Buying a condo before it is built can get you the best price and your pick of floor plans. It also means signing a contract years before you get the keys. Here is how pre-construction purchases work in Florida, and what to check before you sign.
How the purchase works
Most developers start with an interest list, then open sales with a purchase contract and a deposit schedule. Deposits are usually paid in stages, for example at signing and again at later milestones. Prices typically rise as a building sells, which is why early buyers tend to get the lowest prices and the widest choice of units.
Where your deposit goes
Florida law protects condo deposits. Under Florida Statutes section 718.202, the developer must hold deposits of up to 10 percent of the purchase price in escrow. Money above 10 percent can be used for construction costs only if the contract says so, and the contract must say it in a specific capitalized warning. Read the deposit section of your contract closely and know which of your dollars are in escrow and which could be spent on construction.
Your 15-day right to cancel
Under section 718.503, a contract to buy a new condo from a developer is voidable by the buyer for 15 days after you sign and receive all of the required documents. You also get a new 15-day window if the developer later amends the offering in a way that materially and adversely changes it. The right ends at closing. Use those 15 days to read everything.
What to read in those 15 days
- The prospectus or offering circular. The plain-language summary of what you are buying.
- The declaration of condominium and bylaws. Rental rules, pet rules, and what you can change in your unit.
- The estimated operating budget. Your projected HOA dues and what they cover. Florida treats the budget as an estimate, so dues can change.
- The floor plan and finish schedule. What is included, what is an upgrade, and what the developer can substitute.
- Completion and delay terms. The latest date the developer must finish, and what happens if it does not.
- Assignment rules. Whether you can sell your contract before closing, and at what cost.
Financing and closing
If you plan to rent the unit out, check the condo documents for rental minimums and run the numbers on our rental investment analyzer before you sign. You usually cannot lock a mortgage rate years ahead, so plan for the rate at closing, not today’s rate. The unit is appraised near completion, and if the appraisal comes in low, you may need more cash to close. Before closing, schedule a walk-through with an independent inspector and get any defects on a written punch list.
Bring your own agent, and register first
The developer’s sales team represents the developer. You can have your own agent, and developers typically offer buyer’s agent compensation on new construction. Confirm the terms before you register. Most developers only recognize a buyer’s agent who is registered at your first visit or inquiry, so bring your agent in before you contact the sales center.
We are tracking Water Club St. Pete Beach on Corey Avenue and other new construction on the Gulf beaches. Talk to us before you register anywhere.
This article is general information, not legal advice. Have a Florida real estate attorney review any purchase contract before the 15-day window closes.
