I am considering buying a condo that is has been just converted, but with less than 50% sold. Is that risky?

Asked by Anonymous, New York, NY Mon Apr 6, 2009

There seems to be gutted renovations done to the apts. How do I find out if there may be more issues with with building? It's a pre-war building so repairs appear to be likely although the brokers say that it's been fixed.

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Irina Karan, Agent, Aventura, FL
Thu Oct 10, 2013
It's good to check the building department, you can even request a meeting with the developer, contractors/architects - anybody you want - to know what you need to know.

I agree to adding protective clauses, but there are other aspects of the purchase we don't know from your post (like do you need financing?).

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
IrinaKaran@gmail.com
0 votes
Andrew Watson, Agent, brooklyn, NY
Thu Jul 25, 2013
Your attorney or lender will do a title report that will uncover all the issues with the building.
0 votes
Elena Ravich,…, Agent, New York City, NY
Tue Jul 23, 2013
In general, yes - buying in a new condo conversion is more risky than buying in an established condo building. However, buyers will also benefit on the upside when it ithe project becomes successful and fully sold and prices go higher. You should find out, which bank(s) have this condo conversion approved for financing and speak with these guys. These banks have done a thorough due diligence on the project before approving it for financing and should be able to provide more details about the building and the risks. Condo offering plan would also have a lot of information - your attorney will have to review it and all the amendments. Your broker should be able to find out about the developer, its track record, what work has already been done on the building and what else will be done and at what time-frame....
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Jenet Levy, Agent, New York, NY
Thu Apr 16, 2009
Actually, the new Fannie Mae and Freddie Mac guidelines have very recently changed and a building where the sponsor owns more than 30% will not be approved by a major lender that follows these guidelines. This doesn't only apply to new conversions. I have a current deal at Ruppert-Yorkville Towers on 3rd Ave. and 91st Street, which has been a condo for many years now and buyers never had a problem buying there. My buyer was recently turned down because the sponsor still owns 33%. Until very recently it was 50% and she would have been fine. Yes, you could run into a problem. Similarly I have a listing at 20 Pine St. in the Financial District and since the new regulations went into effect, I was holding my breath waiting for it to get to 70% sold. Fortunately now we have a deal and it is 80% sold (or in contract, which counts). See if there is sponsor financing or find out if they have a particular arrangement with a lender. You definitely want a mortgage contingency in your contract just to make sure you don't lose your deposit if you can't get financing.

Jenet Levy
0 votes
Yocari Lara, , 10013
Thu Apr 16, 2009
Hi Anon,

Richard and Glenn are right. Just also try to assess your risk tolerance for this purchase - what is your exit strategy if the building does not complete it's transformation.

Speak with Mortgage professionals at banks but also Mortgage brokers who have access to many banks (including local and regional banks,) and see who has the best plan to get you into a 50% sold building. 51% is the magic number on a building that is already built but not finished.

Call me if you need any clarification on any of the above. 646.442.7407

Good Luck!
0 votes
Glenn Minnick, , Upper West Side, New York, NY
Wed Apr 8, 2009
It all depends on how reputable the sponsor/builder is. Also you need to realize that it will be extremely difficult to get financing, most banks now want a building to be at least 70% sold. They're also asking for between 30-50% cash down...especially for new condo conversions.
0 votes
Everett Perry, Agent, Fresh Meadows, NY
Tue Apr 7, 2009
All you need to do is have your atty add a clause in the contract that gets you a full refund if the deal cant close or doesn't close in a certain amount of time.

Buyers don't realize that they can send out time of the essence letters on purchases.
Web Reference:  http://uvpinc.net
0 votes
Jamal Hadi, Agent, Scarsdale, NY
Tue Apr 7, 2009
Look at teh reputation of the company that is converting it. In this market it still might be risky.
0 votes
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