Real Estate Closings: Negotiating Closing Costs

Posted By on May 26, 2015

Buying any home or condo in Florida, or any piece of residential real estate, means that the buyer and the seller must go through the “closing process,” which may be the only time, or one of the few times, that they have to go to a real estate closing. However, for the real estate agents involved in the deal, along with the title agents as well as any real estate lawyers hired by either buyer or seller, closing on real estate is a familiar transaction, filled with all sorts of tasks and to-do lists (some of these tasks require spending money, like for inspections, title searches, survey and lien search, etc. ) before the sale of the property is completed.

Both buyers and sellers have a lot of work to do to close a real estate transaction, with some tasks requiring expenses to be incurred. For those buyers and sellers who don’t educate themselves on the details of a real estate closing, particularly on the customary costs associated with a closing in Florida, they may be vulnerable to paying more than they need to for these tasks.

Educating yourself is a good thing because it’s possible to negotiate the cost for certain services and even avoid paying others. (It’s also possible to negotiate, prior to entering into a contact, for which party (either buyer or seller) who is responsible to perform and pay for certain closing costs.)

Residential Real Estate Closings

In Florida, like other parts of the country, when a buyer and seller of real estate are ready to finalize the sale of a property, the process of completing that purchase is called the Closing of the Transaction, or simply “the closing.” Things like title searches to make sure there is clear real estate title to pass to the buyer, and inspections of the property for termites, are part of the closing process.

For more information on the closing process, check out our prior post on Florida Real Estate Closings.

What Are The Usual Closing Costs for a Florida Residential Real Estate Closing?

There are customary costs and fees when selling a home or condo in Miami-Dade, Palm Beach, and Broward Counties. These are costs that the seller and buyer and their real estate agent can expect as part of any deal.

For instance, a buyer of residential real estate in our part of the country should probably expect to pay costs at closing that include:

  • The costs charged by your lender as part of providing a home loan mortgage to you for the purchase (for example, credit report fee, loan origination fee, flood certification fee, etc.);
  • The fee for conducting the closing and issuing a title insurance policy;
  • The cost to perform a lien search or order a Survey of the property;
  • The fee to record the mortgage down at the county real estate property records.

Negotiating Residential Closing Costs

 

1. Buyers/Borrowers and Lenders

First of all, buyers should be ready to discuss what their lenders are charging in closing fees. There are usually several items that can be negotiated between the bank and the buyer, including things like:

  1. Broker fees;
  2. Loan processing fees;
  3. Locking mortgage interest rate fee;
  4. Loan application fee.

From a Florida real estate lawyer’s perspective, if there is any fee or cost involved in closing that seems suspicious, curious, or high, then it’s smart to ask about it. Negotiation is a part of real estate transaction, and there are usually ways to negotiate for a lower closing cost – or even get that fee removed from having to be paid at all.

This includes deciding which lender to use in getting the home loan. There are some banks out there who offer flat-rate closing cost fees. They market flat-rate closings as making things easier for everyone who is going through closing, it’s less paperwork.

Sometimes, that flat-rate may be a good deal. In other situations, it may be hiding excessive closing costs for the buyer to pay.  (lending institutions are required to disclose all costs and expenses associated with a residential real estate loan – for questions here, see Real Estate Settlement Procedures Act and the Consumer Financial Protection Bureau)

A Florida real estate lawyer can help by reviewing the paperwork provided by the lender to make sure the buyer/borrower is receiving all of the information needed to make a fully informed decision in order to get the best deal on a mortgage (on interest rates as well as on closing costs). Your lawyer can help you compare offers (by reviewing the Good Faith Estimates) from a handful of mortgage lenders, where the lenders disclose to you what they will charge in closing costs if you were to get your home loan from them. (In our part of the state, buyers typically pay between 3-5.5% of the sales price in total closing costs, which includes escrows and prepaid items i.e. taxes and insurance.)

