Buying a new development condo in NYC is slightly more complicated than
buying a regular apartment. There are two reasons:
Reason Number 1: buyer closing costs for new developments
are higher. They can be up to 6% compared to 3% to 4% for non new-development condos.
Reason Number 2: whether the buyer or seller pays certain
closing costs on a new development is negotiable.
So in this video, we’ll tell you exactly what you should do
before negotiating a new development condo in NYC.
I’m Nick at Hauseit. Visit hauseit.com to learn how to save money
if you’re buying or selling a co-op, condo or townhouse here in NYC. So let’s get started!
First things first, a bit of terminology. In this video, we use the words ‘developer’ and ‘sponsor’
interchangeably. They mean the same thing. Both words refer to the entity which owns the building.
In other words, the seller of the apartment you’re trying to buy.
The first thing you should do before negotiating a new development condo in NYC
is to request the closing cost summary from the building’s Offering Plan. This document provides
a highly detailed overview of all closing costs applicable for the new development
you’re considering. It’s usually several pages. Many buyers (and buyer’s agents) make the mistake
of simply asking the listing agent for an overview of the closing costs, without asking to see the
exact language from the Offering Plan. This is problematic because a listing
agent could provide a vague answer, or the agent could accidentally
or intentionally omit a closing cost. For example, the listing agent might say
that the purchaser is responsible for paying the developer’s legal fees,
but she or he might omit the actual amount. Are the developer’s legal fees $2,000 or $3,000? How
much are the additional legal or closing fees for the purchase of a storage cage or parking spot?
In addition, the listing agent could intentionally or accidentally omit something.
In one small Brooklyn new development we came cross recently,
the sponsor added an additional buyer closing cost of $3,000 to “defray the Sponsor’s costs
of creating the condominium.” This closing cost was in addition to sponsor legal fees.
The listing agent didn’t mention this extra $3,000 closing cost, only saying that the
buyer is responsible for transfer taxes and sponsor legal fees. If we hadn’t requested and
read the closing cost overview from the Offering Plan, the buyer would have been responsible for
paying this random extra closing cost by default, since we wouldn’t have known to negotiate it. Or,
perhaps the shock discovery of this unanticipated closing cost may have resulted in the buyer
backing out of the deal after an accepted offer but prior to signing the contract.
The second thing you should do before submitting an offer and negotiating on a new development
condo is to confirm what incentives (if any) are being offered by the developer.
For example, many new developments will openly advertise that the developer has
agreed to cover some closing costs which are typically the responsibility of the purchaser,
such as transfer taxes and sponsor attorney fees. More motivated developers might even agree upfront
to provide some sort of credit to cover a number of months of real estate taxes or common charges.
We’ve also seen developers offer free gym memberships.
Whatever incentives being offered by the developer don’t need to be negotiated since
the sponsor has already agreed to them upfront. The first step in obtaining this information is
to re-read the listing description. Often times, the incentives being offered by the
developer are listed there. However, this information is frequently out of date.
Even if the listing description mentions something about developer incentives, make sure you confirm
what’s being offered in writing with the listing agent before submitting an offer.
Developers might also be offering a higher buyer agent commission for contracts signed within
a certain time-period. Similarly, any other incentives being offered might be predicated
on contracts being signed before a certain date. If you fail to confirm what incentives are being
offered prior to negotiating, the goal posts of the negotiation will be biased against you,
so to speak. In other words, you might think the developer is being
extra flexible during the negotiation because they’re offering XYZ incentive, but in reality,
they’re not being flexible at all since they’re offering that to everyone upfront without having
to negotiate. You just didn’t realize this. If you mistakenly think you’re negotiating
for something which is in fact already being offered by a developer, it means that the terms
of your original offer aren’t aggressive enough. The third thing you should do before submitting
an offer and negotiating on a new development condo is to confirm what other things are for
sale in the building. For example, storage cages, parking spots or rooftop cabanas.
Get the specifics of everything. For example, what size storage cages are for sale,
and what are the asking prices for each size?
You should do this, even if you’re not necessarily interested in buying any of these things.
You should do this is because it’s very common for a developer to give away a storage cage during the
course of a negotiation. Or, a developer might be willing to offer a highly discounted price,
which actually might make you very interested in buying one of these things.
If you don’t have the complete picture of what sorts of things might be negotiable, it
will weaken your negotiating position and reduce your chances of getting the best possible deal.
The final thing you should do before submitting an offer on a new development is to request a buyer
agent commission rebate. This is an easy way to save thousands of dollars on your purchase.
In essence, your buyer’s agent will give you back a large portion of the commission
paid to her or him by the developer. Buyer agent commissions on new developments
are typically the highest in NYC, and this means the size of the rebate you can receive from your
buyer’s agent can be substantial. It’s a great way to significantly reduce your buyer closing costs.
At Hauseit, we offer buyer agent commission rebates through our Buyer
Closing Credit program. To learn more and sign up, check out our website, hauseit.com,
send us an email to team@hauseit.com or give us at a call at (888) 494-8258. We’ve saved New
Yorkers millions on closing costs since we were founded in 2014, and we’d love to help you too.
Don’t be one of those people who leaves money on the table by not
receiving a buyer agent commission rebate from your’ buyer’s agent.