Comprehensive Guide to Buying a Pre-construction Property or Condo in Miami
by Sep Niakan | May 22, 2017
- Why You Need to Read This Miami Pre-construction Condo Guide
- Miami Pre-Construction Phases
- How to Negotiate the Best Miami Pre-Construction Deal
- How to Finance Pre-Construction Property
- Closing Costs for Pre-Construction Properties
- Choosing the Right Miami Neighborhood and Project for Your Pre-Construction Purchase
- List of Miami Pre-Construction and New Construction Properties
- Tips on How to Cancel or Get Out of a Pre-Construction Contract
- Miami Pre-Construction Frequently Asked Questions
So you are thinking about buying a condo in Miami either as an investment, a place to call home or a pie de terre for you and your family to visit whenever you wish. Regardless of the reason, buying a Miami condo should be a pleasurable experience that you can enjoy both financially and for your lifestyle.
NOTE: This guide is meant to be comprehensive starting point for you to get an initial understanding Miami condo pre-construction, but it should not be used as a replacement for legal or other professional advice. Every condo and situation is different, and unless we are privy to the exact pre-construction contract and condo you intend to buy and we are the ones signing as your realtor on the dotted line, we can’t make any guarantees to you.
Why Buy Pre-Construction
You might be buying a pre-construction condo in Miami for one of these reasons:
1. You want to lock in a beautiful condo at lower prices so you can benefit from rising real estate prices, while not actually having to worry about maintaining the real estate while it is being built
2. You love the fresh condo smell and knowing that you are the first owner.
3. You like being in charge of your own destiny, by having first choice at exactly the floor plan you want and exactly what floor you want -- options only pre-construction can offer.
If you are going to buy it, buy it right
If you are going to buy a pre-construction condo in Miami, here at CondoBlackBook, we want to make sure you do it right. This is the first time anyone has ever put together this anything-you-ever-wanted-to-know about preconstruction buying guide to make sure you have all your bases covered and you end up in a great condo that’s right for you in every way.
If we can save you a few dollars or a few headaches with any of the below pre-construction buying tips, that’s all we want to know!
When you are starting your search, you will get to condo projects at different stages of their development, and each stage has its own benefits. You definitely want to weigh in on which suits you best based on the factors we discuss below.
Pre-Construction Phase 1: Reservation
In this phase the developer typically offers deep discounts for the buyers willing to jump onto the project early on to help the developer create buzz and get a strong pre-launch for the project. Typically the developer has all the floor plans and initial design of the building. They usually have selected initial or final finishes, appliances, etc, so you will have a very strong idea of how your final unit will look like. The building plans are still in approval stages with the city, and the developer has also submitted for approval to officially register the condominium with the state of Florida. During this phase the buyer is requested to sign a non-binding Reservation Agreement to secure their selected unit and must provide a 10% deposit to secure it.
- Low deposit requirement;
- Wider selection of units to choose from;
- Lowest prices;
- No penalty to cancel at any time.
- Some details about the building may change;
- Some unknowns remain;
- Occasionally the project may not be built (your deposit will be returned).
Pre-Construction Phase 2: Contract
At this point the developer has received approval on its plans from the city and also has received official approval for its Declaration of Condominium with the state of Florida. This typically happens 3-6 months after the beginning of the Reservation phase. Now the developer can officially go under contract for its pre-construction units. You will receive a developer contract and also the full condominium documents. At this time the developer will require a total of 20% (If you already paid 10% reservation fee then you will pay the 10% remaining balance).
- What you see is what you get;
- More certainty that the condo will be built;
- Below-market prices.
- Larger deposit required (typically 20%+);
- You only have 15 days to cancel and then you are obligated to move forward or lose your deposit;
- You may have less units to choose from.
Pre-Construction Phase 3: Construction
Construction begins with “groundbreaking” where the developer starts building the foundation of the project. At this point, the developer typically requests an additional 10+% deposit, and then at certain milestones of construction such as when reach the “top off” (i.e. when they pour the concrete at the top of the building), they will request deposits until they reach 50% total deposit.
- 2 years or less away from Closing;
- Building plans and finishes are most certain;
- Below-market prices.
- Less selection on inventory;
- Deposit requirement will likely be 30-50% depending on time of entry.