2. Buyers and Sellers

All closing costs can be negotiated between buyers and sellers. There is no Florida law that demands one party or the other pay the closing costs in a residential real estate purchase.  Depending on the market conditions, one party may be willing to pay all or some of the closing costs in order to sweeten a deal or to get a deal completed.

The HUD-1 Form Before Closing

The Consumer Financial Protection Bureau (CFPB) requires that a completed federal document called the new “HUD-1 Form” be provided to the buyer/borrower within 3 days of the closing date (the time when the transaction is scheduled for the final documents to be signed and the deal to be completed).

This document provides all of the details for every single closing cost that is being charged and paid by the borrower at the closing. It’s important to review the HUD-1 carefully, to double-check that what you’ve been told (see the good faith estimate) you will have to pay in fees and costs is exactly what you will be paying at closing.

If you negotiated not to pay the lender certain fees, for instance, then you need to check to make sure that the HUD-1 does not show those fees in its list. Additionally, you need to make sure that there aren’t any surprise fees and costs on that HUD-1 that you aren’t expecting to pay at the closing table.

Florida Real Estate Lawyer and Closing Costs

Having an experienced Florida real estate lawyer help in the purchase or sale of Florida residential real estate is not as expensive as some may assume — and having an attorney to help deal with bankers and brokers on things like reviewing home loan terms and closing costs can sometimes result in savings for those involved.

If you are curious about how a Florida real estate attorney might be able to help to buy or sell a home or condo in Florida, then call and ask what they can do for you and what they might charge you for their services — it’s free to ask!

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

Inherited Property and Partition: When Your Brother or Sister or Other Heir Won’t Agree to the Sale

Posted By on May 19, 2015

In Florida, when a parent passes away owning real estate and they are the only owner or the only surviving owner, the property, whether it is the family home or the family vacation property, becomes part of the deceased parent’s probate estate.  In most circumstances, this means that the property can only be transferred to the beneficiaries named in the decedent’s Last Will and Testament after a probate is formally opened. (If the decedent dies without a will, then the real estate is transferred in accordance with Florida’s intestacy statutes, which also normally requires a probate administration.)

Once an estate is opened, the decedent’s real property moves through the probate process under the guidance of the  personal representative(s). Once the estate is ready to distribute the estate assets to the beneficiaries, Florida probate and real estate law require legal documents to be prepared and recorded in the public records in order to reflect a change in ownership and to clear any title issues, including tax related matters. Often times, this happens by preparing a new Deed, which will name, as grantees, the parties named in the will as beneficiaries of the real estate. Once all of the the documentation has been recorded, the beneficiaries (i.e. the decedent’s children) then become the recognized owners of the property according to our real estate records.

Florida condos at sunset in Hallandale Beach

Brothers and Sisters Sharing Ownership of Inheritance

Often, this means that brothers and sisters end up sharing ownership in Florida real estate. Siblings become co-owners of real estate. Legally, they inherit the property as “tenants-in-common” or joint owners of the home (or condo, or land) with their interests being undivided. Each has equal rights to the property, but there’s no line or boundary that separates who owns what portion of the property.

Brothers and Sisters Inheriting Florida Real Estate: Co-Ownership

When things go smoothly, the siblings agree on what to do with the property. For instance, everyone agrees to sell the condo in Fort Lauderdale, the second home in Miami Beach, the retirement home in the over-50 community. The brothers and sisters get together, work with a Florida real estate agent and sell the property, splitting the net proceeds.

Or, maybe they all agree to keep the property as an investment. Working together, they rent the place and have a Florida property manager handling the day to day responsibilities of being a landlord.

That’s when everyone agrees. All too often, things don’t go smoothly in these situations and family conflicts pop up over what to do with the inherited real estate.

Disputes Between Brothers and Sisters Over Inherited Real Estate

Shared ownership can lead to disagreements over what to do with the inherited property. Usually, the conflict arises over one or more siblings who want to sell the real estate and another who either does not want to sell it, or does not agree on the terms of the sale.

