New Construction costs (in Gowanus and elsewhere)
Mukul Lalchandani is a great broker in New York City who often works with new construction condos. He and I were discussing closing costs, etc., when purchasing and how crazy the market is (yes, this is what we really talk about). I thought a breakdown of what you’d pay if you bought a typical new construction condo in New York City would be helpful.
Let’s start with the Contract. When you’re a purchaser buying a new construction condominium in NYC, what kind of negotiating power do you have for the terms of the Contract of sale?
The answer is LOL. Really. You basically have none. Prospective purchasers are essentially at the mercy of the developer. Why? Because the market is insane right now. Units are selling in Gowanus for over $2,000,000 . People in Williamsburg are riding around on gold plated Citibilkes.
In 2008, you could get a developer to come over your house and cook you dinner and wash your car. Today, nada. As the market cools (and it will eventually cool), you’ll see more of a desire on the part of developers to negotiate. But until then, what you see is what you get.
So how does a new construction differ in terms of what you’d pay as a purchaser:
– You’re paying the Sponsor (Seller’s transfer taxes). 1.85% of the purchase price to be exact. When you’re buying a home or apt that someone has lived in, the Seller always pays for that. Chunk of change.
– You’re paying the Sponsor’s attorney fees. Why? I don’t know. You just are. How much? Anywhere from $2,000 to $3,500.
– You’re paying a whole bunch of other fees. Getting a mortgage? Cool, the Sponsor’s attorney will need to review that for $750 (I am, to be honest, completely unclear as to what specifically they are reviewing.) Need to assign the Contract to an LLC? Awesome? $1000. Need to delay closing? Thanks. $500.
– You’re paying the 421-A plan reimbursement fee. A rather absurd fee that you pay because the Sponsor got the building out of paying taxes for 15-25 years. Fee ranges from $1500-$2500.
You get the idea. And this is uniform and standard. I always try to negotiate these away (it would be against my upbringing as a lawyer from Brooklyn if I didn’t), but most times the Sponsor’s attorneys will only allow a few small, specific changes to the Contract. Tons of great things about living in a place no one has lived in. Many of these buildings look like Equinox and Miami Vice had kids, but it’s really up to you whether or not you want to pay for the privilege.