Buying a new construction condominium

[zarzapan]

??? A price increase on a unit that is already in contract? That does not make any sense to me. If you have signed a contract, by definition you have agreed to a set of terms including a price.

I'll start with the caveat that I am neither a lawyer nor a real estate agent but... I believe what bigkdc says is true. However, I believe the owner may nonetheless issue amendments to the offering plan that show higher prices for units already in contract, even though those have no legal effect upon the buyer who is currently in contract. In that case I assume they would just be indicative prices in case that contract fell through.

As to when and how sponsors increase prices: I would expect that is more a matter of art than science: their expert judgment of what the market will bear. I doubt there is any predictive formula that an outsider could apply beyond "if real estate prices in the area are going up at x%, the sponsor will probably raise prices about x% each year".

That's two cents worth from the layman / buyer -- any experts care to weigh in?

[seven]

NEWSFLASH. the 4 owners/occupants just found out that our RE taxes are literally DOUBLE than the offering plan. The only reason that we found out was that our neighbor just received his RE tax statement and couldn't believe the amount. Meanwhile i checked ACRIS and discovered that i paid the correct amount at closing and so did the other 2 owners SO THE SPONSOR WAS AWARE OF THE CORRECT AMOUNT but never told us. The difference is significant ($600 per month) and it makes me believe that we have been lied to. Furthermore they are trying to sell the penthouse on the market forever WITH THE WRONG RE TAX AMOUNT quoted ($ 700 versus more like $ 1,500 per month according to ACRIS).
VERY UPSETTING

[Front_Porch]

That blows.

Didn't your lender flag this before closing? If you submit an app that says your income is X and your costs are going to be Y, and then it turns out that your income is X and costs are Y+Z, doesn't the bank go "wait a minute?"

or did you pay cash?

ali r.
{downtown broker}

[bigkdc]

NEWSFLASH. the 4 owners/occupants just found out that our RE taxes are literally DOUBLE than the offering plan. The only reason that we found out was that our neighbor just received his RE tax statement and couldn't believe the amount. Meanwhile i checked ACRIS and discovered that i paid the correct amount at closing and so did the other 2 owners SO THE SPONSOR WAS AWARE OF THE CORRECT AMOUNT but never told us. The difference is significant ($600 per month) and it makes me believe that we have been lied to. Furthermore they are trying to sell the penthouse on the market forever WITH THE WRONG RE TAX AMOUNT quoted ($ 700 versus more like $ 1,500 per month according to ACRIS).
VERY UPSETTING

I have heard a bunch of stories like this...do sponsors play these types of games a lot?

[seven]

I really don't know. The lender didn't flag it....As i said we all paid the semiannual fee at closing through our mortgage bank in July except for my neighbor who paid all cash and got the bill in the mail afterwards (at first he thought that i had the bill for the whole building!)

[Laura KC]

Actually, I'm mostly interested in how/ when the sponsor decides to increase prices, including on those that are already in contract... this seems to be a normal occurance in new developments.

I think that price increases can occur on units "pre-sold" by the developer. In a new development, the developer needs to sell 10% of the units to make the building's offering plan effective. So generally, the developer will plan ahead for this and make the units available to friends and family, or what not, at a discount. This allows the developer to make the plan effective quickly and to entice future buyers who otherwise would have been hestitant to be the first to commit.

The developer may, however, preserve the right to increase those discount prices at a later date. This is a link to an article about Trump doing that very thing on a Chicago development: http://ownchicagohome.com/blog/2007/...tracts-voided/.

I do not believe a contract price can be raised on a generic, unrelated purchaser.

[incredibleskulk]

From what I understand sometimes buildings are billed as tax abated and then don't actually get their tax breaks...so you end up getting a big surprise come tax time.

[guest]

We are first time buyers but we are sure this situation is still a bit complex.

We signed a contract many months ago for a unit in the new building btw Atlantic and Fulton on Vanderbilt Ave (525 - 527) Fort Greene Brooklyn. It is 10 units. Nothing special but the cost per square foot. I mean we liked it but there weren't any "extras."

