2021 is greeting us with a surge of new constructions, especially condos. With the promise of amenities like swimming pools, a communal clubhouse, and done-for-you landscaping, buying a new condo attracts many eager buyers.
Are you thinking about making an offer on a new condo construction? Read this article to find out some helpful tips.
New Condo Construction Requirements
It's possible that the lender will require that the entire complex is completed before you get approved for a mortgage. However, for large complexes that are completed in phases, it may be enough that the most recent construction phase is complete.
Completeness is measured by the governing documents set up by the builder, so it's not enough for the building to "appear complete."
Although it may seem like a hassle, these construction-completion requirements are for your protection. Mortgage investors like Fannie Mae, the FHA, and the VA want to ensure that the property is safe and move-in ready.
There are additional guidelines for financing new or pre-constructed condos since it's considered is a higher risk to lenders. Because of this, you'll want to start working with a trusted mortgage professional right from the start.
Helpful Tips for Buying a New Construction Condo
Schedule A Pricing Will Be The Lowest
Schedule A pricing is typically the lowest pricing available to the public. At this point, the developers have already hit significant milestones and have shown progress, which affords more flexibility on pricing.
The Developer's Rep Matters
This is where it might be safer to buy from a well-known and publicly-traded developer rather than a small-time one. Should you end up in court from shady dealings with the developer, a larger one will have much more to lose from a tarnished reputation. However, a smaller developer will have an easier time dissolving their LLC and fleeing with the money.
Delays are inevitable in construction. Don't put yourself in a desperate position by selling your former home, and expect to move into your condo on the estimated completion date. Sometimes the delays can be a few months but waiting a few years past the estimated date isn't unheard of.
Negotiate an "Outside Date"
Have an attorney negotiate an "outside date" into your contract, which allows you to cancel the purchase contract if construction isn't completed by a specific date. That way, if construction is exceptionally delayed, you can cancel the contract and get your deposit back.
Be Aware of Additional Fees
A typical down payment on a new condo is roughly 3% –20% of the purchase price, and it depends on the type of loan. However, when purchasing a pre-constructed condo, the builder will also require a deposit.
The developer may also add other expenses, such as the complex's insurance costs for its first year or the attorneys' fees to prepare your pre-construction contract. Be aware of these fees before signing on the dotted line.
Despite the intricacies, buying a new or pre-construction condo is still an attractive investment. The cost will be much lower when you purchase in advance, and developers are often eager to negotiate fees with early buyers. Need more answers? Give us a call, and we'll walk you through the process of buying new construction --whether it's a condo or a single-family home!