Common questions in these brother – sister disputes include:

  • How do I sell the house after probate if my brother (or sister) won’t agree to it or cooperate with the sale?
  • What can I do if I’m trying to sell the property we inherited in Florida and my brother (or sister) will not agree on a sales price?
  • How can I protect myself when my sibling is making me a low ball offer to try and buy me out of my inherited share of our parent’s home?

How Does a Brother or Sister Deal With Inherited Real Estate and a Stubborn Sibling?

The answer in these sibling conflicts over what to do with the inherited property is a partition action. This is a formal action filed as an adversary proceeding in the probate court where their parent’s Last Will and Testament has been filed.  It is filed under Section 733.814 of the Florida Probate Code by either the sibling or the estate’s personal representative and it is a formal request, asking the probate court to partition the property.

If the estate has been closed, then the probate court request is not an option.

In these situations, the brother or sister who is in need of help must hire their own Florida lawyer to file the request for a partition under the Florida Civil Practice and Procedure Code.  Chapter 64 of Florida Statutes explains how all partition actions are to be filed in Florida.

Partition actions are lawsuits that can be filed by any of the owners of the land: i.e., “one or more of several joint tenants, tenants in common, or coparceners, against their cotenants, coparceners, or others interested in the lands to be divided.” Florida Statute 64.031.

What Happens When Siblings Sue For Partition Of Inherited Real Estate?

The partition request is a formal lawsuit, and it means that there must be formal notice just like any other lawsuit and that the procedures for the partition action will follow along with standard Florida procedure (the Florida Rules of Civil Procedure). There will be fact-finding and court hearings, and ultimately a judgment (or settlement) over the partition request.

That judgment will be filed in the real estate records to document that legal title of the property has changed and partitioned into separate ownership by order of the court. See, Model Land Co. V. Crawford, 155 Fla. 323, 20 So.2d 122 (1944).

Money Spent By Sibling On Mortgage Payments, Taxes, Insurance: What If One Sibling Paid Everything?

When there is a request to partition the inherited property between two siblings, the brother or sister who paid mortgage payments, taxes, and insurance as well as any other money spent on upkeep and repair of the home, would get credit for one-half the amount of payments they made that are ruled to be “reasonable” by the court. See, Potter v. Garrett, 52 So.2d 115 (Fla. 1951).

Resolution of Sibling Inheritance Disputes Over Real Estate

Suing your sister or brother over an inheritance dispute is a serious matter and something that should never be undertaken without lots of consideration of your options and investigation of all your options under Florida law.

Having an experienced Florida lawyer at your side to help negotiate on your behalf both before the filing of a partition action as well afterwards can be invaluable to you — both for resolving the inheritance dispute as well as dealing with the emotions and stress that comes with these kinds of controversies.

For more on Florida partitions, see our resources page.

 

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

Selling the House After a Florida Divorce: Is Partition the Answer?

Posted By on May 12, 2015

You live in Florida and you just got divorced. The two of you bought a house while you were married, which is usually the most valuable marital asset. The judge finalized your divorce, but ownership and how the home is to be disposed of wasn’t mentioned or adequately addressed in the settlement agreement or in the final judgment and now you have a problem.  What do you do?

What do you do when an ex-wife or ex-husband won’t agree to buy you out or won’t answer your calls or texts about signing over the deed?

What do you do, if you need the home sold for any number of reasons: maybe just to get the divorce completely behind you; maybe because you cannot afford to live in the house and your credit and FICO scores are dropping.; or perhaps you need to get the equity out of the property.

Your answer may be a partition action.

What is a Partition?

Under Florida law, any owner of real estate can file a lawsuit requesting a judge to end the joint ownership of the property. Partition lawsuits are filed in all sorts of situations; however, no matter what the facts are, when two or more parties share ownership of real estate (commercial or residential) here in Florida, one of those owners has the legal right to request the property to be sold. (Thus, for those who have been divorced and still share joint ownership of the home they lived in while married, a Florida partition action may be a godsend.)

