New Devs: No Negotiations For You!

A: So you've been looking for a new home in NYC for the past few months and you have seen a few good ones so far, but not the one that 'blows you away'. Then, you visit a brand new development set for occupancy by Fall of 2006, with every amenity you can possibly think of and design features to die for! Only one problem, the developer is asking $1,350 a square foot and its TAKE IT OR LEAVE IT! I ask WHY!

What makes developers' products so different from existing products on the market now that their asking prices are non-negotiable? Is it because each unit must bring in a certain amount of profit? Is it because new developments are immune to a housing slowdown and are worth every penny no matter how much housing corrects? Is it because early buyers of a new development paid a certain price and later buyers MUST pay more? What is it that makes these properties non-negotiable?

Unfortunately for me I am not connected with friends that are developers so I'm left to speculate over this 'outdated' behavior of not being able to negotiate on a new development property. It just doesn't make sense to me. The one thing that I do know and that no developer could ever argue with is:

A PROPERTY IS WORTH ONLY WHAT A BUYER IS WILLING TO PAY FOR IT

In a New York City housing market where buyers have much more control than they did a year ago, where borrowing costs are rising, where inventory and time on the market is increasing, where the costs of raw materials are starting to correct, why are new development properties special in the sense that buyers can't submit a bid and get a response to move a unit?

If developers stand pat on this behavior and refuse to accept any price lower than the pre-determined asking price, what will happen to all the unsold inventory should the housing market continue to cool over the years to come? Are developers immune to foreclosure? What about all the loans/investors that helped backed the project; don't they expect to see a return on their investment? I wonder how much lower the developer can go with the asking price to still bring in a profit?

It will be very interesting to observe what happens over the next few years as many new developments start to come to market; will developers compete with each other by lowering prices? Take a look at a portion of new developments that are currently being marketed (list excludes a ton of new devs in Lower Manhattan & Harlem):

CHELSEA
Verde Chelsea
Slate Condos
Remy - 101 W 28th Street
Onyx Chelsea - 261 W 28th Street
Chelsea House - 130 W 19th Street
555 W 23rd Street

W. VILLAGE
744 Greenwich Street
147 Waverly Place

TRIBECA
1 York Street
Tribeca Summit
255 Hudson
145 Hudson

SOHO
21 Mercer Street
350 W Broadway
40 Mercer Street
7 Wooster

E. VILLAGE
One Ten Third
254 E 2nd Street
One Avenue B

GRAMERCY
Landmark 17
Abbey Condominium

MURRAY HILL
m127
The Benson
The Parkwood

MIDTOWN
The Milan - 300 E 55th Street
The Capri
The Veneto

UPPER WEST SIDE
The Avery
The Ariel
The Hudson Condos
220 W 93rd Street

UPPER EAST SIDE
Barbizon63
The Stanhope - 995 Fifth Avenu
One Carnegie Hill
The Arcadia
The Cielo
Sutton 57

Now I'm not saying that these new buildings aren't gorgeous and worth every penny, I'm just saying that the # of buyers out there that can afford to pay $1,300+ a square foot in NYC are dwindling as the housing market cools. There certainly isn't a frenzy to buy these products, so I would expect developers to offer incentives first before lowering any asking prices or accepting lower offers. Look for these types of incentives:

1. Closing Costs Included in Sales Price - Look for developers to start with this incentive to buyers!

2. Flat Screen TV Included w/ Purchase - I don't know what it is about flat screens but they seem to go great with marketing a new property. Expect this to be one of a few possible products to be included in the deal.

UrbanDigs Says: The only way to negotiate on a new development property is to NOT buy during pre-construction marketing and wait for a speculative investor who did purchase with the intent of flipping to close and settle for a purchase price to below the price they paid. I do not know of any specific transactions thus far that shows recent speculative flippers losing $$$ on the deal, but then again it's not such a far out thought either. Keep an eye on these buildings as they start closing on pre-constrcution deals to see if you can negotiate a sweeter deal than the first owner did!