What Happens If A Buyer Cannot Close On Their Preconstruction Condo?
The spring and summer of 2017 are going to be an interesting time for Miami in a real estate sense. We are going to see a flurry of new condo developments opening, bringing thousands of new closings (and probably hundreds of new resale and rental listings).
Brickell Heights 01 and Brickell Heights 02 are set to open within the next month, 1010 Brickell will follow shortly thereafter (or maybe they will open before… the two projects are neck and neck). Up in Edgewater, Biscayne Beach is slated to open its doors any day now, followed by the first tower of the Paraiso District, Paraiso Bay. The four projects together total over 1,800 new condos that are set for completion this summer. The fall and winter will bring another flurry, but for now let’s concentrate on the openings that are closer. These projects are all effectively sold-out. They are a wild success for the developers! But, what happens if one of the buyers is unable to come up with the remaining funds to close?
During the sales cycle of these four towers, the developers were requiring staggered deposit schedules that totaled a 50% down payment prior to closing and the remaining 50% due at closing. Remember that the majority of these condo sold in 2014-2015. A lot of things can happen in 3 years that can change the financial situation of the buyers. There could be an argument between partners in a condo, divorce, death, health issues. There could be political problems, currency exchange rate troubles, economic hardship. A dictator could be elected. We all know that these things are going on around the globe and they are all very sad. But what happens if one of these factors affects a buyer’s ability to close? It isn’t as dire as some may fear. The buyers do have choices.
They can walk from their deposit
Everyone knows this one. If you put a deposit down on a contract and don’t complete the contract, you will lose your deposit. It is very straightforward, and it stings. These condos sold around $500-$600/square foot. If you figure Related Group’s signature 2 bedroom layout that is almost always 1,200 square feet, give or take, the sale amount would be around $700,000. That’s a $350,000 loss, and that is not ideal for anyone… but it’s an option.
They can close with a mortgage
Although condo financing isn’t easy in brand-new developments, there are banks that will finance preconstruction purchases at the time of closing. The challenge is that many of the buyers in these developments are foreign nationals, and those mortgages are more difficult. Some banks refuse to lend to buyers from countries that have political turmoil (looking at you, Venezuela). It’s not a racist thing, the banks are worried about the political climate and their ability to recoup the mortgage. If you have questions about which banks can finance buyers from different countries, let us know. We have a resource that can help.
They can close with a private mortgage
If traditional financing just isn’t a possibility, buyers could visit a private lender. These mortgages typically require very little documentation and are able to close very quickly because the lender is familiar with the local market, the project, and bases the approval on that. The downside of these mortgages is that they are extremely expensive. Expect to pay 3-4 points to the lender at closing as a fee plus astronomical interest rates. I’ve seen interest rates as high as 13-14%. If a buyer was attempting to close the signature 2 bedroom unit that we discussed previously, that would amount to $10,500 – $14,000 just as a closing fee. Then you could expect around $4,000 per month to go just toward interest. Again, not ideal but also better than losing $350,000 right out of the gate.
They could find someone to step in and close on their behalf
This is probably the most ideal situation for someone in a preconstruction condo bind. Developers typically frown upon contract flipping and there’s no guarantee they would approve it, but developers in today’s market are also not eager to hold inventory on a previously sold-out project. They want to take their money and go do something else until another build cycle opportunity presents itself.
We have already had several investors request opportunities to buy in the event that a preconstruction buyer cannot or will not close. If anyone is in a preconstruction condo bind, please contact us and hopefully we can work it out in a mutually beneficial way.
The highly anticipated Biscayne Beach is preparing to open!
The sand has been delivered, the pools are being filled, the tennis courts are installed and the closing letters are being sent. That’s right, the highly anticipated Biscayne Beach is preparing to open! The developer’s title company has reached out to clients in order to start preparing for closing. As is typical, they will close the cash deals first to give some time to the buyers who are financing to line up their loans.
There are a few finishing touches being added before the TCO is delivered. The ground level pool already has water, but the upper level one does not. We haven’t been able to preview the amenities yet, but hope to schedule something soon. From the looks of the exterior and the fact that the title company is rounding things up, I imagine that the indoor amenities are also nearly finished. The interior design is by Thom Filicia, who you may remember from Queer Eye For The Straight Guy.
When it opens (we’re anticipating next month), the building will offer a full-fledged beach club on the bay. They will have 2 tennis courts, basketball courts, beach and pool cabana service, a beach/pool club bar, an outdoor fire pit, beach volleyball, jet ski and kayak rentals, library, theater, and pool tables.The lobby of Biscayne Beach includes a fine dining restaurant, beauty salon, and art gallery for guests and residents. The list goes on and on.
There are 399 total apartments with layouts ranging from one to four bedrooms plus den options, as well as exclusive penthouses with private rooftop garden terraces. All units will include floor-to-ceiling glass windows, oversized balconies, and sweeping views of Biscayne Bay, Miami Beach and the city skyline.
Something that I love about Biscayne Beach condos is that it is within close proximity to both causeways which travel to and from Miami Beach. The tower is also within 10 minutes of the Design District, Midtown Miami, and the American Airlines Arena, home of the Miami Heat. It really is a central location, but still very private.
