What is going on with all the new construction in New York, Chicago, San Fran and other huge cities?

As the market slows down outside, around and now in the big cities, buyers are becoming a little bit stronger. They have more inventory to choose from, are able to negotiate prices and have some breathing room.  Resales are looking like they are more of a bargain to price savvy shoppers.  Developers with their new and shiny towers are getting worried about increasing inventory, rising costs of labor and material and the credit market drying up.Potential buyers are seeing that the costs of buying new construction might not be worth it when they can negotiate with a seller that has to sell. 

 In new construction or in a building (condo) conversion, the buyer picks up a bulk of the seller’s costs, whereas in resales they do not.  This is swaying shoppers away from the new and dazzling buildings dotting the skyline. Each state might have their own list of seller expense, so check with your attorney or escrow agent before you sign contracts.

Typical seller expenses (in New York) that are picked up by the buyer:

 

1.    Transfer tax paid by the seller, depends on the purchase price. Assuming purchase price is under $ 500,000, then NYC is 1% of grossed up consideration, and NYS is $ 4.00 per $1,000 of consideration. If it’s over $500,000, then the NYC goes up to 1.425%.

2.    sellers attorney’s fees: could be upwards of $2,000

3.    add two months common charges into the Working Capital Fund on behalf of the “developer”.

The above may add tens of thousand of dollars onto your closing bill.  The joy of having been the first to use the toilet might be mitigated by the cost. You do not pay these costs when buying a resale.  When buying a resale, the apartment is not all shiny and new, however the money you save on closing costs can be used to replace the existing seat! Keep that in mind, always ask what the closing costs are ahead of time and see if the seller is negotiable!

-Dale Siegel