Pre-construction means buying a home, usually a condominium unit, before the building is finished, sometimes before construction starts. Miami-Dade and Broward have an active new-development market, with many projects in Downtown Miami and Brickell, Sunny Isles Beach and along the coast.
It can be a good way to buy new construction in a location you want, at today’s price, with time to plan. It also comes with risks that resale buyers do not face. Here is what to understand before you sign.
How a Pre-Construction Purchase Works
- Reservation. Some projects take a reservation deposit to hold a unit before contracts are issued.
- Contract. You sign the developer’s purchase agreement and receive the condominium documents.
- Deposits. You pay deposits on a set schedule, often in stages tied to dates or construction milestones.
- Construction. The building is built. This commonly takes years, not months.
- Completion and closing. When the building receives its certificate of occupancy, you are notified, complete a walk-through, arrange financing or funds, and close on the balance.
The Developer Matters
You are relying on the developer to finish the building, to the quality promised, and to hand over a well-run association. Look at:
- The developer’s completed projects and how they have held up
- The project’s financing status and whether construction has started
- The architect, builder and management company
- How the developer has handled delays and changes on past projects
Deposit Schedules
Deposit structures vary by project. They are typically paid in installments, and the total paid before closing can be a substantial share of the price. Before you commit, make sure you can meet every deposit on the schedule, not just the first one.
Florida law requires developers to hold condo deposits in escrow, and it allows contracts to permit the developer to use deposits above a certain amount for construction. Read the escrow provisions in your contract so you understand exactly where your money is and how it may be used.
Your Review Period
Florida gives buyers of new condominium units a review period after signing the contract and receiving the required documents, during which you may cancel. This is the time to read the documents carefully, ideally with a real estate attorney. Pay particular attention to:
- The estimated completion date and how much the developer may extend it
- What happens if the project is delayed or canceled
- What the developer may change in the unit, finishes or building plans
- Your obligations if you cannot close
Budget for the Building You Will Own
The developer’s estimated budget for the new association gives you projected monthly fees. Those projections can change once the building is operating, insurance is bought and the owners take control. Leave room in your plan for fees to be higher than the first estimate.
Also plan for closing costs at completion, which are often higher in new construction than buyers expect. Ask what the contract requires you to pay.
Rental Rules and Resale
If you are buying as an investment, read the rental rules in the documents before you sign. Some buildings allow short-term rentals; many do not. Minimum lease terms and leasing limits affect both your income and who will want to buy the unit later.
Some contracts restrict assigning your contract to another buyer before closing, or require the developer’s approval and a fee. If your plan depends on selling before or soon after completion, read those terms closely.
Financing at Completion
Most pre-construction buyers either pay cash at closing or obtain a mortgage when the building is finished. Interest rates and lending rules can change during construction, and the unit must appraise for the loan amount you need. Talk with a lender early, and have a backup plan.
Benefits and Risks, Side by Side
Possible benefits: a new building built to current codes, time to accumulate funds, choice of unit and floor plan, and potential appreciation during construction.
Risks to weigh: construction delays, changes to the project, market conditions at completion that differ from today, higher-than-projected fees, and the capital tied up in deposits for years.
How Mariya Helps
Mariya has access to pre-construction projects across Miami and works with buyers from an independent, buyer-focused perspective. She starts with a consultation about your goals, whether a primary home, second home or investment, and then recommends the projects that fit. Request a pre-construction consultation, or call or text her at (646) 678-6477.
Frequently Asked Questions
Can I cancel a pre-construction condo contract?
Florida law gives buyers of new condominium units from a developer a review period after signing the contract and receiving the required documents, during which the buyer may cancel. After that, your rights are set by the contract and the law, so read it carefully, preferably with an attorney.
Are my deposits protected?
Florida law requires developers to hold condo buyers' deposits in escrow, with specific rules. Contracts may allow the developer to use deposits above a certain level for construction costs. Read the escrow section of your contract to see exactly how your deposits are held and used.
Do I need financing in place when I sign?
Usually not, but you will need financing or cash when the building is completed, often years later. Plan for the possibility that rates, lending rules or the appraisal at completion differ from what you expect today.
Can I have my own agent when buying from a developer?
Yes. The developer's sales team represents the developer. Mariya can represent you as the buyer in a new development purchase; talk with her about how that works for the specific project you are considering.
This article is general information, not legal or tax advice. Florida laws, county rules, association documents and contract terms vary and change over time. Confirm how they apply to your transaction with a Florida real estate attorney, CPA or your closing agent. Mariya Stoyanova, P.A. is a licensed real estate sales associate, not an attorney or tax advisor.