Miami Condo Buying Tips and Frequently Asked Questions
Here are some tips for buyers of condominiums in South Florida. I will continually add to this page as I have time.
Over the last couple of years the Miami Real Estate and Condo market has become complicated with terms such as shortsales, pre-foreclosure, lender-approval required, third party approval required, developer fees, etc. This section of our website is meant to be a short guide to some of the basics of buying a condominium in Miami and Miami Beach. For specific questions please feel free to ask us by posting a comment or by emailing us directly.
There are many types of condo units on the market today. A few years ago you basically has a few types – resales (condos built many years ago) and pre-construction condos (condos you would buy in advance of being built). Today many of those pre-construction condos have been completed and many of those early investors have defaulted (not been able to complete the purchase) – these units are available again as developer units. So today you have the opportunity to purchase these condos which are essentially brand new and have never been lived in direct from a developer.
Some things to consider when buying a pre-construction condo:
When you buy a pre-construction condo or a brand new condo directly from the developer there are often hidden fees involved besides your contract price.
1.) In your contract you will see “development fee” or “developer fee” which is typically 1.5%-1.8% of the purchase price. This is a fee that is paid in cash at closing to the builder. Part of this fee goes towards paying for the buyers title insurrance, and the rest is a profit for the developer or funds to offset miscellaneous costs incurred by the builder.
2.) You will also see in your contract “capital contributions” this is basically two months worth of maintanance fees collected from each purchaser of a new condo which goes towards creating an operating fund for the condominium association. This two months worth is not used towards your first two months of fees. This is also required to be paid in cash at the closing. 3.) Besides these fees you will have your ordinary closing costs containing document recording fees, deed taxes, any prorations for taxes, title service fees, utility hookup fees and attorney fees.
Next we will discuss “Short Sales” which are becoming more common in South Florida.
Over the last couple of years the Miami Real Estate and Condo market has become complicated with terms such as shortsales, pre-foreclosure, lender-approval required, third party approval required, developer fees, etc. This section of our website is meant to be a short guide to some of the basics of buying a condominium in Miami and Miami Beach. For specific questions please feel free to ask us by posting a comment or by emailing us directly.
There are many types of condo units on the market today. A few years ago you basically has a few types – resales (condos built many years ago) and pre-construction condos (condos you would buy in advance of being built). Today many of those pre-construction condos have been completed and many of those early investors have defaulted (not been able to complete the purchase) – these units are available again as developer units. So today you have the opportunity to purchase these condos which are essentially brand new and have never been lived in direct from a developer.
Some things to consider when buying a pre-construction condo:
When you buy a pre-construction condo or a brand new condo directly from the developer there are often hidden fees involved besides your contract price.
1.) In your contract you will see “development fee” or “developer fee” which is typically 1.5%-1.8% of the purchase price. This is a fee that is paid in cash at closing to the builder. Part of this fee goes towards paying for the buyers title insurrance, and the rest is a profit for the developer or funds to offset miscellaneous costs incurred by the builder.
2.) You will also see in your contract “capital contributions” this is basically two months worth of maintanance fees collected from each purchaser of a new condo which goes towards creating an operating fund for the condominium association. This two months worth is not used towards your first two months of fees. This is also required to be paid in cash at the closing. 3.) Besides these fees you will have your ordinary closing costs containing document recording fees, deed taxes, any prorations for taxes, title service fees, utility hookup fees and attorney fees.
Next we will discuss “Short Sales” which are becoming more common in South Florida.
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I have spoken to Samir a few times and am extremely impressed by the depth of his knowledge on Miami realty, specially waterfront properties.
The energy and passion that Samir brings with him will serve him well both as a buyer’s as well as a seller’s agent. I wish him the best.
PJ Gohel – Thank you for the kind comment. I wish you the best as well.
Also I am told that when you an out of state resident, like I am a resident of New York state, taxes on my property will be approx. 40% higher than a resident of Florida- something to keep in mind for the snowbirds.
PJ – where did you hear that. You should not think they are 40% higher in all cases. Here is how it works. When it is your primary residence you will qualify for a $25,000-$50,000 homestead exemption. You will deduct this from your taxable value before the tax rate is applied. Also if it is your primary residence then your taxes are capped at a maximum 3% increase per year.
If it is not your primary home, then the exemption does not apply and the cap is maximum 10% increase per year.
Thanks Samir. Speaking of association fees, the fees at the Quantum are approx. 67 cents per SF while at the 1800 club they are approx. 43 cents per SF, why such a large difference? The amenties are comparable. Is it because the developer at the 1800 club has not handed over the building to the association?
I believe that the building at 1800 club is not fully insurred. So if you are buying with financing then your lender may require you to pay gap insurrance which is an upfront premium every year. This if you calculate in terms of square footage and monthly could result in additional cents per sq ft per month as a break down.
Interesting, I believe the higher maintenance fee at the Quantum is also because of reserves the association is collecting for and should come down with time and the 1800 club could go up as they do the same thing.
Correct
I recently viewed the 1808 one bedroom apartment in the building. My question is what guarantee do I have that the association fees wont go up with time and if so what would be the worse case scenerio that these fees would possible go up to with time?
Frank Peemoller – 1808 in which building?
You have no guarantee with condos just like you have no guarantees with any properties. Monthly fees are made up primarily of costs of insurring the building, maintaining the building (including staff). Fees could go up as a result of a building deficit (other owners not paying their fees). Fees fluctuate every year. They could remain the same (typically in mature buildings which have worked through problems early on). They could go up as a result of deficit or raising of insurrance premiums. You just don’t know. This is why it is important to investigate the association finances prior to purchasing.