Pre-construction condos - what do I need to know?
April 22, 2007 8:52 PM Subscribe
What do I need to know and what things should I consider before buying (and while buying) a pre-construction condo?
Everyone says that it's a buyer's market in DC, but things seem to be selling really quickly after they are listed, and I'm one of those people that needs time to think about whether I am making the right decision or not for a while. Last week I saw what sounds like a perfect condo - except it was just the floorplan and renderings for said condo b/c it is currently still just a hole in the ground (I'd have to wait almost a year!). I'm thinking about putting down an offer (or paying the deposit, or whatever it is that I have to do), but before I do that, has anyone bought a pre-construction condo before? What was your experience like? And to all of you - do you have any advice on what sort of things I should look at to ensure that this condo turns out the way I think it's going to turn out; and that I am making a wise investment? Thanks!
Everyone says that it's a buyer's market in DC, but things seem to be selling really quickly after they are listed, and I'm one of those people that needs time to think about whether I am making the right decision or not for a while. Last week I saw what sounds like a perfect condo - except it was just the floorplan and renderings for said condo b/c it is currently still just a hole in the ground (I'd have to wait almost a year!). I'm thinking about putting down an offer (or paying the deposit, or whatever it is that I have to do), but before I do that, has anyone bought a pre-construction condo before? What was your experience like? And to all of you - do you have any advice on what sort of things I should look at to ensure that this condo turns out the way I think it's going to turn out; and that I am making a wise investment? Thanks!
Ask yourself if you can stomach a downturn if the market drops 10% or 20% by the time you move in and the developer starts selling at a discount to new people.
I've read tales of potential rebates being built into sales contracts, as developers in some parts of the country are finding buyers to be quite leery. If you have doubt or fear around the issue, and demand isn't too hot, you may be able to negotiate one.
posted by Kwantsar at 9:41 PM on April 22, 2007
I've read tales of potential rebates being built into sales contracts, as developers in some parts of the country are finding buyers to be quite leery. If you have doubt or fear around the issue, and demand isn't too hot, you may be able to negotiate one.
posted by Kwantsar at 9:41 PM on April 22, 2007
This is advice better suited for when you decide to commit, but I'll toss it out anyway:
Since the units haven't been built yet, you'll have all sorts of upgrade options available: speakers in the kitchen and bathroom, jacuzzi tub, surround jacks, extra plug placements, etc. Think about those carefully and spend as much as you can on getting the things you even slightly might want, since it will be an order of magnitude cheaper to do it right from the start than to hire someone post facto.
We never imagined we'd need a speaker in the kitchen, but I'll be goddamned if we don't wish we had shelled out the extra $150 every time we're cooking and want to listen to the stereo.
Additionally, think about the plug/jack locations. You'll likely be given the option to modify their placements and/or add additional ones. Again, you'll feel much better if you have an ethernet jack on both sides of a room than if you realize in 6 months that you want to put your couch on the wall where the ethernet jack is.
posted by Hankins at 11:14 PM on April 22, 2007
Since the units haven't been built yet, you'll have all sorts of upgrade options available: speakers in the kitchen and bathroom, jacuzzi tub, surround jacks, extra plug placements, etc. Think about those carefully and spend as much as you can on getting the things you even slightly might want, since it will be an order of magnitude cheaper to do it right from the start than to hire someone post facto.
We never imagined we'd need a speaker in the kitchen, but I'll be goddamned if we don't wish we had shelled out the extra $150 every time we're cooking and want to listen to the stereo.
Additionally, think about the plug/jack locations. You'll likely be given the option to modify their placements and/or add additional ones. Again, you'll feel much better if you have an ethernet jack on both sides of a room than if you realize in 6 months that you want to put your couch on the wall where the ethernet jack is.
posted by Hankins at 11:14 PM on April 22, 2007
Another thing to consider on options like hankins mentions above: when time comes to sell, all those little things add up quite a bit, and some of them can actually recoup their original cost, if they're done beforehand.
posted by notsnot at 5:13 AM on April 23, 2007
posted by notsnot at 5:13 AM on April 23, 2007
Definitely do as jamaro suggests with checking the builder's past work. I have seen many brand new condos that were built like shit. I wondered if they had hired monkeys from the local zoo to design and build them.
It is a risky market to pre-buy, IMHO but I don't know what the real estate forecast is looking like in DC.
I also assume you have done a lot of your homework already and have seen many dozens of condos to know exactly what you want and don't want? A condo or home is a big investment so you are absolutely right in taking your time and mulling it over.
posted by JJ86 at 5:50 AM on April 23, 2007
It is a risky market to pre-buy, IMHO but I don't know what the real estate forecast is looking like in DC.
I also assume you have done a lot of your homework already and have seen many dozens of condos to know exactly what you want and don't want? A condo or home is a big investment so you are absolutely right in taking your time and mulling it over.
posted by JJ86 at 5:50 AM on April 23, 2007
since it will be an order of magnitude cheaper to do it right from the start than to hire someone post facto.
