Buying preconstruction in Miami: the deposit schedule, the escrow, and the fee nobody mentions

What do you pay, and when?

Typically 40% to 50% of the price in deposits spread over the construction period, with the balance at closing. In Miami the standard schedule is four payments before you get keys.

Two consequences that shape the whole decision. First, your capital is committed for years without producing anything — no rent, no deduction, no use. Second, the final payment is the largest and the furthest away, and it is the one exposed to whatever mortgage rates do between now and delivery.

Where is my money while they build?

In escrow — but not all of it, and the part that is not is the part worth understanding.

Florida law requires a developer to hold buyer deposits in escrow. The critical distinction is what the developer may do with them:

• The first 10% must be held in escrow and, in general, may not be used for construction.
• Deposits beyond 10% may be used by the developer for construction costs, if the purchase contract says so — and it usually does.

So on a $1,000,000 unit with 40% down before closing, roughly $100,000 sits protected and roughly $300,000 may be spent building the tower you are buying into. That is not a scandal — it is how preconstruction is financed everywhere — but it does mean your exposure is to the developer’s ability to finish, not to a segregated account.

What to check before you sign: who the escrow agent is, whether they are independent of the developer, and exactly which clause authorises the use of deposits above 10%.

What can actually be negotiated?

More at launch than later, and more on terms than on price.

Developers protect the headline price because it sets the comparables for every remaining unit. What they will move on:

• The deposit schedule — spreading payments, or delaying one stage.
• Upgrades and finishes, credited rather than discounted.
• Closing costs, including the developer fee below.
• Parking and storage, which are often priced separately and are pure margin.
• Assignment rights — whether you may sell the contract before closing, and on what terms. This is the most valuable clause in the document for an investor and the one most often left as the developer wrote it.

Florida gives you 15 days to cancel a condominium purchase contract after signing and receiving the condominium documents, with a full deposit refund. That window is the buyer’s strongest protection in the whole process and it is short.

What happens if the project is delayed or never built?

Delay is normal and rarely gives you an exit. Cancellation gives you your deposit back, without the years.

Most contracts allow the developer substantial extensions for permitting, weather, supply and “force majeure”, and building a tower in Miami routinely runs a year or more past the original date. A delay clause that looks like a protection often permits two or three years of slippage before you have any remedy.

If the developer cancels the project, deposits are returned — that is the escrow’s purpose. What is not returned is the opportunity cost of capital tied up for years, or the market you would have bought in instead.

Federal law adds one protection worth knowing. Under the Interstate Land Sales Act, if the developer does not commit to completing construction within two years, buyers may have a right to rescind. Whether it applies depends on how the contract is written — which is one more reason for the attorney.

What do I pay at closing, beyond the balance?

Between 3% and 5% more than a resale would cost — and the biggest piece is a line that does not exist in a resale at all.

In a resale, custom splits the closing costs and the seller absorbs several of them. A developer’s contract typically passes them all to you and adds its own:

• The developer fee — 1.25% to 2% of the price in Miami. It is not a service; it is a charge. It is also negotiable at launch.
• The documentary stamp tax on the deed, which in a resale the seller pays.
• Title insurance, which in most Florida counties the seller pays.
• Association working capital — usually two months of dues, contributed rather than credited.
• The usual buyer items: doc stamps on the note, intangible tax, lender fees, prepaid insurance.

On that $1,500,000 unit, 3% to 5% is $45,000 to $75,000 due on closing day, on top of the balance. It is not on the price list. It is in the contract.

What does it cost to hold each month?

Condominium dues in new Miami towers run far above the Florida average, and the buildings with the best amenities have the highest carry.

Budget per month, once delivered:

• Condominium dues, priced per square foot and covering staff, amenities, insurance on the building and reserves. In new luxury towers these are the largest single carrying cost after the mortgage.
• Property tax at the full rate, with no homestead exemption if it is not your residence, and a 10% assessment cap rather than 3%.
• Your own contents and liability insurance — the building’s master policy covers the structure, not what is inside your unit.

What are the developer incentives worth?

Real money at launch and at the end of a sell-out, and close to nothing in the middle.

What gets offered, in rough order of value:

• Reduced deposit schedule — the most valuable, because it is your capital and your time.
• Closing cost credits, including waiving part of the developer fee.
• Upgrade packages, credited at retail prices that are not retail costs.
• Free parking or storage, which has a real resale value.
• Rate buydowns through a preferred lender — check what the underlying rate is before valuing the discount.

Timing is most of it. Launch pricing buys you the lowest price and the most flexibility, in exchange for the longest wait and the most uncertainty. The tail of a sell-out buys you delivered inventory and a motivated seller. The middle of a successful sell-out buys you neither.

Preconstruction or finished — which is the better buy?

Preconstruction is a bet on the market two or three years from now, financed by you at no interest. Finished is a known quantity at today’s price.