EP 41: FAQ – New Developments, Mansion Tax, and Cash Buyers in NYC
The John and Jonathan Sell NYC Podcast: Episode 41
Welcome to the John and Jonathan Sell NYC Podcast, where experienced, expert NYC real estate brokers John Gasdaska and Jonathan Conlon break down what’s happening in the market, what you need to know whether you’re a buyer, seller, or agent, and their insight into the future, with a little bit of fun along the way.
In this week’s episode, John answers some frequently asked questions about New York City real estate. Navigating the market on your own can be challenging, but our team is here to help you understand the ins and outs of buying NYC real estate, including what happens when a new development doesn’t sell out, what the mansion tax is, and whether or not cash buyers in NYC get better deals.
What happens if new developments don’t sell out?
New developments can be more complicated to buy in than resale apartments, simply because the building’s plan has to be declared effective, or 15% of the units need to sell in order for any of them to close. If a new development building can’t get to that magic number, it can spell financial trouble for the developer. Sometimes they will lower prices, cut bigger deals, increase buyer incentives, or simply rent out the units to get through.
If you’ve purchased a new development apartment and it doesn’t sell out, the value of your home can go down temporarily, and it might be harder to refinance.
If you are buying in a smaller development, there is much more risk. As in any transaction, having a great real estate broker and real estate attorney on your side can help you navigate the new development marketplace.
What is the mansion tax?
The mansion tax is imposed by the City of New York, and is a straight tax on the purchase price of any apartment over $1M. As of recording, this ranges from 1% for apartments between $1M-$2M, all the way up to 3.9% for apartments $25M+. The tax is usually paid at closing.
Do cash buyers in NYC have more buying power than financed buyers?
In a marketplace like New York, where there are so many wealthy people, cash buyers are pretty common. But that doesn’t necessarily make cash buyers in NYC more attractive when compared to buyers that are financing, especially if they are willing to waive the financing contingency in their contract. At the end of the day, sellers just want top dollar for their apartments, and don’t worry too much about where the funds are coming from.
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