How a real estate purchase is conducted in Florida

 

Step by step information for the foreign buyer

  • The Purchase offer. It is done through the buyer's real estate agent.

  • The acceptance of the Offer by the seller, or a counter-offer and further negotiations to reach an agreement.

  •   The inspection (optional)

  •   The financing process, if needed.  

  •  Contact with banks and mortgage lenders.          

  •   The Property Title search: this is the first step in order to issue a Title Insurance policy that will guarantee a clean title.  

  •   The Title Insurance, usually issued by a Title company or an attorney, specialized in real estate.

  •   The Closing and recording of the sale.  This is done by the Closing Agent or the Title Company. In general it is the same company or attorney in charge of the Title search and Title Insurance.

 

We use Florida Realtor Association's standard forms (F.A.R.) or FAR/BAR forms which are standard issues of the Florida Realtors Association and the Florida Bar. (Attorney’s Official Organization)

In those contracts are included the usual clauses regarding designation of the parties, of the property, the price, the inspection procedure; eventually the appraisal, the payment conditions. (That means if it's a cash based transaction or if it is conditioned on getting a mortgage loan)

There are "AS-IS” contracts which could allow the seller to refuse any repairs in the property, after an inspection is conducted, giving the buyer the option to cancel the contract if he is not comfortable with the amount of  repairs recommended in the inspection.

The offer is made by means of a contract, signed by the buyer and presented to the seller through the participating brokers.  

It is usual to accompany the offer with a good-faith check of US$1,000.00 which demonstrates the seriousness of the offer.

The real estate agent has the obligation to present all offers to the seller.          

The seller will respond by either accepting the offer, reject it, or make a counter-offer.   Usually if he does not respond within a specific date, the offer is considered cancelled. A counter offer will modify the amount, or any other condition presented in the initial offer.

The negotiations conducted in this manner will possibly end in a contract, signed by both parties. We name this an "executed" contract.   

Usually these contracts will require the buyer to complete his deposit with a specific date and it is common to deposit 10 % of the sale price but it could be more or less. This deposit will be kept in an "Escrow Account” which is a “Trust Account” used by the Attorney or the Title company chosen by the buyer.

It is common to have the inspection (if agreed upon) performed within 5 to 10 days.

When it is a sale of a NEW condominium the buyer has the option of canceling the contract within 15 days after he has received all the required documentation from the Condominium Association, as well as their Financial Statements and Budgets.

If it is the RESALE of a condominium property (NOT NEW) the term will be 3 days instead of 15 days.

Commissions are generally 6 % (although that could vary) and are usually paid by the seller and will be shared between the seller's and the buyer's agents.

When the sale has been made through the listing agent, without the cooperation of another broker, then the listing agent will be entitled to the full commission.

There is no advantage for the buyer to try to deal directly with the listing broker since it will not reduce the commission paid by the seller who is already obligated by his agreement when putting his property for sale.  

The buyer will have - in my opinion - a much better leverage when he uses his own agent who will choose between thousands of options instead of trying to steer a client to a specific property where he is the listing agent.

The closing and recording of the sale are usually done at the office of an attorney or the office of a title company, and both of them will work with the mortgage bank (if there is one involved) and will further coordinate all documents, recordings, payments to third parties and handling of the funds.

Buyers' expenses are variable - in case of a CASH purchase including the title insurance, recording fees, and all other expenses, they fluctuate between a total of 0.80 % and 1.0 % of the purchase price.  

In case of financing the purchase through a mortgage all the expenses of the loan must be added.

There will be a 0.55 % (from the loan value) on the mortgage, appraisal fees, and additional expenses that banks and mortgage companies will charge. 

Apart from "Points" charged by the bank to reduce interest rates, the total mortgage expenses in this case could be between 2.0 % and 3.0 %.

Let me explain the "Points". As an example, a client wants a $100,000 loan at a fixed rate for 30 years. The bank will propose a fixed rate of 5% per year. However, if the borrower would like to lower the interest rate, the bank could propose him an interest of 4.75% for example, and in compensation, the bank will charge upfront $1,000 (1% of the loan amount, or one Point), as a fee. Sometimes the bank could propose for example a $2,000 (which is 2% of the loan amount, or 2 Points) and lower the interest rate to 4.50%. It is up to the borrower to calculate if it is to his advantage to accept any of these deals or just go with the 5%. It will depend on how long is the term of this loan; if he expects to repay it in full before the 30 years, or any other consideration that can justify paying these "Points" upfront.

 

For the seller, there will be a tax of 0.70 % charged in all cases plus miscellaneous expenses by the attorney or Title Company.

Mortgage companies and banks, when dealing with foreign buyers require a higher down-payment what was in the past about 20 % up to 30 %. 

Presently and due to the new events, it could be between 30 % and 50 %. 

The required documents are usuall

  • ·         Bank references

  • ·         Bank statements.

  • ·         Letters of credit references by third parties.