New Home Sales Reps Won’t Tell You
DC new home sales and marketing firms may overpromise on settlement dates to promote sales, then underdeliver on timelines and more. Worse, they won’t disclose that you’re never going to settle until you’ve lost time, money and patience.
New home sales representatives may quote unrealistic projections for project completion and delivery to spur sales, leading to fallout when buyers are stretched to the limit with long-delayed closings. Revised promises, claims of being ‘almost there!’ or ghosting you when you press for answers won’t help when your quoted delivery date comes and goes—four or five times–as rates rise, alternatives become more expensive and your current living situation becomes untenable. And what if the developer decides not to deliver at all?
Buyers assume risk in contracting to purchase pre-construction homes. Here’s how to get informed and minimize loss:
Getting The Information You Need
Get the facts
It is to your advantage to have as much information as possible if you’re planning to buy a pre-construction new home in Washington DC.
We explain key factors in project progression and suggest points you can research to provide insight into your timeline and delivery date if the sales team and developer are vague, unresponsive or even deceptive.
Key Factors Likely To Impact Your DC New Condo Delivery Date:
- Construction timeline
- Project Compliance FNMA
- Certificate Of Occupancy
- Pre-Sale Requirement
- Your location in the building
New construction timelines are not unbreakable codes, universal mysteries or transcendental equations. Penciling costs and scheduling is part of the initial development process. Sophisticated software and services exist to handle it, and experienced developers already understand the process and potential pitfalls.
Sales & marketing companies review the goalposts when negotiating for the right to sell the project. They read in their senior sales staff, who make it their business to know what the delivery timeline looks like at various stages, if only because settlement is when they’re paid.
If the project is just beginning construction and is projected to take 8 months or longer to complete, there are too many variables and outside influences for the sales team to confidently project delivery accurately. They incur liability if they quote hard dates, so representatives are likely to provide a general timeline, but caution that they can not guarantee it, or be more specific. Accept the explanation, but try to get written agreement that you’ll be provided with informative email updates at key points during construction and sales goalposts that may lengthen the timeline. Then, begin your own due diligence.
Start tracking your timeline with the ‘outside date’ (the contractual deadline by which the developer must complete and deliver or refund your deposit) as a guide. Then, investigate these considerations:
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Bullet Points
- Get a pre-approval first
- Partner with an experienced agent
- Prioritize needs + wants before touring
Brian K
Susan tapped into her network and went out of her way to get me in on a new construction condo in a popular neighborhood in NW DC long before it even hit the market. I had the floor plans, pricing, and videos of the units before they went public.
Potential Financing Considerations
The timeline for new condos depends on the size, scope and property attributes of a project. From land purchase to design, zoning/ANC/HPRB and/or review board approvals, permitting, environmental issue mitigation, razing, demolition and the actual constriction process including any design changes, variance needs and inspections, the construction timeline for a new condominium can take anywhere from eight months to five years or more. Developers should know at sales release time if any of these are likely to cause delivery setbacks.
The construction timeline for new condos can also be impacted by unforeseeable occurances such as the Covid pandemic in 2020-21 that slowed supply and construction for several years.
PROJECT COMPLIANCE | FNMA FINANCING
Even if the condominium construction is completed and units are ready to deliver, the sales team and preferred lender may not be. In many cases, Fannie Mae sets pre-sale requirements the developer must meet before deliveries can commence.
For new or newly converted condo projects at least 50% of the total units in the project or subject legal phase must have been conveyed or be under contract for sale to principal residence or second home purchasers.
- For a specific legal phase or phases in a new project, at least 50% of the total units in the subject legal phase(s), considered together with all prior legal phases, must have been conveyed or be under contract for sale to principal residence or second home purchasers.
- For the purposes of this review process, a project consisting of one building cannot have more than one legal phase
- According to our source (a DVM lender), qualifying contracts don’t have to have passed the right-of-rescission period.
WHAT COUNTS, WHAT DOESN'T
Do all units count toward the 50% presale requirement?
- Doesn’t Count: Investor Units
- Does Count: IZ Units or ADUs
FNMA Waivers
Your developer and lender may negotiate a waiver to allow 30% pre-sales instead of 50%
For project requirements to be eligible for a review waiver, see B4-2.1-02, Waiver of Project Review .
- Refer to the Eligibility Matrix for the maximum allowable CLTV and HCLTV ratios. (For example, a mortgage loan for a unit in a PERS-approved project can have a CLTV ratio up to 105% if it meets the Eligibility Matrix and Community Seconds requirements.)
- The CLTV and HCLTV ratios in this column align with the maximum CLTV and HCLTV ratios that are permitted for projects outside of Florida, as described in B4-2.2-01, Limited Review Process.
NEW AND CONVERTED CONDOS FNMA
B4-2.2-03, Full Review: Additional Eligibility Requirements for Units in New and Newly Converted Condo Projects (06/05/2018)
Introduction
This topic contains information on the Full Review of units in new and newly converted condo projects, including:
LEGAL DOC REVIEW REQUIREMENTS FOR UNITS | NEW OR CONVERTED
The table below provides Fannie Mae’s requirements for the review of the condo project’s legal documents for units in new and newly converted condo projects containing more than four residential units.
Condo Project Legal Document Review Requirements – For Units in New or Newly Converted Condo Projects |
|
---|---|
Limitations on Ability to Sell/Right of First Refusal |
Any right of first refusal in the condo project documents will not adversely impact the rights of a mortgagee or its assignee to:
|
Rights of Condo Mortgagees and Guarantors |
The project documents must give the mortgagee and guarantor of the mortgage on any unit in a condo project the right to timely written notice of:
|
First Mortgagee’s Rights Confirmed | No provision of the condo project documents gives a condo unit owner or any other party priority over any rights of the first mortgagee of the condo unit pursuant to its mortgage in the case of payment to the unit owner of insurance proceeds or condemnation awards for losses to or a taking of condo units and/or common elements. |
Amendments to Documents |
Required provisions related to amendments to project documents are as follow:
|
FULL REVIEW REQUIREMENTS
Full Review Requirements – For Units in New or Newly Converted Condo Projects
“Substantially complete” means that
- a certificate of occupancy or other substantially similar document has been issued by the applicable governmental agency for the project or subject phase; and
- all the units and buildings in the legal phase in which the unit securing the mortgage is located are complete, subject to the installation of buyer selection items, such as appliances.
- For a specific legal phase or phases in a new project, at least 50% of the total units in the subject legal phase(s), considered together with all prior legal phases, must have been conveyed or be under contract for sale to principal residence or second home purchasers.
- For the purposes of this review process, a project consisting of one building cannot have more than one legal phase.
- consistency of future and existing improvements,
- time limitations for expansion, and
- reciprocal easements between legal phases.
- cash deposits,
- letters of credit,
- assignments of certificates of deposit, or
- assignments of other assets that can be easily converted to cash.
Similar arrangements must be provided to support assurances against construction and structural defects. The assurances must
- protect each unit against defects that become apparent within one year from the date of its settlement, and
- cover all common facilities for one year from the date on which units that represent at least 60% of the votes in the HOA have been transferred.