Take this with a grain of salt, though. It doesn't apply to everything. Friends who recently bought a pre-construction condo found that getting hardwood floors installed by the builder cost about half again as much as having them done after and four times as much as laying them themselves, which is what they ended up doing.
posted by jacquilynne at 5:58 AM on April 23, 2007
Take this with a grain of salt, though. It doesn't apply to everything. Friends who recently bought a pre-construction condo found that getting hardwood floors installed by the builder cost about half again as much as having them done after and four times as much as laying them themselves, which is what they ended up doing.
posted by jacquilynne at 5:58 AM on April 23, 2007
Best answer: The DC area is rather large -- where in DC did you want to purchase your condo?
Last year thousands of would be condo units in the DC area were turned into apts. The builders returned buyers' deposits at pretty negligible interest rates.
On pre-construction condos especially. The Washington City Paper ran an article in the past year about headaches city purchasers of pre-construction condos had encountered when they finally moved into homes.
I work in real estate (not as an agent, but sales team assistant) and the agents with experience (having been round in the last downturn) are staying away from condos. In the last downturn prices did go down 40% or more for places in D.C. Head over to thehousingbubbleblog.com or calculatedrisk.blogspot.com -- there are some crash-happy bears on both boards but there are also links to newspaper and historical accounts of the last real estate crash. It wasn't pretty. The housing-bubble blog covering the DC area is bubblemeter.blogspot.com -- it's less scholarly than the other two.
Also, at what point does the builder expect the condo association to pay for its own fees? If the number of owners decrease, will the builder take up the slack (probably not)? Your condo fee could go from being supported by 400 homeowners to 300, maybe even 250. The more people who don't pay their condo fees, the shakier the condo association's finances, and the less likely a bank is to give potential buyers loans for that building. (Which will cause listing prices to go down even more... damn circle).
Something interesting: a lot of properties that go under contract very quickly do not make it to settlement. The property will end up back on the market at a lower price point. Especially for properties sold in the last couple of weeks -- condos were more likely to have 100% financing than SFHs. With the sub-prime squeeze, people who thought they had financing suddenly don't. Welcome back, almost-sold-listing.
Go to Bankrate and play around with their mortgage calculator. Type in the figures for your condo. Then head over to Craigslist -- compare the asking prices for rentals of similar properties your estimated mortgage payment (something that doesn't include taxes, insurance, or condo fees/utilities). You might be way better off renting (renting, NOT lease-to-own), socking away the difference between your rent and estimated mortgage payment in a high-interest saving account or high yield CD and keeping your eye on the market. A real estate agent can set you up with an automatic email that will alert you when properties meeting your criteria (prices, year built, availability of gold-plated bathtubs) hit the market.
My bosses have been trying to get me to purchase a home -- they love selling. They're also rather fond of me and have told me if I want a condo I'm better of waiting (and have I thought about a smaller SFH in cool neighborhoods like Mt Rainier or Takoma Park? *smile*). Find a real estate agent with experience (one that's been in the business full-time, since the eighties) --- would they help a loved one by a condo? If yes, under what conditions? Then follow their advice.
Finally, and this is what's causing me major unease -- once you've closed on your home you can refinance interest rates, but you can't renegotiate your price. So Freddie Mac's and Fannie Mae's one billion plus band-aid is merely a stopgap (they're helping borrowers refinance their homes). A lot of sub-prime and Alt-A buyers (step above sub-prime) were not and are not paying enough monthly to cover the principal, let alone the principal and interest. In the past five years in DC, prices have doubled. Incomes haven't.
As an investment property, wait to buy your condo (unless you know for sure if the Supreme Court will exempt DC from federal income taxes -- then buy, buy, buy). Lots of investors are trying to get out of the RE market. There'll be sales.
As a place to live, wait to buy your condo. Again with the sales. Do you want to be a homeowner or live in a drool-worthy apt? The latter is far cheaper. Good luck :)
posted by whitneykitty at 6:04 AM on April 23, 2007
Last year thousands of would be condo units in the DC area were turned into apts. The builders returned buyers' deposits at pretty negligible interest rates.
On pre-construction condos especially. The Washington City Paper ran an article in the past year about headaches city purchasers of pre-construction condos had encountered when they finally moved into homes.
I work in real estate (not as an agent, but sales team assistant) and the agents with experience (having been round in the last downturn) are staying away from condos. In the last downturn prices did go down 40% or more for places in D.C. Head over to thehousingbubbleblog.com or calculatedrisk.blogspot.com -- there are some crash-happy bears on both boards but there are also links to newspaper and historical accounts of the last real estate crash. It wasn't pretty. The housing-bubble blog covering the DC area is bubblemeter.blogspot.com -- it's less scholarly than the other two.
Also, at what point does the builder expect the condo association to pay for its own fees? If the number of owners decrease, will the builder take up the slack (probably not)? Your condo fee could go from being supported by 400 homeowners to 300, maybe even 250. The more people who don't pay their condo fees, the shakier the condo association's finances, and the less likely a bank is to give potential buyers loans for that building. (Which will cause listing prices to go down even more... damn circle).
Something interesting: a lot of properties that go under contract very quickly do not make it to settlement. The property will end up back on the market at a lower price point. Especially for properties sold in the last couple of weeks -- condos were more likely to have 100% financing than SFHs. With the sub-prime squeeze, people who thought they had financing suddenly don't. Welcome back, almost-sold-listing.
