- Sensible floor plans (and closet sizes!) for modern day living
- Being the very first person to live in a unit
- The sweet sweet smell of (low-VOC) new paint
- Sparkling new appliances
- The promise of high-efficiency appliances and systems
- Fast new elevators
- Central heat and AC
- In-unit washer + dryers
All of these – and more – are reasons so many buyers are attracted to new construction condos in Washington, DC. But those perks come at a premium, as buyers nearly always pay more per square foot with new construction than similarly-sized resale units.
Buying a new construction condo can be exciting – but it is a whole new ballgame when compared to buying resale. We’ve helped dozens of buyers navigate a new construction purchase.
Here is what you can expect in the process:
- Developers can market units and accept fully refundable deposits on a project prior to the project being fully approved by the city. The Public Offering Statement (also referred to as the Plats and Plans), a detailed plan of what the development entails, must be approved before the developer can ratify contracts in the building.
- There is a sliding scale of risk/reward along with a time continuum for buyers between buying pre-construction versus waiting for the project to be complete. The earlier in the process you get a contract accepted, the greater the risk of the unit layout changing, finishes not being what you expected, construction delays pushing back your move in-date, etc. On the flipside, new construction in highly desirable areas where there isn’t much room for new buildings will likely be sought-after, so your chance at scoring a prime unit/view is increased the earlier in the process you get a contract accepted.
- You will be expected to use the developer’s contract and few, if any changes, will be accepted.
- It is imperative that you engage an attorney to carefully review the sales contract and Public Offering Statement on your behalf (you have a 15 day right of rescission period by law to review these documents). They should be looking for hidden costs and any clause that could be detrimental to you. The resale contract used by DC Realtors is generally thought to be very ‘fair’ to both buyers and sellers. However, a developer contract is created by the developer to protect the developer and not the purchaser. Here are just a few gems we have found in developer contracts over the years:
- If Purchaser elects to place a mortgage on the Property with a lender of Purchaser’s choice, then this Agreement shall be in no way contingent upon Purchaser obtaining any financing and Purchaser assumes full responsibility to initiate and pursue all steps necessary to obtain the funds required for Settlement. READ: Absolutely no financing contingency is in place! It doesn’t matter how long the project takes, if rates skyrocket, etc, you better show up at settlement and close.
- Purchaser acknowledges that measurements shown on the Plats and Plans are approximate and actual dimensions may not be exactly as shown. READ: Just kidding on that 15×15 master bedroom or perhaps now there is a structural column right where you had planned to put your couch.
- Seller reserves the right to substitute manufactured items or products in the Unit should sources become unavailable. READ: So you think you are getting real hardwood floors, but surprise, the developer swapped them out for a manufactured product that is not nearly as durable.
- However, should the Adjacent Property owner build improvements up to his property line, and the Affected Units lose the windows on the Western side of the Condominium, the Affected Units will become one (1) bedroom units with one (1) den. They will no longer be two (2) bedroom units. READ: Just kidding on the second bedroom! Now you have a den, which will reduce your resale value.
- Developers tightly control the inspection process and development of a ‘punch list’. We have seen punch-lists 30+ items long with little to none of the items being complete by settlement. There can also be a serious disagreement between the buyer and developer of when an item is “complete” to the satisfaction of the buyer. Most developer contracts give buyers very little leverage over the punch list process.
- Developers often underestimate the projected expenses for upkeep of the common areas, so the condo fee at the time of purchase is substantially lower than it should be. Once the building is sold out and a board made up of owners is put in place, they typically order a study to confirm that their fee structure is correct. More often than not, it is wrong and condo fees jump substantially in the first 1-3 years. We encourage buyers to budget for a 25% condo fee increase right off the bat.
- Construction issues with the building can take months or even years to materialize. Many of these issues are easy to handle but every now and then there are major structural issues that must be addressed. Often times, the developer is long gone and owners in the building are left footing a substantial bill for remedial work. A reputable developer will stand by their work even well past the end of construction, but many of them hide behind contracts and warranty loopholes, and the new owners are left footing the bill.
We keep close tabs on all the new construction condos in DC that are in the planning and construction phases. HERE is a link to current projects.
While it can be satisfying to be the very first person to occupy a condo unit, there is inherent risk in being one of the founding owners in a condo project. Navigating the purchasing process should be done with a professional and experienced agent by your side.
Call/text us for a consultation today at 202.270.1081, email us at email@example.com, or send us a message here if you are considering purchasing new construction condos.
The Stokes Group is a team of dedicated professionals who have passion for the real estate business and will advocate for our clients with the utmost honesty, integrity, and confidentiality. We believe in building solid relationships with our clients and that starts by getting to know who we are. Follow us on Facebook and Instagram.