The wave of Brazilian buyers could change the structure of Miami’s condo market. Since getting a construction loan became a challenge for developers, the Brazilian way of financing residential projects is a good alternative. The developers of the Apogee Beach in Hollywood are already using that method with great success. After only a few months on the market, guess what? 50% of the units are already under contract. With 53 % of Brazilian buyers in South Florida, I think the model is likely to become very popular.
But how does it actually work? In Brazil and most of Latin America, preconstruction buyers do pay an amount of money at each stage of the building construction. The split is usually as follows; a certain percentage at contract, then at groundbreaking, then at the height of their floor and, finally the rest is split between the topping off of the building and the delivery of the unit. Before completion, buyers usually already paid 80% of the purchase price. In the US, you would traditionally put only 20% down at contract and the rest at closing. The Latin model does offer great opportunities for developers but it is not sure that the tendency will last.
My question is what happens if some of the buyers can’t come up with the planned payments? The only answer I was given is that the delivery of the project will be delayed. Anyway the risk is very low since chances are slim that a majority of unit owners get into financial trouble at the same time.
So now that you know the ins and outs of preconstruction in 2012, check out my favorite ones: BrickellHouse, MyBrickell and Apogee Beach.