Magnetic Deal of the Month: A $2.8M 3-Bedroom New Development Lesson

or, what goes on behind the scenes in a New Development negotiation

This month, we're taking you behind the scenes of a new development condo deal in Morningside Heights. This charming neighborhood, often considered part of the Upper West Side, is a gem in its own right. With its historic pre-war co-ops, lively eateries, and close ties to Columbia University, it offers a unique blend of academic energy and classic Manhattan living.

While the area is known for its walkability, our focus today is on a recent sale we handled at a stunning, modern tower: The Vanderwater. This building, a joint venture between Savanna Partners and the Jewish Theological Seminary, was completed a few years ago but still had a handful of units available. Why the delay in selling out? A combination of pandemic-era market shifts, protests near campus, and, most importantly,  the broader impact of rising interest rates all contributed to slowing sales.

The Deal: Negotiating a New Development Purchase

Our client was set on a high-floor, 3-bedroom unit at The Vanderwater. With the asking price just under $3 million, they needed expert guidance to secure the best possible deal. Unlike a typical resale, navigating a new development requires a specific strategy. The developer and their capital partners have different priorities than the usual seller, and understanding them is key to a successful negotiation.

Key Questions to Ask in a New Development Deal

Before you start negotiating, you need to arm yourself with information. Here are a few essential questions to ask:

• How far along is the building in its sales process?

• Has the developer been flexible on pricing for previous sales?

• Is this particular unit a hot commodity, or is something holding it back?

• What "extras" are on the table, such as storage units, parking spots, or roof cabanas?

• What are the building-specific closing costs that a buyer is expected to cover?

Beyond the Price Tag: Uncovering Credits and Costs

This is where a savvy real estate broker truly proves their worth. In a new development deal, the final sales price can be deceiving. Developers have a strong incentive to keep the public-facing price high to protect the value for existing owners. Instead of lowering the sticker price, they often offer substantial credits and incentives to sweeten the deal.

These can include:

• Credits for closing costs that are typically paid by the seller, such as state and city transfer taxes.

• Monthly building charge credits to offset common charges for a period of time.

• Allowances for custom renovations or built-ins.

• Inclusion of “extras” like storage units or parking spots.

In addition to standard closing costs, new development buyers may also be responsible for unique fees, like contributions to the building's reserve fund or the cost of the building manager’s unit.

Our Negotiation: Some Lessons in Strategy

With all of this in mind, our negotiation began. We knew the developer needed to move the final 3-bedroom unit that had West-facing windows, so we came in with a strong, well-supported offer that factored in market conditions. We requested a comprehensive package of credits, including coverage for the legal fees and transfer taxes they were trying to pass on, a credit for the building reserve fund, and even a credit to cover common charges for a period of months. You could say that we threw in the kitchen sink.

The negotiation wasn’t simple. It involved back-and-forth discussions with the developer's capital partners and took three months to get the deal approved. Our client ultimately secured a beautiful apartment with stunning river-facing windows and a credit for the wall removal they wanted, but the process wasn't without its challenges. The New York City Department of Buildings unexpectedly delayed the work, causing a six-week setback and an extension of the mortgage rate. That's a post for another time. 

This experience highlights a key factor in buying new developments: flexibility is a must. The good news is our buyer had it, and after a four-month wait, they finally completed their final walkthrough and closed on their dream Upper West Side apartment.

Congratulations to our buyers on their beautiful new home in one of Manhattan's best neighborhoods! The area continues to thrive, with new additions like Claremont Hall adding to its value and appeal.

Whether you're looking to buy your first New York City condo or sell your current property, navigating the market can be complex. Give us a call, text, or email to discuss your real estate goals. We’d love to help you find the best value and the perfect home. - Scott & Magnetic