When buying into new construction, there are many factors different from buying other homes. For just a few examples, did you know:
- when you sign into a building you waive your right to a realtor.
- building owners try to hide comparative pricing for units so they can charge more. The price for the exact same layout goes up about $20,000 for each floor higher you go.
- you must be pre-approved by the building’s lender.
Don’t worry, I have the 8 Top Things To Know About Buying New Construction in San Francisco listed below to help you in the process. Plus, I am happy to talk you through any of it.
When it comes to navigating new construction, there is a big advantage of having realtor there. We know the facts, know what to ask, can hold your hand through every step, and are there to look out for your best interest – and it doesn’t cost you anything.
Why would you go into this unprotected? When you get these curve balls thrown at you – you’ll be glad you have someone on your side.
TOP 8 Things To Know About Buying New Construction in San Francisco
1. The buyer pays the transfer tax
In all other purchases in the city the seller pays the transfer tax. On new construction, the buyer pays it at the rate:
a. <$1Million= $6.80 per $K
b. >$1Million= $7.50 per $K
This means you need to budget to pay the transfer tax at closing. Example: if the sale
price is $800,000, you will pay $5,440.
2. Appliances–some included, most not
Usually the stove and microwave are included. Microwave and stove are often included, but you will most likely need to buy a fridge, washer/dryer. It varies from development to development. You need to ask specifically which appliances are included, so you can budget what you need to buy.
3. Carpet v. Wood Floors
In many properties getting hardwood floors requires an upgrade. Budget $10,000 for hardwood. On the positive side, wood floors do better on resale than carpet.
4. Let the builder supply it for you
Most developments have a sales center to sell you home essentials like:
b. Carpets or hardwood floors
c. Glass shower doors
d. Track lighting
You may be thinking it would be cheaper to purchase and install these on your own. You are correct, but here’s why it is often better, and may even save you money, to let the builder supply them.You can’t have your vendor start work or deliver until after the property closes. So instead of a move-in ready experience you may have to wait to move in. Or you will be trying to move in and live in a construction zone, and may have to arrange to be home from work to manage vendors.
If you get it from the builder – you can move right in. Yes, it will cost you more, but it will let you move in sooner, have less hassle, and possibly let you avoid paying double mortgage (or rent) while you wait to your apartment to be ready.
5. One Year Fit and Finish Warranty. SB 800
SB800 requires Builders to provide homeowners with a minimum one-year express warranty covering the “fit and finish” of cabinets, mirrors, flooring, interior and exterior walls, counter tops, paint finishes and trim. This law controls the rights and obligations of homeowners to seek damages from a builder for construction defects. It also sets forth the rights and obligations of the homeowner and the builder with respect to claims procedures, construction standards, required warranties and allowable damages for the applicable new residential properties which were built on or after Jan 1, 2003.This is very special – no other home buyers get a 1 year warranty. If you pull a drawer and the nob breaks off – you call the developer, he comes and fixes it. No else gets this! It’s peace of mind.
6. Buy off plan! Don’t wait until building is built. Presale.
If you wait for the property to come onto MLS you are missing the good ones. You should already be visiting the property before it officially goes on the market. We can get you in the door for an early preview.
Builders release properties in phases. Usually they release from the first floor up — because the lower floors, which lack beautiful SF views, are harder to sell once the building is complete. People excited and eager to get a property jump in for an early purchase.
If you want a higher floor view, you’ll have to wait for that phase to be built — or you can “buy off plan” — which can also get you a better deal.
The solution: Buy off Plan When you buy off plan, you can to get the best floor and the best price. Many people are not comfortable doing this because it requires picking the property based on the “plan,” the artist’s rendering of what it will look like. It may feel like you’re taking a risk. But once the apartment is built and everyone can walk in and see it –the prices go up.
Be brave. We can go with you to the building showroom to look at the floor plan, video rendering of the apartment, and artist rendering of the courtyard and fountain, etc to help you get a feel for what you really want. They may have a kitchen and bathroom mock up set up to show you those finishes along with the showroom of other finishes (blinds, etc) in the design center.
7. Initial deposit required, bring your checkbook. 3% down
If you see a condo you want, you sign the paperwork that day and put down your 3% deposit. They are taking it off the market for you. You have a set number of days to complete the full purchase contract or pull out of the contract. Your 3% deposit holds it until closing when you pay your full down payment (minus the 3% you’ve already put down).
8. Do you have to use the buildings lender?
Many people get confused about this part. First, go get preapproved by your own lender. However, the building will tell you, “you have to use our lender”. What? Isn’t that illegal? Yes, no one can force you to use a lender, however, the builders can ask you to get an additional preapproval from their preferred lender. After that, you can choose whether to use their lender or your own lender.
The “catch” — here’s how they get away with it:
Many lenders cannot close a purchase until a set percent of all units in a buidling are sold. So if you are one of the first buyers in, you may have to go with the buildings lender. HINT: So, when get preapproved by your own lender, save all those documents to hand to the buildings lender.