When purchasing a Miami Beach condo, there is a lot you need to know. Typically buyers put down an earnest money deposit once a contract is executed. In our area, it is customary for buyers to place 5 to 10% of the purchase price. It can be more on preconstruction properties, or it can be less in some other situations. All in all, deposits often consist of thousands of dollars. For most people a lot of money and money they wouldn’t want to lose.
So, how can you protect your deposit when purchasing a Miami Beach Condo?
- Don’t default on the contract. There are very specific timelines and due dates for many different tasks within the contract (inspections, application to the lender, time to review the condo docs, commitment letters from your lender, etc.). **These are NOT flexible dates.
- Hire competent vendors. Within all of these dates, you are going to have to hire vendors to perform certain tasks. If your inspection period is only seven days, you best hire an inspector who can get out to the property fast and turn that report around quickly. Otherwise, you will lose valuable time during that due diligence period.
- Hire a competent lender. **THIS IS THE MOST IMPORTANT PERSON YOU WILL HIRE!! I am not joking my friends; the wrong lender can be the biggest way for you to lose your deposit.
Here’s a little story about what happened to one of my past clients and this story (unfortunately) can be told over and over again in our area.
When we start working with buyers who need financing, we explain the common pitfalls and what to expect. Therefore, one of the biggest processes we require before showing properties is to speak to an experienced lender for our area.
So, one of my past clients did just this. We had the buyer consultation; he was approved by a well known reputable, experienced local lender. In fact, the company he chose is most of our clients’ preferred lender, as well as many of our colleagues. Okay, so the buyer was approved.
Then one of his family members told him about a different bank one where he could get a better deal. The family member lived in Ohio and bought a single family home with this “killer deal”.
I was hesitant because I know that a lot of these lenders not specialized in our area and condos tend to offer a lot of products that don’t apply to Florida condos. Also after speaking to the lender, I realized he had never done a transaction on a Florida condo. It was concerning.
I advised the buyer, explained my concerns but he still wanted to go with killer deal lender. So we proceeded.
We went under contract and killer deal lender “yessed” us to death. Everything was perfect, and he issued the commitment letter. Once the commitment letter is issued, the deposit goes hard.
Guess what happened? Seven days before closing, the killer deal lender called and said they found a problem, and they were not going to give the buyer financing.
The buyer’s deposit was now at stake. On this deal, we were talking about $20,000.
Freak out mode ensues.
Luckily the seller agreed to an extension (they didn’t have to), luckily I had a good relationship with the seller’s agent and she agreed to convince her client to extend and luckily we already had an approval completed from our preferred lender, and they jumped in, picked up the deal and successfully closed the transaction.
It could have ended up with the buyer losing the deposit. But luckily it didn’t.
In conclusion, just know that when purchasing a Miami Beach condo, the sales contract governs the transaction and yes you can lose your deposit if you default on the contract.
It’s imperative to understand the contract, your obligations as the buyer, due dates, and timelines. Be sure to be diligent about your obligations so you don’t risk losing your deposit.
Although your agent can assist you through a lot of this process, if you have specific contract questions, you need to ask an attorney. Do yourself a big favor and hire competent people to work for you. Often real estate is a very expensive purchase for most, and it’s important to protect yourself and hard earned money during the process.