Pre-Construction Phase 4: Completion/Closing
“Closing” is the day the complete monies are exchanged with the seller/developer and the buyer becomes the official owner of the property. Once the developer receives the Certificate of Occupancy (CO) from the County, which gives permission for people to start residing in the property, the developer will send out letters requesting closing within 30-days.
- See the finished product before buying.
- Close-to-market prices;
- Less selection of condo inventory.
Pre-Construction Phase 5: New Construction Re-sales
After pre-constructions buyers begin to close, some may want to resell their units. Sometimes this still creates an opportunity to receive a discount on market price, and other times it provides a convenient opportunity to buy a unit that has already had the final finishes and interior design completed by the first owner.
- See the finished product before buying;
- May already have final touches and upgrades;
- More flexible move-in options;
- Developer fee already paid.
- More likely buying at or close to current market prices;
- Less selection of condo inventory.
1. Timing. We find that developers are most flexible in negotiations during specific thresholds
- Of course, if the market is soft. Consult your real estate broker on the latest market statistics
- When they are close to 50% sales
- Right after they have their construction loan
- When they have their last remaining units left. The developer is many time ready to sell and move on.
2. Parking. Sometimes you can get an extra parking space thrown into the deal.
3. Developer Fees. These can be negotiated down or wiped out altogether
4. Finishes (i.e. flooring upgrades, carpet credit, etc)
5. Your Real Estate Agent. Many agents are more hungry for the sale in front of them than for the value of the long-term relationship that working with you can bring. Hire a pro who will negotiate on your behalf and looks out for the fine details that put you in the best position. Negotiating with developers is not easy. Sometimes it takes weeks, and many times you have to know who to talk to up the ladder.
Pre-construction properties are almost always cash contracts. This doesn’t mean that you can’t get a loan or financing for your pre-construction property. It simply means that if you can’t get a loan to close on the condo unit, you won’t be able to use that as an excuse to get your deposit back. For each project, there are lenders that are able to offer pre-construction financing.
It is easy to get surprised at closing when you get your closing or settlement statement. Here are the things you will need to look out for at your pre-construction condo closing.
- Developer fee. Usually from 1.5-2.7%. Sometimes you can negotiate this out.
- Title insurance. This could be included in the developer fee.
- Operating Account / Reserves. You will always be asked to pay 2 months worth of association fees to help build the initial operating account, and possibly the accounts the association will for replacement reserves (savings for when major items in the building need to be replaced)
- Association fee. 1 month association fee in advance
- Lender Closing Fees. If you are financing your pre-construction property, your lender will have a number of closing fees including, origination fees, lender title insurance, appraisal fee, and possibly others.
Choosing the right neighborhood and project comes down to lifestyle and budget. Each neighborhood and condo building has its benefits. We have a comprehensive review of each neighborhood, and you can also search each neighborhood for the pre-construction condo right for you to buy.
Arts & Entertainment District Pre-Construction Condos for sale
Edgewater Pre-Construction Condos for sale
Biscayne Corridor North Pre-Construction Condos for sale
Design District / Buena Vista Pre-Construction Condos for sale
Coral Way Pre-Construction Condos for sale
Dadeland Pre-Construction Condos for sale
Downtown Miami Pre-Construction Condos for sale
Wynwood Pre-Construction Condos for sale
Coconut Grove Pre-Construction Condos for sale
Miami River Pre-Construction Condos for sale
Brickell Pre-Construction Condos for sale
Brickell Key Pre-Construction Condos for sale
Upper East Side Pre-Construction Condos for sale
Hollywood Pre-Construction Condos for sale
Aventura Pre-Construction Condos for sale
Bal Harbour Pre-Construction Condos for sale
Coral Gables Pre-Construction Condos for sale
Hallandale Beach Pre-Construction Condos for sale
Key Biscayne Pre-Construction Condos for sale
North Bay Village Pre-Construction Condos for sale
North Miami Beach Pre-Construction Condos for sale
Sunny Isles Beach Pre-Construction Condos for sale
You will likely be best off with a lawyer if you need to cancel your pre-construction contract. Some things your lawyer will likely look through to find a way out are:
- Condo docs. If there were any amendments to the condo docs from when you first saw them.
- Construction timelines. If the developer promised certain condo construction timelines in the contract but didn’t deliver.
- Defects/Variations. If there were any material defects or differences in what you were promised and what was delivered.
Do You Have More Questions?
Check out our pre-construction frequently asked questions here.
Or call the pre-construction condo experts at 786-930-4220.
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