New construction versus traditional re-sale transactions have many similarities, however there are some differences in the details of some specific items. Below are fees and processes not uncommon to traditional sales transaction but with some adjustments specific to new construction. Read on.
Difference #1- Transfer Taxes
When purchasing a sponsor unit (first purchaser of the unit ever), the buyer is typically responsible for paying the transfer taxes. Buyers can include them in the cost basis of the property which will be important if and when they sell the home, as it is the figure used to determine the taxable gain. NYC and NYS transfer taxes equate to 1.825% of the total sales price.
Difference #2- Mansion Taxes
Mansion taxes in NYC are equal to 1% of the sales price for homes selling over $1 million. This is not unique to new developments. However, one consideration to note is that when the mansion tax is calculated, the transfer taxes will be included in their purchase price.
Difference #3- Sponsor’s Attorney Fees
In addition to your responsibility for your own attorney fees, purchasers are (typically) liable for covering the expense associated for the sponsor’s attorney’s fees. Ask this specific question so you ensure you know all of your closing costs.
Difference #4- Project Pre-Approval
The same way a buyer gets “pre-approved” from a lender, condominiums do as well. Each bank has different requirements when assessing mortgage options in a new development. Therefore seek out the building’s “preferred lenders” who have pre-approved the project and are a direct link to confidently secure a loan!
Difference #5- Board Application & Approval
The nice thing about purchasing from a sponsor directly is that the arduous board application process, in many instances, gets bypassed. It is discretionary though so depending on the sponsor, they may request an application. At a minimum, usually required is a financial statement and evidence of funds. In addition, you do not need to await board’s approval!!