Carlos Cornejo's Blog

What should you know about pre-construction contracts?

How do you affect the stages the price?

Properties in pre-construction or planes go through different stages. As construction progresses the prices tend to be increasing as deposits. However, not all developments have the same structure and many have incentives or attractions during the different stages of the construction

  • 1st stage is known as "reserve" in which is expressed the intention to acquire a "style" of unity in a "price range" and reserves with only 10%.
  • 2nd stage is known as "contract" in which reserves a specific unit at a specific price. With the signing of this contract and a deposit equivalent to 20% begin to count the 15 days of cancellation.
  • 3rd stage, known as "ground breaking", where construction begins and requested another tank.
  • 4th stage often reach the half of the building (only outside)
  • 5th stage is usually at the end of the last floor (only outside)
  • 6th stage, is the closing of the transaction.

Terms you should know before you buy in pre-construction

1.-Unilateral contract 
The Developer (developer) is who drafted the contract and set all the rules, the purchaser is not entitled to make any changes.

2.-cancellation period 
Within this period (15 days after the signing of the contract), the purchaser shall be entitled (under the law of Florida) to cancel the contract but agree with any of the terms of the same, without any penalty.

The contract is made on behalf of the purchaser or on behalf of a company where this buyer is 100% owner. The property cannot be sold or transferred to a third person before the work completed and executed the deed of the property, unless you have the consent of the Developer (developer)

4. method of payment 
The majority of projects follows a standard payments, and may be different in some developments.

  • 10% to the signing of the contract
  • 10% between 60 - 90 days after the first deposit
  • 10% at the beginning of the construction
  • 20% in the middle of the construction of the building (floor 30 if you have 60 floors)
  • 50% the day of the writing of the property (the closing date)

5.-financing without contingency 
If for the final project payment the buyer requested a loan and it is is not granted at the time of the closing, and does not have the cash, the developer has the right to stay with the total of the money delivered to date. In practice the develop suggests that different lenders to facilitate this process.

6. breach of agreement by the developer
If it were to arise any breach by the Developer (developer), this must be notified in writing to the buyers, taking 7 days to fix it, not fulfilled buyers would be within their rights in reclaim its deposit with interests.

7. time of delivery
It can be from 2 to 3 years if the contract of purchase at the beginning of the project, this time may be less depending on the stage in which the project is located at the time of purchase. Also influences, the time of delivery, the finishes that units are delivered.

It is important to make sure the delivery terms since this significantly influences the final investment, however, the "standard" in the South of Florida is that projects are delivered:

  • "Decorator ready", which is known as "ready to decorate" and means that they deliver it without floors and paint.
  • equipped with appliances
  • equipped with kitchen cabinets
  • Full baths with and without floors.

9.- how to estimate closing costs when buying a pre-construction 
Costs to be paid at the time performed the deed of the property on behalf of the purchaser vary if it is cash or financed:

  • Cash only between 3% and 4% of the purchase price comprised:
    • Developer's Fee 1.75% to 2%
    • Contribution to the condo of 2 months
    • documentation in transfer stamps
    • title insurance of the owner
    • other transfer costs
  • Funded between 6% and 7% of the purchase price comprised:
    • Developer's Fee 1.75% to 2%
    • Contribution to the condo of 2 months
    • documentation in transfer stamps
    • title insurance of the owner
    • registration and issuance of mortgage
    • Commission from the lender
    • other transfer costs

Carlos Cornejo
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Luxur Realty LLC
2786 NW 79th Avenue
Doral, Fl 33178
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