Why buyers in new developments and pre-construction condos need to know timelines
Sep 04, 2023
Anyone who’s lived in New York long enough to get invited to a dinner party knows what a reliable go-to topic of conversation real estate is in this city. Who bought where, who overpaid, and who has an in with co-op board are as normal as talking about the weather in other places. So it’s only natural you’ve likely talked to friends about what their condo-buying process looked like. And that’s a great way to do some recon before your search begins in earnest. Unfortunately, that intel is not always totally applicable to you if you’re considering buying in a new condo development or one in pre-construction.
Why? The timelines are very different and the buying process for a classic six is often very different than for a sleek high-rise, despite the fact that both are often condos. But knowing is half the battle so let’s take a look at how the process might look for a new-build buyer.
If you don’t know where to start, start here
Knowing that the buying process can sometimes take a few (to many) months can be intimidating but when you break it down week by week, the whole process becomes much more manageable.
Your first week (or three)
- Before you figure out what you want to buy, you need to know how you want to live, which means you’ll need to answer the big questions for yourself: what neighborhood do you want to be in, what kind of building is a fit for you, and what sort of icing-on-the-cake stuff (AKA, amenities) are absolutes and which are deal-breakers.
- Next, you’ll want to figure out the preferred lender situation. Most developers will be working with a list of preferred lenders (i.e., the people who will give you money for the mortgage). New developments are generally working to get to a threshold of 50% occupancy before additional lenders open up, so you’ll want to assess where this particular building is at in terms of occupancy. After that mark is hit, you’ll then have more lenders to choose from.
- Finally, you’re going to want to meet with brokers until you find the right one for you.
At the one- to two-month mark, you’ll want to choose your attorney
- This step tends to intimidate many new buyers if they don’t have experience working with an attorney, but don’t worry; if you’re taking care of this step now, you have plenty of time to ensure you find someone whose personality meshes with yours (and someone who will give you the kind of attention and support you need during this process). Your attorney will be working on behalf of your best interests, which means they’ll be doing due diligence on the building and the developer to make sure all is on the up and up.
- This may also be the time reality starts to set in a bit and sky-high expectations may need to be lowered. Where can you compromise on aesthetics or amenities and what are still non-negotiables?
Months three and four are decision time!
- You’re putting in work, homing in on the properties that will make the final cut. Once you really narrow it down, your broker will be talking with the building’s sales director. Keep in mind, in NYC, buildings cannot be classified as condos until 15% of units in the building are under contract.
- Next, your broker is compiling the offering plan, which is a bit like an FAQ of the building. What are the buying procedures?; what are the building’s bylaws?; what about the floorplans? At the end of the day, all of this stuff needs to check out — and the home you buy must match what’s agreed-upon here (or you’ll have legal standing to dispute the contract).
- Wrap up loan approval next. It’s likely the most nitpicky, time-consuming aspect of the whole process, with hoops to jump through, T’s to cross, and I’s to dot. Your employment, income, and accounts will all be getting thoroughly vetted during this process.
You’re almost there (just weeks out now)
- If all goes according to plan, you can expect to make an offer around the 16-week mark and the process will kick into high gear. The building’s sales department will be expecting things to move quickly and your attorney will take on a bigger role at this point.
- We said it’ll move quickly, and we’re not kidding. Usually it’s only about 24 hours before you’ll see a contract and you typically have five – 10 days to review it and negotiate (depending on how fast the market is churning at the time of your negotiations).
- If all goes well with the process above, you’ll sign the contract next.
Time to pay up
- It’s deposit time at this point, and that chunk of change you’re expected to drop can range from 10 to 20% of the purchase price. There is sometimes room for negotiation here but remember, much of that wiggle room is dependent on the building’s desirability and the market’s insatiability at the time.
- You’ll also be locking in your mortgage rate at this point but there are some caveats that are new-build-specific. While you may still be able to look for the best rates from preferred lenders, some buyers have found rates at that point may be too high for their comfort and they choose to wait it out for a bit. This comes with significant risk to you if the developers do not want to agree to any king of financing contingency (which could put you at risk not just for losing out on the apartment but potentially losing your deposit) so make movies very carefully at this point and look to your professional advisors.
Time to (finally) close the deal!
- If you’re financing all or part of your purchase, the lender will now be conducting an appraisal to confirm the unit meets their expectations and once they do, it’s closing time and you can expect about a 90-day wait until signing.
- All-cash buyers, however, won’t be dealing with that red tape, so it’s often possible for them to close with a week or so.
- Yes, this is a lot of hoops to jump through but remember that, as a condo buyer, you won’t also be going through a board approval process, as with a co-op, so relish that!