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Posted at 4:06 AM, Jun. 27, 2007

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8 Ways to Avoid New Construction Pains

Posted at 3:14 AM, Jun. 25, 2007

New construction purchases have a different set of playing rules than that of resale.  Here is what buyers can expect will happen and how to better prepare themselves for any potential pitfalls when buying a new construction condo.

1.   Use an agent.  I know that sounds self-serving but here is the reality, those friendly people at the sales center are there to do one thing, and one thing only, make the developer money.  They are there to protect his interests, not yours. Not to mention, most developer contracts are structured for the developer, not mutually agreeable parties.  I have seen some that make War and Peace look like an easy read!

2.   If you are wise enough to protect your interests and use an agent, don't go to any open houses or sales centers without them.  As tempting as that might be, you jeopardize their commission and therefore will leave yourself without representation.  The developers are sneaky that way, they know curiosity gets the cat and claiming you as "theirs" is just what they want.  The more ignorant you are to the process and your rights, the easier it is for them.

3.   Prepare for homelessness.  What I mean by that is, depending on how far out the project is, even if they say with a straight face that they can deliver within 60 days of signing the contract, don't bet the farm on it.  In fact, I tell all my clients to prepare for the worst case scenario.  Have a plan B for your things and for where you can live.  Most importantly, have your agent and attorney give you a kick-out clause in the event that the developer doesn't deliver the unit in a reasonable time.  Otherwise, you are stuck!

4.  Don't skimp on the inspection.  Buyers can easily make the mistake that if its new construction, what could possibly be wrong?  Everything!  It's worth it.  In fact, a good inspection closer to closing will also act as your punch list of items for the developer to correct.  But be careful, the inspector is only there to point out material, mechanical or latent defects that are noticible.  Cosmetic items are for you to catch.  You also want to note here that most contracts are not contingent upon the results of the inspection, meaning, you can't back out of the deal because of it.

5.  Once the contract is accepted, pick out your finishes as soon as possible, this will help expedite delivery.  Make sure you note that any items that are above standards, you will be required to pay for at the time of ordering, so choose wisely.

6.  Other costs associated with new construction purchases is the monthly assoication dues.  One of the reasons they are estimated at low amounts is that as one of the first to live in the building, you are responsible for starting up the association with reserves, usually about 2 months worth in addition to your first month's due at the time of closing.  Unfortunately, you are not credited with those two extra payments.

7.  A way to save money is on upgrades.  Have the developer do what would be absolutely a nightmare to do yourself such as hardwood floors, but opt to do other upgrades afterward, such as appliance packages.  You will be surprised how much you can save when you cut out the middle man.

8.  Timing is eveything.  One of the best ways to save big bucks is when you buy.  First phase is the cheapest of pricing, but some buyers can have a difficult time visualizing their new home when its just drawings on paper.  Second phase buyers are the ones that experience the biggest hits, pricing goes up, developers are less negotiable, and any upgrades will cost you.  Third phase buyers or close-out specials are where buyers can get some of the best deals.  The properties are already built, so choosing finishes is usually out of the question, but what would be an upgrade package can often become standards, such as stainless steel appliances and granite countertops.  You may even discover parking will be included.  Last ones in can spend thousands less than the the earlier counterparts.

All in all, buying new is loads of fun, but can also be a painful learning experience.  Don't be lured by the flashy signs and grand opening parties, protect your interests from the beginning is the best bet to buying quality new construction at the best price.