After a divorce, you and your ex-spouse are considered to be “tenants in common” — meaning, you are separate but  undivided owners of the real estate — and under Florida law, the only way to forcibly sell the property is by filing a “partition” lawsuit. Florida Statute 64.011 et seq.

In a Florida partition action, the judge orders a fair and equitable distribution of the real estate, thereby ending the shared ownership of the property – and also orders a distribution of the proceeds from the sale of the home based upon factors, including the costs and expenses that one owner has incurred versus the other owner. Meaning, for example, if one owner has expended more than the other for the upkeep of the property, then the owner laying out the money will receive a larger portion of the proceeds from the sale of the home.  (Also, if one owner has been living in the home, the non-residing owner can argue that they didn’t receive their share of the rental value of the property — these are 2 arguments that are normally made by the parties to a partition action and they are settled by the Judge at the time of the resolution of the case.)

Is a Partition Action a Separate Lawsuit?; Where is the Case Filed?

The request to partition the marital home after divorce is a circuit civil lawsuit. It’s not a part of the family law divorce case; since it pertains to land, the partition action must be filed in the county where the contested real estate is located. See, Rankin v. Rankin, 258 So.2nd 489 (Fla. 2d DCA 1972); Florida Statute 64.022.

If the home is in a different county than where the divorce was filed, then the partition action must be filed in the county where the house sits.

How does Remarriage or Death Impact The Marital Home After Divorce?

There are certain special situations where a divorced has occurred, there has been a change in circumstances between the ex-spouses, and the only way to resolve a dispute over the marital home is to file a partition action. These special situations include:

1. Remarriage

In some divorce cases, one spouse may be allowed to live in the home as part of their ex-spouse’s support obligation. That right to live in the home does have limits, however, and for example, the ex-spouse can sue for partition of the home if the supported ex-spouse (the one living in the marital home) remarries. The courts have reasoned that the remarriage changes that need for support and now the home should be free to be partitioned and sold. Anderson v. Anderson, 424 So. 2d 943 (Fla. 5th DCA 1983).

2. Death

If an ex-husband passes away, courts have held that his ex-wife’s right to exclusively occupy the residence terminates as an operation of law. The two ex-spouses are no longer tenants in common because one of the tenants has died. The home is now subject to partition. Huff v. Huff, 453 So. 2d 531 (Fla. 5th DCA 1984).

Real Estate Attorney and a Partition Lawsuit

My advice for those who have been through a divorce and want to unburden themselves from the real estate obligations they entered into while married, specifically the family home and mortgage, is to seek the advice and help of a Florida real estate lawyer with experience not only in real estate matters but divorce related issues as well. Cases involving the sale of a former marital residence can be difficult to resolve (including knowing how to correctly allocate expenses and lost revenue between the parties) and an aggressive yet compassionate approach can be vital in fairly resolving these disputes.

For more about Florida partition actions, read some of our earlier posts including:

 

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

Escrow/Deposit Problems in Florida Residential Real Estate Closings

Posted By on May 5, 2015

When you are buying a home here in South Florida, or you are trying to sell a house or condo somewhere in the Miami – Palm Beach – Fort Lauderdale area, there are certain things that are automatic in every residential transaction. The buyer makes an offer and the seller either counters or accepts. A purchase agreement gets signed. A deposit is put down, a mortgage is sought.

An Escrow account, is part of every Florida residential real estate transaction. And like most things, escrow deposits goes smoothly … until they don’t. And when there are problems with a Florida escrow account, it often takes a Florida real estate lawyer to help fix things and either get the deal closed or help the buyer (or seller) walk away from a bad bargain without getting harmed in the process.

What is an Escrow Account?

An escrow account is a bridge of sorts between the buyer and seller whenever a Florida home or condo is being sold. It is an account where the money that is being transferred from buyer to seller is held. The “escrow agent” oversees the account, and is responsible not only for the money itself but also the documentation that relates to the money.

