Buyers In New Construction Need To Know Their Entire Offering Plan
Buyers in new construction should know their entire offering plans inside and out. NY1's Real Estate reporter Jill Urban filed the following report.
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As the market continues to rebound, sales volume in new developments has certainly picked up. Buyers about to sign a contract in new construction need to understand the tricky language in their offering plans.
Ron Gitter, a real estate attorney and the founder of CoopAndCondo.com, says the language in the offering plan can be filled with tricks and traps, so buyers should understand exactly what they are getting into.
"Offering plans are very complex documents and nobody expects the buyer to read the entire document," says Gitter. "Every buyer should review the special risks and review any disclosures they don’t understand with their attorney."
For example, nowadays sponsors are reserving the right to sell fewer units.
"In new plans, sponsors are reserving the right to rent units rather than sell them. They only have to sell 15 percent of the units," says Gitter. "Buyers should be aware if the sponsor elects to do so. It could create problems financing or selling the unit in the future."
The key is to work with a reputable developer and find out their true intentions for the building.
Also, many contracts now are worded so the sponsor can withhold a deposit if a financing commitment falls through. Gitter suggests all buyers get a financing contingency in the contract so they can get that money back if the bank backs out.
They should also double-check the square footage to avoid any surprises down the road.
"Sponsors have funny ways of measuring square footage. They like to measure from the exterior walls and into the infrastructure of the building," says Gitter. "Since condos are sold on a square footage basis, the consumer is well advised to take his or her own measurements."
While there is a section that discloses the closing costs, additional fees are sometimes presented in the purchase agreement, so be sure to read both.
Finally, when it comes to getting things fixed or getting a punch list completed, many buyers don’t realize they have little recourse against a sponsor who does not fulfill his or her obligations under the plan.
So before anything is signed, make sure you are entering into an agreement with a developer you know you can trust.