Seattle & Bellevue New Construction Condo Guide by Urban Living
Thinking of buying a new condo? Read this first!
This guide is written by Matt Goyer, a real estate broker and publisher of Urbnlivn, and is based on his 15 years of real estate experience. Matt has helped a number of buyers buy new condos. We wanted to give you an overview of what it takes to buy a new condo in the Seattle area – the good and the bad – and this guide will also give you a good sense of what it is like to work with us. Still have questions? Reach us at [email protected].
Why buy a new condo
There’s a lot to love about a brand new condo versus an older condo:
- Move-in ready with the latest and greatest finishes
- The latest and greatest amenities
- No bidding wars
- If buying “pre-sale”, lock in a price early
Heads up though:
- Square footage variance: the developer may advertise a unit as say 1,000 square feet but when it is all said it done it may be as small as 900 square feet according to the King County assessor. This can be for several reasons – things can change as the building is built, or the developer used a different, usually a more generous way of calculating square footage, than the assessor uses. You should ask how the marketing firm is calculating square footage and how it is likely to differ from the square footage number that you’ll be paying taxes or homeowner dues on.
- Lawsuits: condo owners have the right through the Washington State Condominium Act to sue developers for up to four years after the building completes. In the 2005-2010 condo boom 98% of buildings either sued or settled with their developers. If your homeowner’s association sues your developer, you usually are unable to sell your unit as most lenders won’t lend money to a buyer to buy a condo in a building with ongoing litigation. Once the litigation is resolved, you’ll then have to live through the repairs.
- Sewer capacity charge: since 1990 King County has levied a capacity charge for new connections to the sewer system. Almost all developers pass this charge onto buyers, which is $68.34 a month.
- Window coverings: you will want window coverings, they’re almost never included so be sure to budget $2,500-$10,000+ for them, depending on how fancy you go
And if you’re buying a condo in a building that hasn’t been built yet or is still under construction:
- Floor plan versus reality: having purchased it just by looking at a floor plan, you may be surprised (in a good or bad way) with how it turns out
- Completion time: you’ll need to wait, sometimes years, for it to be built
- Delays: almost every project gets delayed. If you have a home to sell ahead of time, this can make timing that sale challenging
Market volatility: the market doesn’t always go up! Between 2005-2008 many people bought condos before they were complete and when they completed in 2009 or 2010 they were worth less than what they were under contract to pay resulting in many buyers walking away from 5-10% in earnest money
New construction versus an apartment conversion
Most new condos are brand new buildings built from the ground up to be condos. On the other hand, what is known as a conversion is a building that used to be an apartment building (either new or old) that was built as an apartment and later converted to condos.
A building built as condos from the ground up are usually higher quality and more expensive. If you’re looking for better value, or a lower purchase price, buying a unit in a building that used to be apartments can be more cost effective.
Finding new condos
We maintain a new construction pipeline page that shows all the new condos on the market and coming up. Buildings that are actively selling can usually be found on the NWMLS (but not always), so we highly recommend that you use an NWMLS-powered site or app to search for new condos. Wait, what is the NWMLS? The Northwest Multiple Listing Service (NWMLS) is an organization of Seattle area real estate agents who agree to work together to better assist their clients. Real estate sites that get their list of homes for sale from the NWMLS have the most up-to-date information on what is for sale and what has sold.
Universal home-buying tip: No matter where you’re house hunting, look for a site (or app) that’s powered directly by the local MLS. In the fast-moving world of real estate, you don’t want to waste time lusting after homes that may have already been sold!
In the Seattle area, examples of NWMLS-powered real estate sites (or apps) are Redfin, Estately, Windermere and John L Scott. We highly recommend Redfin because we feel it is the easiest to use, has the most features and is available on the web, iPhone and Android. We’re also biased because Matt spent seven years working at Redfin.
What about Zillow, Trulia or Realtor.com? These sites do not receive their home listings directly from the NWMLS, so we recommend against using them. Their listings come instead from individual agents and their brokerages, who may not have the resources to provide the most up-to-date information or remove listings as soon as a home goes off the market.
If you decide to use Redfin, here are a few tips to get the most out of your experience:
- Create an account: This allows you to “Favorite” homes so you can keep track of what you like. You can also share your list of favorites with us!
- Keep tabs on the market: Get a jump on the competition by signing up for Instant Alerts. You’ll receive a notification as soon as a new home comes on the market.
- House hunt on the go: Download the Redfin app for iPhone or Android, so you can keep searching wherever you go.
- Do your research: One great way to understand what to expect in your own search is to look at sold homes. Note how much lower or higher the sale price is from the list price and how long a home was on the market. Look for trends among the types of homes and in the areas you are interested in.
Here’s a few other home search tips:
- Walk Score: See how many restaurants, bars and shops are within walking distance of a home you’re considering.
- Seattle In Progress: See what has been permitted nearby in case you’re worried someone might block your view.
Finding condos not on the MLS
Check our new construction pipeline page to get a list of projects that are coming up that haven’t started sales yet.