Funding Escrow in a Residential Real Estate Transaction: Earnest Money

When someone is purchasing a Florida home or condo, they begin by providing a sum of money that is defined in the purchase agreement as the “earnest money.” The earnest money is given by the buyer as evidence that the buyer is serious about buying the real estate; earnest money allows the seller to remove that property from the open marketplace (and from the possibility of other buyers making offers) because the buyer is serious about purchasing the house.

The buyer doesn’t hand over the earnest money to the seller. The buyer hands over the earnest money to the escrow agent who puts it into an escrow account.

Usually, buyers will put up to 10% of the asking price of the home as a deposit towards the purchase. It’s this earnest money – a sum that demonstrates to the seller that the buyer is “earnest” or in good faith about wanting to buy the property – that goes into the hands and control of the escrow agent until the closing is completed and ownership of the real estate transfers from the seller to the buyer.

Other Things That Go Into the Escrow Account

The buyer’s earnest money isn’t the only thing that can gets deposited into the escrow account. Other things that may be held in escrow include things like:

  • The buyer’s additional deposits;
  • Closing costs to be paid by the buyer;
  • Closing costs to be paid by the seller;

Can The Buyer Get Back Their Escrow Money?

Once the escrow account has the earnest money deposit, it stays there until closing. The buyer just can’t say “oops” and get it back. However, there are times when the escrow agent must return the earnest money to the buyer; these instances include:

1. An Inspection reveals problems with the property and a contingency clause in the purchase contract allows the buyer to get their deposit back and walk away; or

2. The Appraisal comes back lower than the purchase price and again, there is a clause in the purchase agreement that allows the buyer a refund of their earnest money and the choice to walk away (if they don’t want to renegotiate for a lower price).

Problems With Escrow Caused By Real Estate Agents and Brokers

Often, real estate professionals (agents, brokers) act as escrow agents in Florida residential real estate sales. One of the most common problems with escrow accounts in Florida is a discrepancy that occurs between the money entrusted to the real estate agent and the money that actually goes into their real estate broker’s account. More common problems caused by real estate agents or brokers holding deposits, include situations where:

1. The agent doesn’t make sure that the buyer’s money is actually in the escrow account, then the deal goes south (i.e. the buyer has breached the contract), the seller not only losses the sale of the home or condo, but also losses the earnest money deposit that was supposed to help make the seller whole in this very situation. Here, the seller may have not only a breach of contract claim against the buyer but also a complaint about the broker with the licensing board  (as well as a legal claim against the broker).

2. Even if the real estate agent and the real estate broker are careful to get the buyer’s deposit check, if the escrow account cannot be fully reconciled down to the penny, then there’s a problem. Escrow accounts should start with the sum of zero, before anything is deposited in it, and it should end with zero, after all the money has been distributed at the closing table. (Real estate brokers in Florida are required by law to check on escrow accounts every month to make sure that everything is okay. See, Florida Administrative Code rule 61J2-14.012.) If the money in the account doesn’t balance at the closing table, then there may be a claim against the escrow agent / real estate broker.

3. Lots of real estate lawyers receive calls about this scenario — The escrow agent willfully breaches the contract or is grossly negligent for mis-delivering the deposit to the buyer or the seller when there is a dispute i.e. there are conflicting demands for the deposit because the transaction has or is falling apart.

Are You Having a Problem with a Deposit Being Held By a Real Estate Broker or Other Escrow Agent?

If you are in the process of buying a home or condo here in South Florida, or if you are a seller who is concerned that the sale of your residential real estate is about to fall apart, then getting the help and guidance of a Florida real estate lawyer can be invaluable to you. Florida attorneys with experience in residential closings may not only be able to get the deal completed, but they may be able to resolve disputes quickly and without stressful time and money on your part.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

Florida Residential Closings and Price Changes: Is The Buyer’s Offer Set in Stone?

Posted By on April 28, 2015

Buying a house or a condo here in South Florida may be the biggest purchase that someone makes in their lifetime, or one of the biggest. Buyers surf the web looking for the perfect home, as well as visiting potential properties with their real estate agent. Once a buyer has found the house or condo that they can envision living in with their families, that’s when things start getting interesting.

