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smak
Posts: 31
Registered: ‎01-28-2009
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pros and cons of buying a new construction condo

I was just curious what people thought the pros and cons were.

 

Areas like negotiating price, HOA, the ability to get a loan, and things like that

 

Are they willing to go lower in price, since they might have 35-40 units to try and sell? 

 

What about problems with the HOA.  What if owners buy in slowly, could there be problems

there?

 

Just any general ideas would be great.

 

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jamesy
Posts: 4
Registered: ‎08-10-2009
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Re: pros and cons of buying a new construction condo

There is no real benefit other than owning a place that nobody has lived in.  They aren't going to budge even a little on price, or HOA.  They may give you some concessions on kickbacks to do some upgrades to the condo, just depends how desperate they are to get rid of the place.  Unless there is some compelling reason that you would want to live in a condo (you can't do yardwork, etc), you are almost always better off looking for an actual house, especially when it comes to new construction condos, you will definitely not be getting cut any deals and are going to pay up for the "newness" factor, as many people are wowed by the nice models that they show off in these new constructions.
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Chip_Whitley
Posts: 125
Registered: ‎08-10-2009
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Re: pros and cons of buying a new construction condo

Actually, I've found that there can be negotiating room on the price. I encountered this with two developments in the Miracle Mile area, two in Hollywood, one in Culver City, one in Sherman Oaks, and one in Studio City. Granted, it's less likely to happen if the building has yet to sell any units (unless they've been on the market for a long while)-- in every case I mentioned, the condo complexes were about half-way to three-quarters sold. In the end it depends on the developer-- they'll dictate what sort of discounts they're willing to offer, and sometimes they'd rather leave the unit empty then sell for under list price.

 

There is usually no leg room on the HOA dues-- typically they are determined by the size of the unit (with larger units paying a bit more). Someone correct me if I'm wrong, but I understood that the HOA is not turned over to the occupants until most of the units are occupied, so I believe that the developer bears the brunt of the cost for unoccupied units until then. Of course, after the HOA has been turned over to the occupants, the board can opt to go with a different management company and renegotiate fees.

 

As for financing, some lenders don't like condos, and they may have higher rates or stricter insurance requirements (i.e. mandating EQ insurance) for mutli-unit buildings. If you go the FHA route, buying a new condo is a hassle. Firstly, the new condo development MUST be FHA pre-approved, otherwise you're going to have to wait until the HOA has been turned over to the occupants for at least one year. Second, FHA guidelines require that at least 51% of the units must be owner-occupied, which means that you may remain in escrow limbo until enough units are sold before you can close.

 

I decided to go with a newer (2006) condo rather than brand-new construction because I found that the developers didn't have it together and I prefered to deal with a traditional seller over a developer or a bank (many developments have gone into receivership as of late).

 

There's already a thread that addresses the single family home vs condo debate. If you're in the market for a condo, you've already made your preference known and I think it's pointless to get into that debate. I happen to think that, given the areas I want to live in, condos offer me better prices for more recent/modern construction and design than do single family homes.

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smak
Posts: 31
Registered: ‎01-28-2009
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Re: pros and cons of buying a new construction condo

Thanks all.

 

One of the reasons i'm interested in new condos is that it seems like less of a hassle, since the buildings sometimes have 8-10 of the same type unit, usually for around the same price, and might make it easier to do business.

 

Overall in the area i'm looking there's 6 or 7 new buildings opening in the next 3-6 months, and have a total of 25-30 places in my range.

 

I could be wrong in my thinking though.

 

The other thing is they are way more likely to not have to need any fixing at all, there isn't going to be ugly green carpets, or pink paint, etc...This is also true with 4-5 year old buildings, but all the older ones than that, vary on how much work their is to do.

 

I know that's all trivial stuff, but it adds up.

 

Which place in Studio City were you looking at?

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Anteater
Posts: 552
Registered: ‎03-20-2008
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Re: pros and cons of buying a new construction condo


smak wrote:

The other thing is they are way more likely to not have to need any fixing at all


In general, I think that homes, whether SFR or condos, need to age about 8-10 years before you know for sure if there are any construction defects.

 

In a sense, all homes are "custom."  They're mostly built by hand and don't roll out of an assembly line (modular homes excepted).  It'll take a few years before all the bugs are found and worked out.

 

And homes that are older than about 20 years will start to show their age, assuming they were properly cared for and not abused.

 

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Edmund_Burke
Posts: 179
Registered: ‎04-05-2008
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Re: pros and cons of buying a new construction condo

>The other thing is they are way more likely to not have to need any fixing at all

 

I wouldn't be so sure--they are racing to complete these projects before money runs out.  construction quality can't possibly be normal.  in addition, some states require a substantial fund from the developer which will cover problems that arise later. in CA, they have 'insurance'--what does it cover?  how good is it? 

 

you and your co-buyers may end up underwater in the next few years.  which means the rest of unit owners will have to pony up for deadbeats' HOAs.

 

sounds mighty risky to me.

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Chip_Whitley
Posts: 125
Registered: ‎08-10-2009
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Re: pros and cons of buying a new construction condo

[ Edited ]

-  Which place in Studio City were you looking at?

 

I looked at the condos on 4424 Whitsett Ave, I believe. I was generally unimpressed with the location (and the crowd that seemed interested in the complex-- lotta Gen Y with their helicopter parents who would no doubt be paying for most of mortgage).

 

As for what anon brought up about quality of construction of newer condos-- generally speaking, there are some defects that will become visible within a year or so, and depending on the case, the developer may be responsible for addressing the defect if it appears within the first few years. I have several friends who purchased condos that later had defects relating to the exterior stucco-- in each case, the developer fixed the issue. A good home inspection (and perhaps a structural engineer) should point out the obvious flaws. Generally speaking, however, for the price, I could get a newer condo or a much older home of the same size, and while old construction is nothing to scoff at (things were built better before particle board was invented), generally these homes require an additional $40-60K of remodeling from a design standpoint. But anon's point (or what I think is his/her point) is correct-- don't presume that new construction is worry free.

 

As for anon's point about the risk of deadbeats in your HOA-- it is quite possible to have a scenario in which a sizeable chunk of your neighbors fail to pay their dues, but the likelihood is not great enough to disuade one from buying a condo. HOAs can levy liens against owners and take them to court to collect back dues-- doesn't mean they will, but they can at least try. The issue isn't that big of a deal in the short run, but it's the long run that poses the greater challenge-- if reserves are low due to non-payment and the roof needs to be redone, you and the other HOA members may be SOL. 

Message Edited by Chip_Whitley on 08-11-2009 03:40 PM
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smak
Posts: 31
Registered: ‎01-28-2009
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Re: pros and cons of buying a new construction condo

Fixing was a poor choice of words, i mainly meant the fact that newer condos are not going to have weird design choices, old ugly cabinets, countertops, and paint colors etc...

 

I've looked at a few over the last month, and none of them came close to that.

 

That's just me, i know some people don't mind doing all that, i'm more of the move in and everything's perfect guy.

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Gobi
Posts: 66
Registered: ‎06-13-2009
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Re: pros and cons of buying a new construction condo

don't believe the really attractive low HOA fees, because as most people who have lived in an HOA building will tell you, HOA can be adjusted at anytime by the board.  If it's a new construction, the developer probably made up some artificially low HOA numbers that will quickly go up once all the units are sold!
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Chip_Whitley
Posts: 125
Registered: ‎08-10-2009
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Re: pros and cons of buying a new construction condo

On average, expect between $350-$450 for a decent HOA fee that covers most tasks. I have found older buildings (with EQ insurance) that charged HOA dues under $300.