We are preparing to list a lovely 2,103 square foot corner apartment on a high floor. It has 3 bedrooms, a den, 4 full baths and is a corner unit. The southeast corner offers south views of the skyline as well as east views of the bay and Miami Beach (the best view offered).
The plan has a private elevator and all of the rooms are very spacious. The living room is 21feet by 20feet, the master bedroom is separated from the rest of the apartment to offer it’s own skyline and beach/bay views, and there are enormous his/hers closets. Even the den is over 18 feet by 12 feet, making it actually big enough to be a separate bedroom (not like the dens in some other buildings that could be converted into closets).
Because the seller has not yet closed, we are not permitted to disclose the price. We can however, promise that it will be priced to sell quickly. Reach out if you’d like more details. In the meantime, feast your eyes on our latest drone video of the project, and the floor plan we’ll be offering below.
07 Line Floor Plan:
Biscayne Beach Is Preparing Closing Letters
To prepare for opening day, the folks over at Biscayne Beach have begun reaching out to the buyers of their 399 new apartments. They are getting updates on contact information and finding out whether the apartments will be closed with financing or cash.
According to the developer’s representatives, closings will begin in January with cash transactions closing first. This barely misses their estimated completion date from the original marketing material in 2013. I always expect construction dates to be delayed, especially with large projects such as this one so delivering the project within a month of the original the estimated date is something to be celebrated.
This project is one of my favorite in the Edgewater area. The building is 51 stories and the amenities are unique. I hope we will get to take a photo tour for you once the TCO is delivered! Stay tuned as we work on that.
Biscayne Beach Topped Off Today, All 51 Stories of It
Biscayne Beach topped off today. Photo via Biscayne Beach.
Over in Edgewater today, the under-construction Biscayne Beach condo tower topped off 51 stories, celebrating the milestone today with a traditional lunch for the construction workers and topping off ceremony for the swells. (We assume this is what they did. We didn’t actually attend) Built as a joint venture between Eastview Development and GTIS Partners, designed by WHLC Architects, and interior designed by Thom Felicia of Queer Eye for the Straight Guy (seriously) the building is almost completely sold out.
Biscayne Beach – Construction Update (Photos)
Of all the condo developments that are completed or currently under construction in Edgewater, Biscayne Beach is by far my favorite. It will be the only condo development in Miami to include an actual beach. How awesome is that? Some of you, especially non-locals, may be thinking, “So what? There’s tons of sand in Miami.” Well, that’s where you’d be wrong. Miami is situated along the bay, not the ocean, and, therefore, does not have sand-filled, waterfront land. On the other hand, Miami Beach, which is a completely different city from Miami, has plenty of sand along its coast, because it’s situated along the Atlantic Ocean. And the rest of you may be thinking, “Duh, well of course.” Sorry, but I feel the need to clarify that very rudimentary point for locals, because, so often, I come across people who aren’t from Miami who think that Miami Beach is a beach off the coast of Miami and that beaches there are plentiful.
Anyway, enough with the geography lesson – all that is about to change. The developer of Biscayne Beach is bringing the beach to Miami. Residents of Biscayne Beach and their guests will be just an elevator ride away from feeling the sand on the bottoms of their feet and/or enjoying a cocktail at the beach club bar. The atmosphere at Biscayne Beach should truly be a unique and special experience. The building hasn’t even been completed, yet every time I drive by it, the song “Beachball” by Nalin and Kane comes to mind. For those of you who have never heard of that song, “Beachball” was the 1997 international dance club hit. The song starts off with the words, “Yeah, let’s go to the beach”. The rest of the song is then filled with rhythmic yet soothing beats and voices. Such an amazing track! To me, it embodies the energy and atmosphere that one will find at Biscayne Beach once it is completed.
Construction of Biscayne Beach is well on its way. Earlier today, I made a visit to the construction site to show a 2 bedroom condo at Platinum. While there, I had an opportunity to snap some photos showing the progress being made to Biscayne Beach. By my count, construction has reached the 26th floor. Below are the photos I took this afternoon. Oh, and in case you’re wondering, just a handful of units remain at Biscayne Beach, one of which is a two-story grand penthouse residence with 4 bedrooms, a den, a study, wine room, 5 full bathrooms, and a rooftop terrace with private plunge pool and summer kitchen. The penthouse has 7,878 interior square feet plus an additional 2,785 square feet of outdoor space. Asking $9,450,900 ($1,200 per square foot).
Icon Bay and Biscayne Beach Construction Update
Earlier this week, while scoping out the panoramic views from the rooftop deck of Penthouse 1 at Bay House, I got the opportunity to peek in on the progress being made at neighboring condo development Icon Bay as well as that of Biscayne Beach, located just two blocks away from Bay House on 29th Street. Contained here are a few snaps that I took that day. Icon Bay looks almost ready to go. My guess is that closings will begin towards the end of April to beginning of May. Biscayne Beach, on the other hand, is still in its early stages of construction. As reported by The Next Miami, Biscayne Beach completed its foundation pour on November 22nd. In the photo at the bottom of this post, you can make out Biscayne Beach’s footprint as well as the early makings of its entrance ramp for vehicles entering the property.
