How to buy a Pre-Construction Condo in Miami.
When purchasing a Pre-Construction Condo, you will usually follow a 4-step process. There may be a few small differences between new development projects.
STEP 1: RESERVATION
This is when you will find our best prices on units, especially compared to later stages of construction. In order to take advantage, you are able to reserve a unit by placing a 10%-20% deposit and singing a letter of interest or reservation agreement.
This document will help you to know the terms under which the deposit is fully refundable. This is the same as a First Right of Refusal to Purchase in that both the buyer and developer are able to cancel the reservation. The deposit is important as it helps the developer to gauge the interest in the project and will assist with its funding and financing.
Occasionally, you might be able to go straight to a contract without reservation if the project is close to completion. For your protection, you funds will usually be placed in an escrow account which is fully refundable at any time in the pre-purchase stage.
After the Purchase Agreement has been signed, you are typically given 15 days to move forward with the purchase of your Miami Beach condo or void the Agreement for a full refund.
STEP 2: CONTRACT
The second phase of the process comes after the developer has fulfilled the target number of reservation agreements. Your official contract will now be prepared, and we will also work out all the technical and legal details for you.
At this stage, you will have 15 days to decide whether you would like to go ahead with the purchase. It is usually recommended that an attorney reviews the contract to ensure you are absolutely happy with the contents.
After the 15 days, you are then committed to the sale and would lose any deposit placed if you decided not to proceed. Between 30 and 60 days later, you will then sign a purchase agreement and will pay a second installment of 10%.
STEP 3: CONSTRUCTION
As the building is constructed, developers will then require additional down payments at different times. The number of deposits and their percentages may vary from case to case, but they will be specified in the reservation agreement, so there won’t be any surprises.
STEP 4: CLOSING
Finally, when the building’s interior is finished, the developer will obtain a Certificate of Occupancy for you and grant a walk-through for inspection of the property. Assuming you are happy with everything, the closing date will be scheduled. At settlement, all closing costs (please see below for additional expenses) including the remaining balance of the purchase must be paid.
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Some of the benefits of buying pre-construction:
- No taxes on maintenance until closing.
- The benefit of buying at the lower pre-construction price.
- You are getting A-area homes in up-and-coming areas. You just can’t put a price tag on low crime rates, good roads and schools, nice sidewalks, and nice local parks. The people looking to rent in these neighborhoods tend to be your perfect tenants — they are professionals (good income), who care where they live and where their children go to school and, most importantly, they’ll pay their rent in full and on time more often than not.
- With new homes, builders will usually offer a warranty. Typically, they’ll cover anything that gets damaged within the first year. Some provide warranties for as long as 10 years! You won’t need to waste time hunting down bids from foundation specialists or putting the plumber on speed dial. If anything breaks, it’s the builder’s problem — not yours.Further, the home’s appliances have never been used. The water heater won’t conk out, the roof won’t leak, the windows fit — everything is brand-spanking-new. You won’t be answering tenant calls in the middle of the night for quite some time.
- Work with the in-house team
Consider writing your contract with the builder’s mortgage company. This will help the builder feel more comfortable with the contract process. He or she wants to see that you really are pre-approved and that you’re going to close on time. Further, because builders already have relationships with title companies, mortgage companies, and appraisers, you may reap significant discounts by using their preferred suppliers. Consider it a potential gain for both of you.
Don’t let a lofty cap rate on a fixer-upper cloud your judgment. In many cases, a new home can ultimately prove to be a smarter investment in the long run.
You can choose your location, customize the amenities, and, best of all, everything is new. For real estate investors, that peace of mind is priceless.
Typical Construction timeline on High-rise Condominiums:
Approximately 24 months
- Ground breaking
- Driving piles
- Foundation pour
- 1 week per typical floor
- Middle of building
- Finishing all building interiors (about 6-8 months)
- Certificate of Occupancy
Additional fees you will incur:
- Fees Associated with Closing
- Developer Fee (1.75%*)
- Title Insurance (provided by seller)
- Cost of officially recording the deed
- Doc. Stamps to convey the unit
- “Working Capital Contribution”
- 2 (or 3) months Maintenance as initial contribution to the condo association.
- 1st months maintenance will also be a part of the HUD at closing and balance of the actual month.
- “Hook-Up” fees
- FPL charges to hook-up
- The power for every unit
- Water Hook-Up Fee (charged by city)
- Lender Fees (if financed)
*Approximate number – Actual amount may vary depending on developer.
- Some condominiums will require the Byer r to Finishing the unit
- Window treatments
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