How does buying pre-construction work in Manhattan?

You purchase directly from the developer (the sponsor) from an offering plan approved by the New York Attorney General, usually before or during construction. The offering plan, not a listing sheet, governs what you are buying: unit specifications, building budget, and the sponsor’s obligations. Contracts are typically signed with a deposit commonly around 10 percent of the purchase price, with some sponsors requiring a further installment as construction progresses. Closing occurs when the building is ready, which can be a year or more after contract.

What closing costs are different in a sponsor sale?

In a typical Manhattan resale the seller pays transfer taxes. In sponsor sales it is common for the purchaser to absorb them, though this is increasingly negotiable in buildings with standing inventory. New York State transfer tax is 0.4 percent (0.65 percent above $3 million for residential), and New York City transfer tax is 1 percent up to $500,000 and 1.425 percent above. The NYC mansion tax applies to buyers on purchases of $1 million or more, starting at 1 percent and rising in steps to 3.9 percent above $25 million. Sponsor deals may also ask the buyer to cover the sponsor’s attorney fee and working-capital contributions.

Pre-construction or resale: which is the better buy?

Pre-construction buys you new product, current amenity standards, and in some buildings early-release pricing with choice of line and floor. Resale buys you certainty: you can see the actual unit, the actual views, and the building’s operating history, and you close on a known date. In a market with negotiable sponsor inventory, the right answer is building-specific, which is why we compare both sets side by side for every search rather than defaulting to either.

What should buyers check before signing a sponsor contract?

• The sponsor’s completed track record, prior buildings, and any history of downsizing amenities or delaying delivery.
• The offering plan’s projected real estate taxes and common charges, and whether they are realistic.
• Deposit protection: where the escrow is held and the conditions for return.
• The percentage of units sold: it affects financing, negotiability, and how the building will feel at move-in.
• Outside dates and your remedies if the sponsor does not deliver on time.