For almost two decades, Florida has stood as one of the top states for new home construction, and it shows no signs of slowing down. As out-of-town buyers continue to favor new constructions, thousands of new units are delivered each month in different parts of the state, including Miami-Dade, Broward, Palm Beach, and Central Florida.
Builders advertise seamless closings, move-in-ready homes, and in-house mortgage and title services. But what they don’t always tell buyers is that new construction closings have their own set of risks — and that using the builder’s preferred title company isn’t always in the buyer’s best interest.
So, buyers are gravitating toward new constructions for their real estate purchases, namely due to location preferences and safety concerns. But how does that affect the closing process? Many first-time buyers might not know this, but the closing standard changes wildly depending on the type of property you choose. While new construction closings strive for a clear timeline and a transparent process, certain factors often ensure that resale closings are completed much more quickly.
To avoid any misinterpretations, let’s outline all the ways in which both transactions may differ:
When it comes to resale closings, the transaction follows a more traditional timeline. Between getting all the paperwork in order, reviewing the title, completing the home appraisal, and defining closing costs, it usually takes between 30 to 45 days between the initial negotiations and the closing date.
Because a resale property is already built, there’s overall less ground to cover in these contracts. After completing the purchase agreement, you should be getting disclosure forms from the seller and homeowners/condo associations about the state of the property, along with the lender-required forms. Home inspections are also crucial when completing a resale closing; if the contract fails to address specific issues involving property structural integrity, encroachment concerns, etc., some revisions might be in order.
The closing costs of an existing property are negotiated with the seller and affected by the property’s location and its market value. Keep in mind that you might have to deal with some hidden fees, even if the distribution of funds is overall much more straightforward.
With that said, it’s still no secret that new constructions are in high demand. They give buyers more freedom to customize their dream home and the reassurance of monitoring the entire construction process, ensuring that all the methods and materials meet the highest standards.
Beyond that, many buyers are ready to navigate the requirements of the closing process because they assume that a brand-new home has a clean title— after all, nobody has lived there before. Mind you, title searches are still required in new construction closings, and there’s a reason for that.
While regular title searches review previous owners and title transfers, the title search on a new construction home looks at the chain of title for the land itself, which may have passed through many hands, be subject to mechanic’s liens from unpaid subcontractors, or carry easements and covenants that affect how the buyer can use the property.
A mechanic’s lien is meant to secure the payment of subcontractors, laborers, and material suppliers in Florida and other parts of the country. Basically, they have the legal right to file this lien if they’d done any unpaid labor while working on the construction of a property.
In a scenario where the builder doesn’t have the funds to pay for the workers’ fees, the resulting lien can be filed after the closing, specifically within the first 90 days after the final furnishing when it comes to Florida properties. So, if the roofing subcontractor is owed $80,000 for their work on the property, and they happen to file the lien after closing, the payment becomes the new owner’s responsibility.
If the lien is filed before closing, it will come up during the title search, but how can you protect your savings in a situation like the one described above? That’s where title insurance comes in. The right policy will cover any mechanic’s liens that might surface after closing, a valuable resource to protect your peace of mind when buying a new construction home.
From the foundations to roofing, plumbing, fixtures, and so many steps in between, the construction of a brand-new property involves the work of dozens of laborers and suppliers. Ideally, the builder will be on top of things when it comes to keeping score of payments, but when it comes to such a comprehensive project, it helps to cover all your bases.
New construction closings include many of the fees you’d see in a resale closing. Appraisals, title searches, title insurance, and recording fees remain as parts of the process, so they should be accounted for. Beyond that, you also have prepaid costs like property taxes and mortgage interests. The state also collects a tax for the transaction in what’s known as Florida’s Documentary Stamp Tax. Many buyers are caught off guard by this fee, even when it’s a non-negotiable part of every real estate transaction.
An aspect that’s often overlooked comes with the Florida Homeowner Construction Recovery Fund, a safety net that can support your insurance policy in the event of mismanagement or scams from a state-licensed contractor. It’s meant to be used as a last resort and can protect you from financial loss in specific cases. It’s fairly common for buyers to forget about the implications of the construction recovery fund when preparing for a real estate transaction, so they’re caught off guard in the instances where it’s needed.
We stated that closing costs might shift with new construction milestones. When it comes to upgrades or finishing touches, it helps to ask about specifics. Costs for landscaping, decks, and fences may not be part of the base price.
All these costs show the importance of having the right title company in your corner. The right counsel can help you keep control over the process, and this comes in handy if builders offer to pay a portion of the closing costs. This offer often demands the use of the builder’s in-house company, restricting your options and adding a separate set of costs.
One thing you need to keep in mind: you should feel secure and confident during each stage of the transaction. Getting to choose a title company that meets your needs is a huge part of that.
Under the Real Estate Settlement Procedures Act (RESPA), builders can’t force buyers to use a specific title company. With that said, they might suggest a title company that’s owned by them or affiliated with them. There might be good intentions behind the offer, but the fact remains that a builder-affiliated title company will have the builder’s interest in mind, first and foremost.
Some common clauses you might come across while perusing a builder’s contract include:
Now, consider staying with a builder’s chosen company while trying to negotiate around these clauses. You’re risking months of stress and the possibility of having to deal with additional fees on top of your standard closing costs.
There are many steps you can take when preparing for your closing. Whether you choose an independent title company or the company suggested by the builder, you should enlist an attorney to review the closing contract before signing.
You can also confirm that the Certificate of Occupancy (CO) has been issued in advance. As explained in the Miami-Dade county website, this certificate validates that a building (or renovation project) is safe for its intended use and has been completed in compliance with applicable code(s).
Circling back to the decision to choose the right title company, let’s see what an independent company can do to assist you before, during, and after your closing.
An independent title company like Key Title & Escrow will conduct a thorough title search, adhering to the parameters of a new construction and evaluating the chain of title for the land. They will also review all relevant documents leading up to closing, including the final settlement statement before closing day.
You deserve the best support while you purchase your dream home. Key Title & Escrow is ready to help you navigate each stage of the closing process. We’re independent from any builder relationship, so you can always trust that your needs are our top priority.
With 24+ years of Florida closing experience, our staff is ready to help you evaluate every clause of the closing contract and introduce the best title insurance options. Above all, we’re committed to protecting your interests, finances, and peace of mind.
Contact us today if you want to buy a new construction home, and we’ll customize our services to your needs.
Not necessarily. It depends on the county where the property is located and the market in that area.
The builder specifies the timeline for each milestone in the construction process, but depending on the project, it can take as long as 12 months.
No, this would violate Real Estate Settlement Procedures Act (RESPA).
The property owner must pay a mechanic’s lien. Builders are responsible for compensating laborers for their work, but the buyer will be expected to pay the owed amount if the lien is filed after the closing, once they’ve become the property’s legal owner.
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