Once the buyer decides on a specific property, there is still the matter of making an offer on the house or condo, and waiting to see if the seller accepts their offer or makes a counter offer. Even sellers anxious to sell and buyers excited to buy can go a round or two in negotiations before there is a firm offer and an acceptance in place.  Once the contract is signed and the earnest money deposit(s) is paid to the escrow agent, that’s when when the closing process begins.

Can a Buyer’s Offer Change After the Seller Accepts It?

Once that offer has been accepted by the seller, then the negotiations are pretty much completed, right? Not necessarily.

There are situations where offers to buy a residential property in Florida can be changed before the transaction closes. Real estate lawyers are often invaluable to both the buyer and the seller when these circumstances arise between the parties.

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One common example of where the buyer tries to renegotiate the price is during the inspection period.

Here in Florida, particularly South Florida where we have humid and hot weather conditions, residential properties are almost always inspected by a third party inspector for things like mold, leaky roofs, or termites, for example. (Other items routinely inspected include electrical outlets, air conditioning, pool and septic tank)

If the home inspector or the pest inspector finds a problem, like mold behind drywall or termite damage in the attic, then the buyer may decide to either cancel the contract or ask to the lower the purchase price to allow for the cost of repairing the problems the inspector has found. (An alternate strategy is for the buyer and the seller to keep the sales price intact, but have the seller credit the buyer, at closing, the cost of fixing what the inspection has revealed – additionally, some purchase and sales agreements have repair provisions that require the seller to make repairs up to a certain dollar amount.)

Contingencies in the Purchase Agreement Allow for Price Change

Most standard contracts that buyers submit to the sellers include not only the amount of money that the buyer is offering to pay the seller to buy the home or condo, but they also include conditions that the buyer and seller must meet before the deal can go close. These conditions are also known as “contingencies.

Here, the assistance of a knowledgeable Florida real estate lawyer can be very helpful, both for Florida buyers as well as Florida sellers — particularly if there are disputes during the closing process on whether or not contingencies have been met or satisfied.

(Lawyers are a must especially if the problems are discovered after closing, see “Does a Home Buyer Have a Claim Because They Weren’t Told About a Problem with Their Home?“)

Common conditions or contingencies that buyers place in a purchase agreement which can lead to a price reduction or change in the sales price include:

  • Inspection rights – where the inspection reveals major flaws or damage to the property;
  • The seller agrees to make repairs before closing, which are not completed;
  • The seller agrees to make repairs before closing, which are not completed to the satisfaction of the buyer; and
  • Undisclosed problems which are discovered during the inspection/closing process (i.e. title defects, municipal liens, Condominium Association or Homeowner’s Association liens, easements, encroachments, illegal conversions, non-permitted additions, etc.).

Can a Seller Avoid Having the Buyer Change the Price?

What if a seller wants the comfort of knowing that the purchase price they initially accepted will be the amount that they are paid at closing? To achieve this goal, the seller can, in the contract, allocate money that he or she is willing to pay for any needed repairs that are revealed during the inspection.

The seller can also decide at the outset that they will offer their home or condo “as is,” which means that the seller is not willing to the lower the price for any issues that the buyer may find during its inspection period, or otherwise; the buyer agrees to buy the home without any real bargaining power for a price reduction. However, selling a home “as is” may make it harder to sell the property, since it can be seen as a red flag to many that the property has some real flaws or defects. (Which may also keep the property on the market longer.)

What about other clauses or provisions in the purchase agreement? Most purchase and sales agreements contain time frames (i.e. 45 days from the effective date or 5 days prior to closing) that impose a deadline on the buyer to voice any complaints about the condition of property (for example, complaints about the title or the physical condition of the property) and, if the deadline is missed, then the complaint is considered waived and the buyer takes the property subject to the condition. Buyers, and their real estate agents, need to be aware of these deadlines (especially since most standardized sales contracts contain a time is of the essence provision) in order to preserve their rights to cancel or try to negotiate a reduction in the sales price.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

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