In our last blog, we talked about what to look out for when purchasing a second-hand condo, such as unpaid bills or other unexpected assessments. In this blog, we’re going to talk about some of the items/costs that you should watch out for when you are purchasing a new condo.
Inspection
Home inspection is normally not necessary if the condition of the condo is brand new. If the condo has been rented out for quite a while, however, a home inspection should be conducted to make sure the tenant did not damage any key structures or fixtures.
Certificate of Occupancy (“CO”)
In order to close, a new condo must have a CO. The contract should have a provision stating how long the Purchaser is willing to wait for the CO. If it takes too long to get the CO (most of the time the Seller will claim it’s the city’s fault for delaying the inspection or not passing the inspection), the Purchaser should have the right to cancel the contract and get their down payment back.
Tax Abatement
Advertisements about new condos will heavily feature tax abatement (a reduction of property taxes) as a key selling point. The abatement is for 15 years or 25 years. A Purchaser must be aware that during the 15-year period, the taxes are fully exempted in the first 10 years. From year 11 to year 15, the exemption will be gradually phased out at 20% each year.
Transfer Tax
When purchasing a brand-new condominium in New York City, Purchasers should expect an extra closing cost of about 2% of the purchase price. This closing cost is the NYS and NYC transfer tax (1.4% if the price is under $500,000, 1.825% if between $500,000 to $1 million).
Sponsor’s Attorney Fee, Tax Abatement Reimbursement Fee and Condo Book Offering Plan Reimbursement Fee
The Purchaser is usually asked to pay all these fees by the Seller. The above referenced fees can run from a couple thousand dollars to over ten thousand dollars. They are not required under any law, but as a common practice it is the Purchaser who pays in NYC. Some fees are negotiable, but most of them are not. The total due could run as high as about 4% of the purchase price; therefore, it’s good to know before you make an offer so that you can factor in all the closing costs and extra costs you will have to pay compared with purchasing a second-hand condo.
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Jacqueline Huang Huang & Associates, P.C. 6402 8th Avenue, Suite 405 Brooklyn, NY 11220 Telephone: (718) 435-666 Email: jackiehuang@huanglawfirm.com  |
