Construction Loan Verification: The Due Diligence Step Most Miami Buyers Skip

1. 01Developer acquires site — secures land loan against land value only
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2. 02Sales gallery opens — buyers commit deposits
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3. 03Developer presents land loan as "project financing" — technically true, strategically misleading
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4. 04Pre-sale threshold not met — institutional lender does not commit to construction
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5. 05Project stalls — buyer capital tied up in concrete and land indefinitely

1. 01Developer pre-sells 50% of units — demonstrates market demand
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2. 02Institutional lender underwrites full project cost
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3. 03Construction loan issued — funds disbursed in draws tied to construction milestones
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4. 04Developer has lender oversight — quality and timeline accountability
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5. 05Project delivers — lender's capital at risk creates genuine completion incentive

The PR Groundbreaking

• ✗Ceremonial shovels and media event on cleared land
• ✗No vertical structural construction started
• ✗Triggers 10-20% deposit milestone — developer accesses your capital
• ✗Months of actual construction prep still ahead
• ✗No lender draw triggered — project financing not yet validated

This is a cash extraction event dressed as a construction milestone.

Real Groundbreaking

• ✓Verified vertical construction on structural core has begun
• ✓Foundation work completed or actively underway
• ✓Construction loan draw triggered — lender has released funds
• ✓Building permits issued and active
• ✓Construction timeline is now a contractual and financial obligation

The lender's money is now at risk. Their completion incentive is aligned with yours.

Request the Lending Institution

Ask for the name of the institutional lender and the loan commitment letter. A developer with genuine construction financing will provide this without hesitation. Resistance is a signal.

Verify the Pre-Sale Threshold

Confirm what percentage of units are under contract. Most institutional lenders require 50% pre-sold before funding. If the developer cannot confirm this threshold has been met, the construction loan may not yet exist.

Confirm the Draw Structure

A real construction loan disburses funds in milestone-linked draws — foundation, structural frame, enclosure, MEP, finishes. Ask how the loan is structured. If the developer cannot explain the draw schedule, the financing may be a land facility, not a construction loan.

Retain an Attorney to Review the Financing Disclosure

Florida pre-construction contracts contain a financing disclosure section. Your attorney must review this document to confirm the nature of the financing, the lender's identity, and any contingencies that could affect project delivery. This is not optional.

Unverified Construction Financing

Committing 20% of the purchase price at contract signing into a project without verified institutional construction financing is one of the highest-risk capital deployment decisions available in the South Florida market. Under Florida Statute 718.202, developers can legally use your deposit funds for construction costs. If the project stalls, your capital stalls with it — with no guaranteed timeline for recovery.