Go to Bankrate and play around with their mortgage calculator. Type in the figures for your condo. Then head over to Craigslist -- compare the asking prices for rentals of similar properties your estimated mortgage payment (something that doesn't include taxes, insurance, or condo fees/utilities). You might be way better off renting (renting, NOT lease-to-own), socking away the difference between your rent and estimated mortgage payment in a high-interest saving account or high yield CD and keeping your eye on the market. A real estate agent can set you up with an automatic email that will alert you when properties meeting your criteria (prices, year built, availability of gold-plated bathtubs) hit the market.
My bosses have been trying to get me to purchase a home -- they love selling. They're also rather fond of me and have told me if I want a condo I'm better of waiting (and have I thought about a smaller SFH in cool neighborhoods like Mt Rainier or Takoma Park? *smile*). Find a real estate agent with experience (one that's been in the business full-time, since the eighties) --- would they help a loved one by a condo? If yes, under what conditions? Then follow their advice.
Finally, and this is what's causing me major unease -- once you've closed on your home you can refinance interest rates, but you can't renegotiate your price. So Freddie Mac's and Fannie Mae's one billion plus band-aid is merely a stopgap (they're helping borrowers refinance their homes). A lot of sub-prime and Alt-A buyers (step above sub-prime) were not and are not paying enough monthly to cover the principal, let alone the principal and interest. In the past five years in DC, prices have doubled. Incomes haven't.
As an investment property, wait to buy your condo (unless you know for sure if the Supreme Court will exempt DC from federal income taxes -- then buy, buy, buy). Lots of investors are trying to get out of the RE market. There'll be sales.
As a place to live, wait to buy your condo. Again with the sales. Do you want to be a homeowner or live in a drool-worthy apt? The latter is far cheaper. Good luck :)
posted by whitneykitty at 6:04 AM on April 23, 2007
Also about options:
Get a central vacuum system. It is really worth doing when the walls are uncovered.
If the condo is two stories, and the laundry is in a lower floor, see if you can get a laundry chute put in. Not having to hump loads of dirty laundry downstairs is nice.
Try to ensure that the kitchen stove hood actually vents to the outside. The ones that blow through a grease trap, then back into the room, are pretty worthless.
posted by Kirth Gerson at 6:55 AM on April 23, 2007
Get a central vacuum system. It is really worth doing when the walls are uncovered.
If the condo is two stories, and the laundry is in a lower floor, see if you can get a laundry chute put in. Not having to hump loads of dirty laundry downstairs is nice.
Try to ensure that the kitchen stove hood actually vents to the outside. The ones that blow through a grease trap, then back into the room, are pretty worthless.
posted by Kirth Gerson at 6:55 AM on April 23, 2007
Response by poster: Thank you all for the great answers. To answer a few of YOUR questions:
The condo is one bedroom+den w/ a private deck a couple blocks east of Logan Circle (I've been looking there, U street-ish, and Adams Morgan. Yes, I know about Columbia Heights, no, I'm not interested in moving there).
I've probably already looked at about 20 places, some are new constructions, some are a few years old, others were renovated and in old buildings. I feel that I have a pretty good idea of what I want and what I can live without (parking, I want parking).
whitneykitty -- do you have any agent recommendations? I don't think mine is very experienced at all. You'll see in a previous post of mine that I've considering dumping her for a while.
posted by echo0720 at 8:08 AM on April 23, 2007
The condo is one bedroom+den w/ a private deck a couple blocks east of Logan Circle (I've been looking there, U street-ish, and Adams Morgan. Yes, I know about Columbia Heights, no, I'm not interested in moving there).
I've probably already looked at about 20 places, some are new constructions, some are a few years old, others were renovated and in old buildings. I feel that I have a pretty good idea of what I want and what I can live without (parking, I want parking).
whitneykitty -- do you have any agent recommendations? I don't think mine is very experienced at all. You'll see in a previous post of mine that I've considering dumping her for a while.
posted by echo0720 at 8:08 AM on April 23, 2007
I don't know if its been mentioned yet, but one thing to keep in mind is that they tell you it will take a year, be prepared for it to take more or less time than that.
My sister just moved into her condo which she purchased pre-construction this past December, when the builders had originally promised an August move-in date. Also worth noting is my friend who had her home finished a month earlier than planned, which left her scrambling to get finances in order for the closing.
posted by dicaxpuella at 9:37 AM on April 23, 2007
My sister just moved into her condo which she purchased pre-construction this past December, when the builders had originally promised an August move-in date. Also worth noting is my friend who had her home finished a month earlier than planned, which left her scrambling to get finances in order for the closing.
posted by dicaxpuella at 9:37 AM on April 23, 2007
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Many condos are pre-sold, so they may not actually be selling in real time.
Ask yourself if you can stomach a downturn if the market drops 10% or 20% by the time you move in and the developer starts selling at a discount to new people.
Use a real estate agent to help you through the purchase.
Try bargaining over purchase price, upgrades, etc.
posted by acoutu at 9:12 PM on April 22, 2007