Your guide for buying in a new development
As the housing market reels from the fall it took in back 2008, buying a pad in a new building is a smart idea, says Stephen G. Kliegerman, president of Halstead Property Development Marketing.
“You’re starting to see more new developments come back to the pipeline,” he says. “In 2012 we’ve seen a real incredible turnaround in the ability for developers to provide new condominium product that will hit the market anywhere from now through 2012, 2013 or 2014.”
Combine that with low interest rates (expect 2 3/4 to 3 3/4 percent interest, Kliegerman says), higher rents due to low vacancies and the opportunity to build equity by paying your own mortgage, and it’s no wonder that the case is being made for ownership. If you’re ready to buy, Kliegerman says primarily you need to ensure you’re fiscally ready to do so.
“The first thing you should do is make sure that your credit is in good shape. No. 2 is, you need to have a down payment. You’re probably going to be putting down 20 percent, so you want to start saving money. Usually a developer will have a relationship with a bank who is their preferred lender and they’ll send you to that bank to get qualified.”
At the bank, have ready two current paystubs, your latest two years of tax returns, a letter of employment and any bonus history you have for the past two or three years, he says. Plus: “They’re gonna want to run credit, and they’d like to see credit over 700.”
Once your finances are squared away, your search can be that much smoother. If you’re looking in a new development, Kliegerman advises finding a developer with a solid reputation.
“Almost every developer at some point has somebody who isn’t satisfied, but what you’re looking for is somebody with a healthy track record,” he says. “Someone who responds to problems if they occur.” To find a good developer, Kliegerman advises searching on the Internet (maybe the building you’re interested in has the developer’s bio on its website), researching the broker (“We turn business away from developers that we don’t believe have the ability to provide quality housing stock because we don’t want to be associated with the problems that come later,” he adds) and asking friends who have bought spaces of their own.
Kliegerman also recommends snagging a place with a 421-a real estate tax abatement, if you can find one. This means that the developer — through means such as providing affordable housing or being in a zone that encourages development — is able to lower real estate taxes for a number of years.
“The number of developments that will be receiving these benefits in the future is dwindling fast, making them a highly coveted commodity,” he says.
When you’ve found a property you like, it’s important to move quickly
“Look for any building that’s being constructed or any vacant land and start to do research,” Kliegerman says. “Contact your local broker if you have one, take a look online through the Department of Buildings to see building permits have been issued so [you] can see what’s being built on that — is it residential, is it commercial? Then I would try to contact either the broker or the developer early on to get on their predevelopment list, because once those buildings come up to market, basically we go down the list: We call those people who called us first. So the earlier you get in, the better ability you’ll have to get an apartment there [and] to get your choice of what’s available. We start taking names sometimes the day that construction starts or even sometimes before, and we keep those lists all the way until through when we open. It could be anywhere from 12 to 24 months, typically.”
Help for those with poor credit
“There are ways to enhance your credit and there are credit counselors that are very good at helping you do that,” Kliegerman says. “The worst that you can do is start to close lines of credit, believe it or not. Every time you close a line of credit — this is what I’ve been told — your score goes down because the idea is that you can’t afford to have the line of credit. You actually want to establish more credit — you don’t want to use it, you just want to establish it. And don’t be late. The worst thing is late payments.”