ChitownLiving | Chicago Real Estate + Life

Having worked with many Chicago buyers in the purchase of new construction properties (from condo to single family), I decided to outline some thoughts. We heard developers do not negotiate, do they? - This is one of the most commonly asked questions from my buyer clients. In short, the answer (or non-answer) is some do … and some don’t. A developer is just a person or group of individuals with a big mortgage and financial objectives just like a homeowner. You never know until you ask but some indicators are as follows:

• Project Phase - Projects getting off the ground are often priced at pre-construction levels. A price increase pattern could be to have a pre-construction price (hole in ground), increase price when sales center is established, increase price when 25%/50%/75% sold, increase price when building is built and first unit is available. If any units are left then create the perception of value with a developer closeout. At any phase, determine whether the price being asked is truly an incentve or just hype.
• Percent Sold/Market Time - In many cases, developments that are in the initial phases or are not selling well with high market time will be more open to negotiation on price and upgrades. Projects in close-out phase often will have close-out specials.
• Project Size - Larger projects represented by huge developers are often less flexible. Smaller developers tend to be more flexible.
• Developer Size - Again, smaller developers will often be more open to negotiation. They are often more accessible and human than large developers.
• Marketability - Hot projects are just that, hot. They have great finishes, location, and are priced well resulting in less developer flexibility.

Ask your agent for advice on all of the above. They can assist in differentiating between hype and real value. Even though the listing agent says the developer will not negotiate, can we still negotiate? - Yes, and taking some of the factors above into account, you should. In many cases the listing agent is a real estate agent for the developer and not employed by the developer directly. All offers must be presented, and the developer must make the decision … not the agent. If asking for upgrades, what should we ask for? - Fortunately, in the Chicago area, the trend has been to deliver units with high-end upgrades as a standard package. In many cases such things as crown molding, steam showers, 1 3/4 inch granite, Grohe fixtures, Toto toilets, Brazillian Cherry floors, etc. all come standard. In situations where this is not the case, the developer should provide a list of standard finishes and a list of potential upgrades to choose from. Working from the list is a safe bet as the developer often can get things done at lower cost. Use your buyer agent to work through the upgrade list and provide suggestions as to things that may be best for resale. If no upgrade list is provided, at a bare minumum ask for a list of standard finishes (and appliances) delivered with the unit. Again, use your agent to request upgrades. Bottom line in all cases is to be realistic as a buyer. Can we visit sales centers on our own without an agent? - You can, but if you want representation, be sure to work with your buyer agent on this. In most cases, the agent needs to accompany on the first visit, or at a bare minimum, the sales center needs to be notified you are visiting and are represented. The full commission will be paid regardless of whether you have an agent. Remember, even tough the listing agent gets you coffee and makes you comfy, they represent the seller, not the buyer, so why enter into the situation unrepresented. We have been asked to sign a contract different from the Chicago Association of Realtors contract, why? - New developments are typically under the control of the developer until a certain percent has been sold/closed. As a result, new construction is subject to a developer contract. As might be expected, the contract is written to protect the developer. The contract is typically subject to an attorney revie period. What if things are not completed when we move in? - In new construction they never are. There are always odds and ends that need to be completed. Prior to move-in we will have a formal walkthrough and develop a punch list of items the developer needs to addess. I always recommend having a licensed inspector accompany during the walkthrough and assist in the punch list creation. If you want an inspection at every construction stage, many inspectors can conduct a pre-drywall and post-drywall inspection. Make sure the contact allows accesss for this. It is typical to have items on the punch list completed within an agreed upon time period from close. Many more items to address, but hopefully my ramblings above will be of help. If interested in purchasing new construction and need some advice please don’t hesitate to contact me so we can discuss the details.