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New York is Test Driving Condos. Should DC?

by Shilpi Paul

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One Brooklyn Bridge, a building where residents can test-drive condos.

Buying a condo often requires a leap of faith. What is the neighborhood like at 2am? Is the upstairs neighbor a stomper? How noisy does it get? In order to answer these questions and eliminate buyer’s remorse, several New York buildings are trying out a new strategy: test-driving condos.

Earlier this week, the Wall Street Journal reported on the trend, which allows would-be buyers to rent a unit before cracking open their nest eggs and committing to mortgage payments.

Interested buyers spend a few months renting a unit in a building they are interested in, feeling out the neighborhood and the layout. If they are happy, the residents can either buy the place or find a similar unit for sale in the building.

The benefits to the buyers are clear: they know exactly what they are investing in. While there is some potential that a desirable property will appreciate in price (and become less affordable) while the resident is testing it out, the security of investing only when they know it is what they want may be worth it.

For the buildings, it’s a slightly riskier proposition. From the Wall Street Journal:

There can be downsides for developers, warns Stephen Kliegerman, Halstead’s executive director of development marketing. “It’s a good idea for an emerging marketplace. But for a developer, it’s also risky, because if it doesn’t go well, the building gets tainted. It’s seen as a building that failed to entice people.”

In DC, we’re used to seeing a clear line between rental and condo buildings, although occasionally the Tenant Opportunity to Purchase act kicks in to allow a renter first dibs at a buildings that is contracted to sell. But a conscious plan like test-driving hasn’t been seen. Would something like this work in the District?

See other articles related to: renting, rent vs buy, new york, editors choice, dclofts

This article originally published at http://dc.urbanturf.com/articles/blog/new_yorks_test_driven_condos/5855

7 Comments

  1. Diana said at 11:10 am on Thursday August 2, 2012:

    I think it’s a great idea in theory, but agree with Kliegerman that it could taint the building if it doesn’t go well.

  1. JP said at 2:42 pm on Thursday August 2, 2012:

    This seems like a bad idea from the developers perspective.  It takes 1-2 months for all of the hidden defects in the unit to stand out.  Furthermore, many first time buyers can’t anticipate all of the potential problems until they move in and realize how bad it can be to own.

  1. JimS said at 3:03 pm on Thursday August 2, 2012:

    I wonder how they get mortgage financing for the condos that do sell.  Does Fannie and FHA approve buildings with structures such as these?  I’d be surprised.

  1. Rob said at 10:13 am on Friday August 3, 2012:

    I don’t see how this is a good deal to developers in a hot market in DC. In a slow market where people need extra assurance, maybe… But in a hot market where there are multiple bids coming in for properties? What’s the point?

  1. Eric said at 10:55 am on Friday August 3, 2012:

    I think this could be a good thing for certain neighborhoods of DC and maybe for houses if possible. The trendy neighborhoods don’t need it but maybe it would work for emerging areas like Brightwood, Woodridge, or Trinidad. I’m a young professional and looking to buy a house. We can’t afford over $400,000. I am attracted to some homes in neighborhoods that I am not especially familiar with. I would love the opportunity to rent for a month before buying. It would make it much easier to convince my wife to consider the neighborhood.

  1. BlairT said at 3:47 pm on Thursday October 4, 2012:

    This is a wonderful, yet smart idea for the Washington, DC direct market to put firth into action given the large amount of approved projects for that market. Or just sell condo’s/apartments from the start, or just half.

  1. BlairT said at 3:50 pm on Thursday October 4, 2012:

    Plus, maybe then some of these local neighborhood associations would calm down a little bit, due to the redevelopment that is taking place north of the Capital, vs if your south.

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