Buying New Construction Condos or Homes in Chicago: Where and How Do I Begin?
The prospect of shopping for a new construction condo or home especially in downtown Chicago can be quite daunting, but the rewards of owning a brand new condo or home outweigh the disadvantages if you know the potential pitfalls.
The following are important considerations: overall dollar budget, location, cost per square foot, finishes, upgrades, parking and delivery date. To access the most comprehensive new construction list of condos and homes in Chicago, including floor plans, amenities and price ranges, email me and I will register you for request-free access for one year. This is normally a $300/yr value.
Overall Dollar Budget
To establish a budget for purchasing a home, you should speak with a mortgage professional prior to looking for property. In terms of your budget, keep in mind that parking is usually not included in the purchase price that is quoted by the developer. In addition, in today's market the list price of the unit is typically not negotiable.
The best way to establish a budget is to determine how much money you will need as a down payment and how much you feel comfortable spending. This is all based on your gross income for monthly payments. Remember that the real estate taxes are generally included in your monthly mortgage payment and should be calculated at a minimum of 2% of the purchase price.
If your down payment is less than 20% of the purchase price, your lender will require that you purchase private mortgage insurance (PMI) - this charge will also be included in your monthly payment. Also factored into your monthly expenses are your assessments both for the unit itself and for parking. Finally, add your monthly mortgage payment.
Generally speaking, the higher the density of the area, the more costly the condominium or townhouse will be. When checking out locations, you may want to consider less developed areas of Chicago. These properties are typically less expensive than those in more developed areas. Note, that as density increases with new development, it is likely that your property will gain value resulting in a higher return on your investment.
Cost Per Square Foot
When purchasing new construction, the favored method of comparing value is cost per square foot. Developers use this to initially price their developments. By keeping the cost per square foot in mind, you will be able to compare different properties on an equal basis and determine whether you are purchasing at a favorable price.
When looking at the cost per square foot price, consider whether or not the developer has included such items as granite counter tops, marble bathrooms, and black or stainless appliances as standard features. In Chicago, prices per square foot often range from $324 to as much as $1,200 in the Gold Coast.
You will need to carefully examine which finishes and appliances the developer has included in the base price versus which are considered upgrades. Understand that the more expensive finishes such as granite and marble are not usually included in the base price of a one-bedroom unit.
Be sure to get a detailed list of specifications in writing from the developer indicating the brand and model number of each appliance. Don't be confused by the finishes and appliances that are shown in the models you see, as they may not be the same as those included in the quoted price. Models are typically finished with granite and marble, under mount sinks and hardwood floor laid diagonally. Keep in mind that such features may not be considered standard, particularly in smaller or less expensive units.
As you can imagine, the cost of upgrades can vary considerably. Developers commonly charge their cost plus a 20% mark-up for upgrades . Others may charge even more. Try to determine the costs when you and your realtor are writing up the initial offer. By determining all costs during the contract period, you can reduce the chance that upgrade costs will exceed your budget.
Keep in mind that many new construction units are not ready for occupancy for a year or two. Make sure you understand the importance of having all upgrade costs in writing as part of the initial contract. This will ensure that the costs are at today's prices, rather than calculated at inflated prices one or two years later.
One of the essential elements of resale value is parking. In a loft conversion or a high-rise building, parking can vary from approximately $25,000 to as much as $60,000 depending upon the level of luxury of the building and the availability of parking in the area.
Since parking spaces have dramatically increased in value, you should seriously consider purchasing a space whether or not you currently own a car. Without parking, the later sale of a unit may be more difficult than that of a comparable unit for which parking is included in the price.
Although your contract will specify a delivery date, provisions in the contract will often allow the developer to deliver your unit much later than the specified date without penalty. If this is an important issue to you, make sure to keep in constant contact with your rRealtor during the construction process as delivery dates can be delayed for as long as a year, and in rare occasions even longer. You should also speak with your attorney to incorporate terms into the contract so that your interests are protected in the event this should occur.
Working With A Realtor
Purchasing a new construction condo or home can be a rewarding experience and a wise investment, but there are definitely nuances involved in purchasing new construction. You may want to consider the track record of the developer, the number of "flippers" purchasing in the project, and the percentage of sold units.
You will be best served by using a realtor who is familiar with the new Chicago construction market along with the various developers and their product. With your realtor at hand to answer all your questions, your interests will be represented and protected in all communication with the developer.
If you rely on a real estate professional, you will spare yourself a great deal of aggravation associated with purchasing a new construction home. On top of this, representation will be at no cost to you because the developer pays your realtor's commission.Sheldon Salnick is a Realtor with Rubloff Residential Properties. He has worked with new construction buyers for the last 17 years and has represented over $200 million in new construction. For more information or guidance in the purchase of a new construction home, townhome or condominium, he can be reached at 312.264.5853 , or email him at SSalnick@Rubloff.com.