Buying a condo in Miami? Not an easy process. Here is my step by step guide:
Step 1 (skip this step if buying cash): Get preapproved by an experienced mortgage banker. Typically this will mean providing 2 pay stubs, 2 bank statements & 2 years worth of tax returns and running a credit report. It is VERY important to not make any unusual deposits or debits from any of your accounts during the mortgage approval process. Also, do not make any large purchases, especially on credit. Doing these types of things will, at best, trigger more conditions and delay your closing or, at worst, cause the lender to decline your mortgage loan application.
Step 2: Execute a contract for sale and purchase. Be sure to include an inspection contingency and a financing contingency in your offer contract. A typical time frame for inspections is 10 days. A typical time frame for a financing contingency is 45 days. A typical time frame for closing is 45 – 60 days if financing or 20-30 days if cash. I highly recommend you instruct your lender with these specific words “my goal is to have the clear to close by my financing contingency deadline”. Read more on this in my article “important things to know about a real estate contract financing contingency”.
Step 3: If you are obtaining financing (even if you aren’t) order a condo questionnaire immediately after entering into a contract. A condo questionnaire is a “make it or break it” document that is required by lender in order to assess the financial and legal standing of any condominium project. This document is given to a buyer by their lender and contains anywhere from 11 to 35 questions for the building to answer. There are two types of condo questionnaires: a full review condo questionnaire and a limited review condo questionnaire.
A buyer needs to obtain a full review condo questionnaire when they purchase a condo with less than 25% down payment. If a buyer is purchasing with 25% or more down payment, they can order a limited review condo questionnaire. I always tell my condo buyers that their lender will not only need to approve them as buyers, but will also need to approve the condo building.
Step 4: Be sure to give any and all required documentation to your mortgage banker as soon as humanly possible. A good mortgage banker will try to have the most complete and seamless file to present to underwriting and any missing or incomplete documents will trigger a new set of conditions which means another review of the file, increasing the chances of even more conditions and requested documentation.
Once the appraisal has been completed and the appraisal report has been delivered, AND assuming the appraisal comes in at or above your contract price (click here for my article on what to do when your appraisal comes in low) you should apply to the condominium association. Most condominium associations take at least 7 business days to approve a new buyer. Therefore you must plan accordingly and apply to the association according to the time frame they give for approval. That time frame may or may not coincide with the timing for the appraisal.
The reason I try to time the association application this way is so that my clients do not spend money needlessly on an association application if they are not past inspections, condo questionnaire, and appraisal. Having said that, it is not always possible to wait until these items are done. Sometimes it is necessary spend the money on these items and the association application at the same time.
Step 5: Be sure to review the condominium documents, the most recent year end financials, frequently asked questions, the rules and regulations, and the budget for the building. In the state of FL, any buyer has 3 days from the time they receive the condo documents to review them and cancel if they are in disagreement with any of the terms. This will help you to avoid pitfalls such as rental restrictions when you are purchasing for investment and want to rent out the unit or pet weight restrictions if you have a large pet or multiple pets. If you are able to, review the budget before doing anything else because if the budget does not have at least 10% in a reserve account, it will be very difficult to get financing. If you still MUST buy the condo, look into local portfolio loans.
Step 6: Have a local & reputable title company or attorney run a title search and a municipal lien search as well as check on the annual real estate taxes and whether they are up to date. If you are using the seller’s title company, I highly recommend you have an attorney review the title commitment and transfer documents. Be sure the title company orders the estoppel letter from the association in a timely manner so that your closing is not delayed.
Step 7: Have a final walk through of the property prior to closing. I have had clients tell me they don’t have time for this, and in that event, I go perform the final walk through for them because you just never know. If the property has been vandalized or if the tenant took all the appliances or if something died in the crawl space and the property became infested with flies (yes these have happened to me) you want to know BEFORE you close on the property. Things like this can happen in ANY price range and you could regret skipping the walk through. Do a walk through.
Step 8: Go over the Closing Disclosure (formerly known as a HUD 1) as soon as you receive it from your lender. The federal government passed a law effective October 2015 that requires that all buyers have a 3 day waiting period between receipt of the CD or closing disclosure and the actual closing. The sooner you receive, understand & approve this document, the sooner your closing can take place.
Step 9: At the time of closing, be sure to bring your association approval and two forms of ID. Keep a few hard copies of the ALTA Master Settlement Statement as proof of purchase until the deed gets recorded and mailed to you with your title insurance policy.
Step 10: Contact your accountant to go over tax deductible expenses (your mortgage interest is tax deductible, MIP or mortgage insurance premium is tax deductible and real estate taxes are deductible). Also, be sure to apply for homestead exemption if the newly acquired property is your primary residence. You can click here to apply for homestead exemption in Miami Dade county. Finally, remember that if you sold a home in Florida before buying this one, you may transfer or “port” some of your homestead exemption savings to the new property.
I hope you found this article informative and helpful. If you need an experienced and tech savvy agent who knows the Miami market inside and out, you can reach me at firstname.lastname@example.org or 786.663.4382.
Paula Barrera Scheer
A modern agent for a modern client.
*This article is advice from the first hand experiences of a veteran real estate agent and is not to be construed as legal advice. Real estate agents are not attorneys. If you are in a real estate transaction and need legal advice, consult with a real estate attorney.