Pre-constructions
What do I need to know about Pre-construction contracts?
Refers to a real estate project that is planned or under development but not yet built. Buyers purchase these properties before or during the construction phase, often based on floor plans, renderings, and model units provided by the developer.
How do the stages affect the price?
Pre-construction properties go through different stages. As construction progresses, prices tend to increase, as do the required deposits. However, not all developments follow the same structure, and many offer incentives or perks during different phases of construction.
1st stage is known as the “reservation” stage, where the buyer expresses intent to acquire a type of unit within a price range by placing a 10% deposit.
2nd stage is the “contract” stage, where a specific unit is reserved at a specific price. Upon signing the contract and submitting a 20% deposit, a 15-day cancellation period begins.
3rd stage is “groundbreaking,” when construction starts and another deposit is requested.
4th stage is usually when the building reaches halfway (exteriors only).
5th stage is typically when the top floor is completed "top off" (exteriors only).
6th stage is the closing of the transaction.
Terms you should know before buying pre-construction
1. Unilateral Contract
The Developer drafts the contract and sets all the rules. The buyer cannot make any changes.
2. Cancellation Period
Within this 15-day period (starting from the contract signing), the buyer has the right (under Florida law) to cancel the contract without any penalty if they disagree with any of the clauses.
3. Not Transferable
The contract must be under the buyer’s name or under a company 100% owned by the buyer. The property cannot be sold or transferred to a third party before completion and closing unless approved by the Developer.
4. Payment Schedule
Most projects follow a standard payment schedule, although some may vary:
10% at contract signing
10% within 60–90 days after the first deposit
10% at the start of construction
20% halfway through construction (e.g., floor 30 of a 60-floor building)
50% on the day of closing
5. Non-Contingent Financing
If the buyer applies for a loan for the final payment and it is not approved by the closing date—and the buyer doesn’t have the cash—the Developer has the right to keep all money paid up to that point. In practice, developers usually recommend lenders to simplify the process.
6. Developer Default
If the Developer fails to meet the contract terms, they must notify the buyers in writing and have 7 days to resolve the issue. If not resolved, buyers are entitled to request a full refund with interest.
7. Delivery Timeline
It can range from 2 to 3 years if the contract is signed at the beginning of the project. This time may be shorter depending on the construction phase at the time of purchase. Delivery time also depends on the unit finishes.
8. Finishes
It’s important to verify the delivery conditions, as this greatly affects the final investment. However, the standard in South Florida is:
“Decorator ready” (no floors or paint)
Equipped with kitchen appliances
Equipped with kitchen cabinets
Fully finished bathrooms, with or without floors
9. How to Estimate Closing Costs When Buying Pre-Construction?
Closing costs vary depending on whether the transaction is cash or financed:
Cash purchase: 3% to 4% of the purchase price
Developer’s fee: 1.75% to 2%
2-month HOA contribution
Document stamps on deed transfer
Owner’s title insurance
Other transfer-related costs
Financed purchase: 6% to 7% of the purchase price
Developer’s fee: 1.75% to 2%
2-month HOA contribution
Document stamps on deed transfer
Owner’s title insurance
Mortgage registration and issuance
Lender’s commission
Other transfer-related costs
Summary:
Pre-construction deals involve staged payments, a 15-day cancellation window, no resale before closing, 2–3 years to delivery, and 3–7% closing costs. Buyer risks losing deposits if financing fails unless paid in cash.