Why you should use a buyer’s agent
Don’t be lured into using the listing agent or the agent sitting at the sales center if you’re thinking of buying a new construction condo. The listing agent represents the seller, as does the friendly agent at the sales center. What you want is a buyer’s agent dedicated to representing your interests.
Here are some examples of where a buyer’s agent will add value:
- Save you money: for brand new condos that have been built and are sitting empty, we can often negotiate either a discount or a closing cost credit. This is also true for many of the new condos being delivered in 2021 and beyond.
- Non-standard paperwork: bigger projects will use their own purchase and sale agreements with long builder’s addendums instead of using standardized forms. A good agent will point out to you what you need to know that might be unusual
- Floor plan guidance: we have a lot of experience looking at floor plans and know what makes a good one and what makes a bad one. We’ll help you avoid making a mistake when choosing between units.
- Parking guidance: just as you should be thoughtful about your floor plan, be thoughtful about which parking spot you get, that is, if you have the choice. However, not all developers give you an option to pick your spot.
- Upgrade guidance: many buildings offer upgrades in terms of window coverings, closets, appliances and more. We can tell you which are worth splurging on, and which you should contract out on your own
- Inspection: we highly recommend doing an inspection even though your offer won’t be contingent upon one. You’d be surprised how much gets missed by the builder!
- Post-close: A good buyer’s agent will stay engaged and help you with any issues post closing.
Plus, your buyer’s agent fee is paid by the seller at no cost to you.
How new condos get sold
Reservations: often times when a new condo is just getting started selling they’ll have buyers first enter into a reservation agreement. Usually the way this works is the developer will commit to sell a specific unit to a buyer, but instead of a specific price, they’ll give the buyer a price range for the unit. In exchange the buyer will make a $5,000 refundable deposit. Developers use reservation agreements to test the market and see how much interest there is. If there is a lot of interest they’ll end up pricing at the high end of the range. If there is little interest, they’ll price at the low end of the range, or perhaps cancel the sale of the building and convert the building to apartments.
Purchase and sale: a purchase and sale is a binding commitment that the buyer is buying a specific unit at a specific price. Though the contract likely contains a provision that if the developer doesn’t sell a certain number of units in a certain time frame that they can cancel your purchase and sale so that they can reposition the building as an apartment building.
First come first served: most new buildings take a first-come first-served approach to selling. Back in 2018 this meant that prospective buyers would camp out overnight to be first in line to buy a condo. However, in 2021 interest in new condos is much lower and there is no need to camp overnight.
Lottery: in 2018 for some buildings with high demand the developer would use a lottery style system to determine the order in which prospective buyers could select their units. We don’t see this system being used in 2021 or 2022.
A new condo starts as low as $600 a square foot for a development like Encore in Columbia City. However, most downtown/South Lake Union/Denny Triangle developments will start at $1,000 a square foot and you can easily spend more than $1,500 a square foot.
Also, keep in mind that parking and storage aren’t included in the list prices so add another $60-100k if you want parking and $10-15k for storage.
All condos, new or old, assess a monthly fee known as the homeowners association (HOA) dues. For a new building these are typically $0.90 to $1.00 a square foot a month and usually cover common area maintenance, water, sewer, garbage, recycling, front desk if there is one, etc.
Financing a new condo
Nearly all new construction condos have 2-3 preferred lenders. Usually as part of the process of either doing a hardhat tour or submitting an offer, you’ll be required to get pre-approved with at least one of the preferred lenders, though you’re not obligated to work with them. That said, we usually recommend working with a preferred lender for a number of reasons:
- Incentives: often times you’ll get a preferred interest rate, or a credit towards your closing costs
- Ability to close: these lenders have already done their due diligence and can usually close much faster than a lender who hasn’t closed a loan in the building before
- Interest rate locks: often times they’ll offer the ability to lock a rate long before the building closes
You may be wondering if a preferred lender gets a kickback from the developer, or vice-versa and the short answer is that they don’t as that would be illegal.
Builder quality — get an inspection
New high rise condos are usually pretty well built. But quality will vary between developers and will certainly vary between buildings built from the ground-up to be condos versus buildings built from the ground up to be apartments and then converted to condos.
For buildings that have yet to be built it is hard to assess quality as the team that built the sales center is likely different from the team building the building. For buildings that are complete, it is much easier to get a sense of quality as you can walk the units you’re interested in.
We also recommend having an inspection done to ensure everything works the way it should. Some issues we’ve seen:
- Heaters incorrectly wired so that they don’t function
- Faucets installed incorrectly so that hot and cold is reversed
- Fit and finish issues with painting and drywall
For buildings that are complete, you may be able to negotiate an inspection contingency. For buildings not yet complete, you won’t be able to have an inspection contingency but you will have a walkthrough prior to closing and you should certainly try and bring a home inspector along for this walkthrough. You should definitely do one if possible, and give the report to your builder as part of their “punch list” process or “blue tape walkthrough.” Push to have the builder fix all the issues before closing.
An inspection will typically cost $300-500 and take an hour or so.
Before your warranty is up, re-inspect
We recommend hiring a home inspector to do an inspection a month or so before your warranty expires. Using their report, you should work with your developer to ensure that any issues are addressed before your warranty expires.