Buyer Beware on Buying in a New Development!

December 28, 2021

I was recently reading an article in “The Commercial Observer” on the pending lawsuits at 432 Park Avenue, here in New York City. It made me think that most buyers don’t know much about buying in new developments and might benefit from a little home spun education.

Buying in a new development is different than buying resale property. The number one rule is, know who the developer is, what projects he/she has been involved with, their financial condition and what litigation may be pending. This is due diligence you can do or if you are smart you’ve hired a good broker to represent your interests and they will do it for you. Remember that good looking salesperson, at the building, is working for the developer not you.

One thing most people don’t know is that a new development is sold in stages, the pre-shovel in the ground, where they may try to sell from floor plans. I don’t think there is much of that currently in NYC because there is too much inventory. Or, a firm is hired to sell the units and one bank has agree to finance in the building. You will find that at this stage the developer strategically releases units for sale a little at a time.

The second stage occurs when a building has been 50% sold, at this point financing in the building is usually open to any bank which will OK it. The selling broker firm usually changes too. The building is occupied at this point. This is where any problems, from daily use, of this “new product” will emerge. These issues generally can’t be predicted, and the sign of a good developer is not that there are issues but how quickly they are resolved.

Thinking again of 432 Park Avenue, I’d also take a look at whether the developer shows any respect for the area or its history. The super tall buildings built in Manhattan along the formally elegant 57th St are a tribute to ego and price per square foot and not much else.