We were told we would close within a month. But the C of O was pending. As time past, the developer would not give us any details about the C of O or the status. They would just say "3 - 4 more weeks."

We recently did some research and found out the developer(s) had been involved in a federal sting in 1998. http://www.usdoj.gov/atr/cases/f2000/2029.htm

Real estate price fixing and tax evasion (guilty).

With the lack of communication and the former charges we are worried we are going to end up in litigation with them over finishing common areas or shoddy construction problems that might occur after we close.

Is this situation normal? Or should we be scared and run from this deal as fast as we can? Our contract allows us to run if we choose right now.

Any information or advice on this would be helpful. Anyone know these developers? Anyone in the same type of situation?

Thanks.

[bigkdc]

It does not sound like this is your dream place so I would run for the hills. Why make this kind of investment in a situation where you have lots of concerns.

Delays in getting a C of O happen all of the time but the shoddy construction point scares me.

[lofter1]

Trust your gut.

Take the money and RUN to something else ...

[naclone]

Hello Everyone.

Apologies in advance if I am not posting in the proper forum.

My wife and I are currently renters in the Tribeca area and are looking to start building some home equity. We are complete real estate newbies with no real idea how to get started and are simply trying to determine how close or far away we are from being able to own a condo in New York City.

Could anybody provide ballpark down payment and monthly mortgage figures? For the sake of round numbers, assume a $1 million condo.

Also, if there is a "buying in new york for dummies" type resource you could direct me to, I would really appreciate it.

Thanks in advance to anybody who takes the time to provide helpful information.

[Front_Porch]

I would argue that "buying in New York for dummies" is a lovely little book called "Diary of a Real Estate Rookie" -- my avatar at left.

The book was called "chicken soup for the New York home hunter's soul" by the New York Observer, and you can see some other nice praise on the amazon.com site here: Http://tinyurl.com/2ag28z

It is available at McNally Robinson on Prince Street, and at most of the Barnes & Nobles in the city. Borders Wall Street keeps selling out, so I don't know if they have it in stock or not.

As far as affording a condo, things have changed very recently. Sadly for you, the rate on jumbo mortgages -- mortgages over $417,000 -- has gone up in the recent turmoil.

Let's assume, as a rule of thumb, that you would pay $725 for every $100K you borrow. If you put $100K down on our sample condo, your mortgage payments would be ($725 * $9) which would be around $6,500 a month.

In addition, you might be paying $700 in common charges, so that brings your costs up to $7,200 a month.

The new buildings have taxes that are forgiven for a few years, so let's assume, for now, you've got no tax load.

In an ideal world, you want a household income of $250K between you to carry those housing costs, and $300K and up would feel even better.

Feel free to ask me lots more questions; that's what this thread is for, and after another 200 posts my forum handle turns dark blue like the cool kids.

Best
ali r.
{downtown broker}

[naclone]

I'll check out the book. Thanks.

I also appreciate the rule of thumb. that's good to know.

We're actually at 250k and that seems like a lot more than we'd want to outlay each month.

[Front_Porch]

the rule of thumb I give in the book is that 2x HHI is conservative for the loan amount, 2.5x HHI is fine, and 3x is doable but feels tight . . .

so that would predict that you would want to borrow in the range of $500K-$750K.

My husband and I are over 3x (as are a lot of New Yorkers) but in general I wouldn't recommend it ... you start to feel "house-poor" and that you're not going out and having fun because you're feeding your mortgages.

Interestingly enough "rich" people -- HHI $500K+ -- don't even feel comfortable at 3x because they'd rather have their money in high-flying alternatives like hedge funds than tied up in bricks.

ali r.
{downtown broker}

[Eugenius]

Ali,
The payments you quoted imply a mortgage rate of 7 7/8% or thereabouts. Is that the kind of jumbo mortgage rate you are seeing? Has it come down at all recently?