PRE-CONSTRUCTION CONDO PURCHASE – THE 4 STEP PROCESS
With so much foreign investment continuously coming into Miami, new construction projects are rising all over the city. Coconut Grove, Doral, Brickell, Downtown, Edgewater, Midtown, South Beach, Bal Harbour, Sunny Isles and Aventura all make part of Miamiâ€™s spectacular transformation. Chic urban mid-rises, designer condo-hotels, ultra-luxurious high-rises, Bayfront & Oceanfront units, Lofts, entire-floor apartments, home-in-the-sky penthouses, you name it, there will be a condo for every taste. With all these fantastic opportunities available, now is a great time to invest in a new development and participate in the cityâ€™s expanding real estate market.
A Pre-Construction Condo purchase usually involves a 4-step process. Please note that there may be some differences between projects. Having an unbiased Realtor assist with your selection and explain the risks involved with this type of investment can be of great help. Also, it is vital that you review and fully understand the Developerâ€™s Agreement so that you know exactly what you are entitled to. Now to the process:
STEP 1: RESERVATION
During this first stage, the public will find the lowest prices for the units when compared to future stages as an incentive offered by the developer. The developer does a Reservation phase in order to jump-start sales before having all permits in place and the approval of the Condominium Documents by the Florida State Government. Buyers will have the chance to Reserve a unit by placing a 10%-20% deposit and signing a Letter of Interest or Reservation Agreement. This document will state the terms under which the deposit is fully refundable. The agreement is the same as a First Right of Refusal to Purchase, where both the buyer and the developer have the right to cancel the Reservation. Finally, by taking Reservation deposits, the developer will be able to gauge the real interest for the project and assist with its funding and financing.
STEP 2: CONTRACT
The second phase of the process comes after the developer fulfills the target number of Reservation Agreements. At this time, all the technical and legal details (Covenants/Restrictions/Bylaws) of the project are outlined in the Condominium Documents and the official contracts are prepared. The buyer is then presented with the Condo Docs and the Hard-Contract (the binding agreement that converts the Reservation to a Sale) for review, approval and signature. The buyer will be granted a 15 calendar day Rescission Period (for Condos) so he/she can decide to go ahead with the purchase or withdraw with a full refund. Hiring an attorney to review the contract is often recommended. After the Rescission Period, the buyer is committed and any default will result in a loss of the deposit.
STEP 3: CONSTRUCTION
As the building is constructed, developers will require additional down payments in installments at different milestones. The number of deposits and their percentages may vary from case to case but they will be specified in the Reservation Agreement or Contract. Usually, an additional 20% at â€œGround Breakingâ€, another 20% when the floor of the unit in question is finished, and 20% more when the building is â€œTopped Offâ€.
STEP 4: CLOSING
Finally, when the buildingâ€™s interiors are finished, the developer will obtain a Certificate of Occupancy for the buyer and grant a walk-through for inspection of the unit. Assuming everything is in order and OK with the buyer, the closing date will be scheduled. At settlement, all closing costs including the remaining balance of the purchase must be paid.