Florida Condo Builders Opt for Formal Contracts

Condo developers who thought they had a handle on what their projects would cost to build are taking a different approach to sell their projects in Florida. Many aren’t just taking low deposits as earnest money to hold a reservation to buy a unit anymore, but are opting for a formal contract up front with a full down payment.

The fallout of reservations on preconstruction units has killed some developments in the panhandle and elsewhere in Florida.

The market has changed so developers are changing with it, refusing to accept just reservations.

In Jacksonville a condo project being developed in downtown Jacksonville by Hines construction will require buyers to go straight to contract, putting down a deposit worth at least 10 percent of the purchase price. The decision by Hines mirrors what other companies are doing nationwide as construction costs rise and speculators flee the market.

In Panama City Beach and Miami developers of high-rise condo projects have canceled reservations and resold condos for higher prices.

"Many developers were falling for the short-term gains that appeared when speculators did go through to closing," said David Parker, president of real estate consulting firm Parker Associates. "Now, it can come back to slap you in the face."

Instead of a $5,000 or $10,000 reservation, buyers will pay a deposit at the time they originally initiate formal proceedings to purchase a unit in the future. Alabama and other surrounding states have required the hefty down payments to purchase preconstruction units for years.

The large deposits, which in many cases are non-refundable also make it less likely that buyers will pull out of a contract before closing.