'to spec', is this usually outlined in a contract that says 'bathroom floors will be marble', the toilet will be kohler, etc etc? that level of detail or is it just much more broad uually?

I'm closing on a new development in a few days and I will say that it hasn't been the best experience. They are over 9 months delayed. We went on our walkthrough two weeks ago and the floors still hadn't been sanded, some appliances weren't in, and there were scores of detail work that hadn't been attended to. They are now saying that they are ready and are urgently pushing us to close (even after being delayed for 9+ months) because they are cash strapped. They are really unscrupulous - saying that they sent us a time is of the essence letter when they didn't and can't produce the certified mail receipt showing that they did. Still, we would rather just close and get it over with than litigate at this point. The apartment building itself seems quite well constructed and once the apartment is actually finished it will be beautiful. I'll find out soon enough.

The problem with buying new construction *before completion* is that you lose most of your leverage once you've made the offer and put down the deposit. They've got you in the bag, and they know it; there's no longer an incentive to attend to the business of finishing your apartment with any degree of urgency.

NYC Matt, you hit the nail on the head.

Yes, NYCMatt "hit the nail on the head." He always does. Wish he were the President of my Board (now that I am no longer President)!!!! LOL