Questions to ask when buying a new condo?

I would ask... 'Why am I buying into a new development right now?'

Or 'Is this really smart?'

And if the answer to that is 'Yes', I would ask 'Are you SURE this is really smart?'

And if the answer to that is 'Yes' also... well, Godspeed.

Michelle, there are several things I would ask but first let me ask you is this building already completed? In this market I would strongly advise that if you are buying in a new or newer development that you find out what percentage of units have already closed in the building. If you are getting a loan it is essential to know this- not how many are in contract, but how many have closed to date.
I would also make absolutely sure that the contract is a mortgage contingent one.

Don't sign the contract until you have garnered more advice here.

Prices are coming down and are likely to continue their slide. Unless you really need to buy now I'm sure most people here would say wait another few months.

The kinds of issues you should be reading about apart from price declines are the following:

1. Ability to get financing for new construction (nc). The days of 90% financing on nc are over. You need at least 20% and usually 30% now.
2. Ability to get financing at all for nc is difficult. New Fannie and Freddie guidelines are now that the building has to be 70% sold before they will buy any conforming loans.

Net effect for above two could be this when it is time to close:
http://www.streeteasy.com/nyc/talk/discussion/9423-up-in-smoke-the-deposit-vanishes
http://www.streeteasy.com/nyc/talk/discussion/9424-deposit-losses-from-credit-crisis

3. Sponsor could be the majority holder of units when you move in and could control the condo board, making decisions on cost, maintenance, common areas, rules, etc. that are not in the best interests of the owner occupiers.
4. In a similar vein, you have check the offering plan to see how soon the residents can elect their own board. Some plans stipulate that the sponsor is in control for a long period of time that again, is detrimental to the residents.
5. Finishes and workmanship is usually not up the the standards expected if most people posting here represent most nc. Expect long punch list of items that either take forever to fix while sponsor tries to finished other units for closing- or never get fixed at all, unfinished common areas that also take forever to complete,
6. Potential for major structural and infrastructure issues that take a quickly organized condo board (see my comment earlier about the sponsor being in charge of the board not being a good thing) a lot of time, money and effort to get resolved either via the AG or your own lawyers that the residents will have to pay for initially through special assessments.

The last point emphasizes the need for the residents to organize quickly into a legally elected board if they are allowed to by the offering plan. If the offering plan states that the sponsor will be in control for a period after closing from a few months to a year or more, then run away from that contract.

Make sure you have 20 to 30% down because the people in the nyt article were once approved for 90% financing but the situation has obviously changed dramatically.

This is worst case scenario, not meant to scare you off, but meant to prod you into asking a lot more questions. You will benefit a lot from posting more questions here based on what I and others post. Most of us are happy to help.

Good luck.

Also, if you feel comfortable with posting which building this new construction is you could benefit from others here that have done their due diligence on it and who may have uncovered potential issues or pitfalls, or who may say that they could find nothing to cause alarm.

nycbrokerdax, the building is a conversion thats still under construction; the projected move in is May. They only first started selling the units just over a month ago and already 10 out of 25 are in contract...seems to be selling very well for this marketplace. Let me know what you think.

Divvie, very good post. Reiterate....MORTGAGE CONTINGENCY...

My guy on the inside said that a lot of banks are just taking appraisals and chopping a certain percent off of them in NYC these days (that declining market bias).

DO NOT SIGN A CONTRACT W/O a mortgage contingency (and make sure it's for a full commitment, not just a letter from the bank saying they'd love you, but then you find out that there are additional requirements).

Michelle,
Here is my general thinking and commentary
1. I am surprised that if they just started marketing the conversion that they would be ready to close in May- conversions in particular oftentimes have delays. Also to have 10 in contract in one month out of 25 units in this marketplace is very surprising. What are the price points of the units?
2. Per Divvie's comments- You need to be acutely aware of the mortgage market before signing a contract- although there are some great rates out there, banks are changing their requirements on a daily basis. Again, no buyers are signing a no mortgage contingency contract in this market so make sure that yours IS mortgage contingent.
3. When you get the offering plan have your attorney check to see that it is already ratified by the city.
4. Depending on the neighborhood find out is they developer is applying for a tax abatement, and verify if the taxes that are being quoted to you are pre or post abatement.
5. Research the reputation of the developer. This will give you some insight as to how successful their project is.
Look in the offering plan to see whether or not the developer is allowed to hold onto units and keep them as rentals.

Generally be aware that there is shortage of credit, even for the most qualified financially well off indivduals, make sure that you have the assets to close and that you will be able to acquire mortgage terms that you will be happy with. Be prepared to put a minimum of 30 percent down if the unit is over 800k, and 35 percent down if it is over 2 million generally.
Lastly, make sure you have an outside date where should the unit not have a C of O for you to move in by, you get your deposit back.
Hope all of that helps!

Check to find out how much of the maintinance you're paying is going into reserve, find out what similar more established buildings put into reserve and use that to guess out how much your maintenance is going to rise.

grr, spelled maintenance right once and wrong once.

michelle, i work on the mortgage end so I can give you some mortgage market advice. You should certainly try to get a mortgage contingency. There is nobody out there that can guarantee your mortgage, especially for a new construction or conversion where many things are out of your hands and even the bank's hands. There are 2 approvals required today, you, the borrower and the building (33%-70% pre-sale requirement, no single entity owning more than 10%, no more than 20% commercial units, etc.) But with that being said, 10 out of 25 in contract in a month is very good. May I ask which development? sunny_hong@countrywide.com

michelle, it sounds like you are set on this place and I dare say you would probably go ahead with the purchase regardless of what you read here.

