Patricia Musa, an agent with Elite International in Miami, is selling a lot of pre-construction units to Brazilians, and signed up for two units herself one at 400 Sunny Isles and another at Brickell House downtown. Latin Americans, she said, are comfortable with big deposits, which are customary back home. In Miami, she said, You put little by little [as the project advances.] You have time to rest, to breathe a little between payments.
Alejo Reimann, a 37-year-old Argentine who lives in Miami Beach, is buying two units in Brickell House as rentals. All told, he will put down 70 percent before closing on the condos two years from now. I saw a very good investment opportunity, said Reimann, who was contacted through the developer. I see Miami long term as one of the most cosmopolitan cities in the world.
Miami-based Related, which is pouring concrete for the 10th floor of its MyBrickell project at 30 SE Sixth Street, has contracts on 95 percent of the 192 units planned for the 25-story project, according to Rosso. More deposit installments are due as the project hits benchmarks, for a total of 80 percent before closing.
In September, Related plans to begin construction of Millecento, a 42-story tower with 382 units at 1100 South Miami Avenue and already has 90 percent of the units under contract with 20 percent down, he said.
The project requires buyers to make a series of deposits totaling 50 percent of the price (15 percent is due when construction begins and 15 percent when the building is topped off) with the other 50 percent due at closing.
Harvey Hernandezs Newgard Development Group is developing BrickellHouse, a 46-story, 374-unit tower at 1300 Brickell Bay Drive, largely with buyer deposits.
Developers say the new approach weeds out speculators, who upended projects in the last boom. When prices cratered, droves of buyers walked away from 20 percent deposits and refused to close on new units, leaving developers unable to pay their banks.
The supply of buyers is less, but theyre more real. Theyre not relying on debt, said David Martin, president and chief operating officer at Terra Group, which plans two high-end buildings on the Grand Bay site with sweeping 12-foot ceilings and just two or three units per floor, a total of 96 residences, designed by hip Danish starchitect Bjarke Ingels Group. Terra Group requires 50 percent deposits prior to starting construction and the balance at closing and says it is getting local as well as international buyers.
When we start construction, we are going to be fully funded, said Martin.
The interest-free deposits provide cheap financing that developers say enables them to sell units at lower prices. But a deposit is not unlike an unsecured loan. If a project goes sour, other creditors have priority over unit buyers. Any bank that lends to a developer is certain to require collateral. Construction companies also usually have priority rights to get paid.
If things go sideways, there might not be much left for unit buyers.
Banks lending for construction typically track a projects progress before disbursing each stage of funding. But with the new model, buyers are placing more trust in the developer. Who is looking [how funds are spent]? No one really is doing that, said William P. Sklar, a real-estate attorney at Akerman Senterfitt and condominium law expert who teaches at the University of Miami.