Please take all the advice to heart and address each point. You will benefit from the collective experience of people here who have been buying and selling in nyc for many years.

mdasch, if you're not even going to bother to answer the question, why post just to insult someone's intelligence?

michelle,

Lots of good advice on here already. As someone who's been through this before, I would say:

* First, make sure your lawyer is really good at this - I'm sure many of them just skim the offering plan, so make sure you test him/her with plenty of questions.
* Read the offering plan yourself - it will clarify a lot.
* Find out exactly what would happen under "worst case scenarios." That includes unsold units sitting for years - does the sponsor pay all common charges/taxes for them? What happens if they default on their loans? Make sure you are prepared for and comfortable with all of these. And understand how likely they are to occur (less likely when there's only a few units left, for example).
* Get a clear understanding of the insurance policies - what is the condo board responsible for vs what you are responsible for.
* Check the budget - it's pretty common for them to understate certain costs, which means common charges would be artificially low. I actually lucked out in my condo because they overstated for many of the items, but it's the first time I've ever heard of that.
* Make sure you are clear on what your recourses are for any issues in your unit and the subsequent repairs that would need to occur. You don't want any unpleasant surprises here, and you can be sure they will try to stick as much of the burden on you if you don't take precautions. Bring someone with experience to the walkthroughs - they may push back, but you should force the issue.
* I absolutely second NOT waiving the mortgage contingency. How waiving it ever became the norm is insane to me.

Everyone, thank you so much for all the invaluable advice and points to go over with my lawyer. I have quite the list of questions and points to cover now!

In regards to the building, it's address is 72 Berry in Williamsburg. http://www.streeteasy.com/nyc/building/72-berry-street-brooklyn
For some reason, not all the units are showing up on streeteasy anymore, but they can be found on corcoran.com. The smaller units are starting at $425 and then up to $1.375M. I think that it's selling so well due to the fact their price point is more realistic than what we've been seeing in the neighborhood and because they actually have some character! Not the same boring cookie-cutter condos that have been popping up left and right.

As far as the developer, does anyone know much about the Meshberg Group or Meshberg Martin, LLC?

msmichelle,

I knew it was 72 Berry! I'm surprised that you think pricing is more realistic there - I don't think it is, but if the layouts really work for you, then I can see the draw. I don't know anything about the developer, but it seems like a great conversion. That said, how complete is the interior of the building? I haven't been inside, but doesn't look like that much progress has been made (I live nearby, so walk past it fairly often). If that's the case, you might benefit from waiting this out a bit longer, if only to ease some fears from new construction issues, as well as get a real sense of what the space will look/feel like. As I've said before though, this is a fantastic location. Go to Miranda when you have a chance! Good luck!

I've been to see this building. Would you mind sharing a bit about the negotiating process? Presumably you offered less than asking price...would you be comfortable sharing how far below ask (in % terms) the agreed upon price was? Also I noticed the C-line apartments were the first in the building to go. Are you one of those? Any insight as to why the C-line apts were preferred?

bjw2103-yeah, it's a great location, right? Close to the park, close to the train and yummy Miranda. The interior is still pretty torn up...I would say probably between 60-70% done. I'd be quite surprised if they were finished by May.

miannucci-I'm sorry, but I don't feel comfortable sharing about our negotiating process as we aren't in contract. I think the C line were probably the first to go because they were the the same price as the B line, but had more footage, great southern and eastern exposure and views.

Forgive my nosiness...I like the building, but am unsure if it's within my means. Would it be fair to say that the developers are willing to negotiate? Also FYI, when I visited a few weeks ago they said they were now shooting for June/July move-in.

you've given up more than enough info now msmichelle. I would play the rest very close to your vest on here until you are contracted and in the door. that building looks nice and berry is my favorite street in williamsburg. good luck with your new home.

Make sure you like the finishes; shoddy construction is the biggest problem with new construction. Get an inspector to inspect your unit and the building.

miannucci - I have a buyer in contract in the building. I'd be happy to discuss negotiations with you, as long as you don't already have a broker. You can email me at tina24hour (at) yahoo (dot) com.

BTW, I think June/July is generally realistic, but you never know with the DOB and the atty general. They are moving pretty quickly now, and have done a ton of work in the past couple of weeks.

Tina
(Brooklyn broker)

Assuming this is 421a, I would review what the monthly costs will look like in 6-8 years and either be comfortable with paying it or comfortable with the reality it will depress your resale value.

I know this is an old thread, but had to share this in case anyone has feedback. We have been looking at the Trump Plaza in New Rochelle and while the prices seem to be a bargain, I'm wise enough to know that nothing is free in life. I sent the following questions to my real estate lawyer and cc'd the broker (since she referred me to the attorney) but am worried I will not get the answers. How likely is it that I can find out the following before signing anything:

Can I get a copy of the offering plan?
Do banks lend to the building? Which ones?
Is there an established condo board? Is the board composed of unit owners? How soon can residents elect their own board? Can we speak to president or a member?
What percentage of the building is unoccupied?
What percentage are rental units?
What percentage is in foreclosure?
Can we see a copy of the building's financials? How much do they have in reserves?
What other commercial tenants have a signed contract with the building?
Is the building involved in any litigation?
What special assessments have been mandated in the past 5 years?
How much turnover occurs in the building?