How Important is Title in a Florida Residential Real Estate Closing?

Posted By on April 21, 2015

Closings for residential real estate (homes, condos) are often held at the offices of title companies here in South Florida (even though most real estate lawyers will close a transaction at no additional cost). One of the most important aspects of a real estate closing, is the title work, which is an often under emphasized issue at closing.  (The title company usually, at least in my experience, focuses on getting the deal closed and lets the title underwriter worry about the title work.)

In our part of the state, real estate records are kept in the Broward County, Miami-Dade County, and Palm Beach County public records. They not only cover every square inch of land in each county’s jurisdiction, these records track the ownership of land here for hundreds of years — back to the Spanish land grants of long ago.

Florida land records can be complicated with historically dense documentation, and confirming clear title in our state is more of a complex issue than in other parts of the country.

The Importance of Title at Closing

In any closing, but especially a Florida closing where someone is buying their primary residence, that buyer assumes that the seller is legally transferring full ownership of the land, and the improvements built upon the land (house, driveway, fence, sewer drains or septic systems, etc.), free and clear of any liens or encumbrances. However, those assumptions can sometimes be wrong.

If the seller is unable to convey “clear title” (the term used in most Contracts is “marketable title”) to the buyer, then the transaction should not close. The closing should not happen because the seller cannot transfer what he or she has agreed to sell to the buyer in most Florida residential real estate contracts (i.e. The Florida Realtors/Florida Bar Contract).

Title Search and the Title Report

So what happens to make sure there is “clear title” or “”marketable title” at the closing table? Before closing, a title search is performed to confirm that the seller is indeed the legal owner of the property being sold.

The title search will also reveal any claims against the property — from a lien filed by a contractor who wasn’t paid for work done on the home or condo to any mortgages and/or equity lines. Anything that interferes with clear title is called a “cloud on the title” and the seller needs to get these matters resolved before closing can take place.

In Miami-Dade and Broward Counties, title searches are performed by the closing agent (i.e. the title company or lawyer closing the transaction) who have expertise in investigating real estate records and claims against property. The reports are usually prepared by title underwriting companies who will issue a title report that summarizes the title company’s findings.

Once the buyer has the title report, then the seller needs to resolve any problems identified in the title report. If the title cannot be cleared for the closing, then the sale may fall through — if not because of the buyer walking away, then because the lender will not go forward with the home loan without a clear and clean title on the property.

Title Insurance Policies

In Florida, title insurance is an important component of our real estate industry.   It facilitates the timely transfer of property between buyer and seller and allows for mortgage lenders to confidently lend money to property owners.

An “owner’s title insurance policy” is an insurance policy that provides coverage for the owners of real estate in the event there is a defect in title, a valid lien against the land, or other legal claims against the real estate that result in a loss in interest held in the property (mortgage lenders receive a “mortgagee title insurance policy”). If there is a successful challenge to the policy holder’s title, then the coverage will pay for the damages that result (up to the policy amount).

Title insurance is a part of almost every residential real estate closing here. Lenders mandate that title insurance policies (with the lender as the named policyholder) are in place before they’ll fund a home loan, for example. Nearly every cash buyer will often ask for an owner’s title policies, too.

It’s a big business, and the Florida Department of Insurance oversees the title insurance industry in the State of Florida. There are laws and administrative rules in place regarding how title insurance policies are to be sold and what they may and may not provide in their coverage. There are also regulations regarding what these title insurance companies can charge for this real estate title protection.

Should Florida Lawyers Conduct Real Estate Closings and Issue Title Insurance?

Experienced Florida real estate lawyers representing buyers of single family homes, condos, or other residential real estate know what to look for when reviewing a title search report (especially when the home being sold is a foreclosure). This review is usually to occur at least 5 days before the closing (see the “Title Evidence and Insurance” provision of your Residential Contract For Sale and Purchase).

Simply stated, the title insurance policy is designed to protect the buyer for years into the future.  The policy represents to the buyer that he or she has clear and marketable title to the real estate — no contractor is going to be knocking on their door demanding to be paid for work done before they bought the place or there are no unsatisfied mortgages, for example.

Title insurance underwriters have title agents (title companies or lawyers) that conduct the title search,  issue the title insurance policy and close the transaction. Florida title insurance lawyers understand the duties and liabilities that come with title insurance coverage, and have an ethical obligation to assist buyers and sellers with making sure that the closing proceeds with as much protection as possible against future title challenges (most Florida real estate lawyers perform these services, along with closing the transaction, at no more expense than what a title company will charge to close the transaction).

For More Information, Read: 19 Reasons to Hire a Real Estate Lawyer When Buying or Selling A Home

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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.

Closing on Florida Real Estate: Buyer’s Documents at Closing

Posted By on April 14, 2015

At the closing table for the purchase of a home or condo here in South Florida, buyers, both native to Florida as well as those who have recently moved here, or out of state residents purchasing a vacation home, will have lots of paperwork to sign.

Buyers are often surprised at how much they have to review and sign at the Florida closing on their new purchase — even a cash transaction, which is normally the simplest and smoothest residential real estate closing, can take some time.

Why? There are lots of documents (i.e. Mortgage, Note, Flood Notice, Insurance Notice, TILA Notice, Same Name Affidavit, IRS Forms, Real Estate Disclosure, etc.) that the buyer must read, and then initial on many pages, and sign in several spots.  For many of these documents, a notary will be needed to witness their signature.  A single contract with one signature at the bottom of the last page, no matter how things appear on television, will not consummate the transaction and/or convey the property to the buyer.

Why so many documents? Both federal laws and regulations (for example, RESPA and TILA), as well as state statutes, require the buyer to confirm in writing his or her understanding and agreement (or waiver) of issues and conditions as they take on the expense of a home loan (i.e mortgage).  These laws and regulations are designed to disclose as much as possible to the homeowner about the loan transaction they are entering into at the closing.  After all, providing as much information as possible about the largest transaction that most consumers will engage in is a good thing.

What Are Some Common Buyer Documents at a Residential Real Estate Closing?

 

Promissory Note

This legal document is normally a standardized form created by the lender which your real estate attorney (if you have one) will have reviewed on your behalf. It is the document where you promise to repay the bank the money you borrowed.  Once the buyer’s signature is on the promissory note, he or she has agreed to repay the amount shown in the loan and if he or she fails to pay, this document will be used as evidence of amount due.

Mortgage

This is a legal document that is also a standardized form which you give to the bank and it creates a lien against your property. It provides security to the bank in the event that you, as the buyer, stop paying on the home loan. This document, once signed by the buyer, gives the lender a lien against the real estate and a legal right to take the real estate in foreclosure if there is a default.

HUD-1 Statement

This is a form that is required under federal law. It is provided to the buyer so that he or she is given formal, written notice at closing of the details (costs and expenses) associated with their mortgage home loan. The HUD statement tells the buyer things like:

  • Expenses related to the loan (i.e. documentary stamps and intangible taxes paid to the county and the state)
  • Interest rate calculation and prorations
  • Costs of closing
  • Fees to be paid by the buyer at closing to other vendors (i.e. real estate agent transaction fee, survey expense, lien search, title insurance premiums, etc.)

Truth in Lending Disclosure Statement

This document discloses to the buyer important information about the loan terms.  The Truth in Lending document (a/k/a “TILA”), will set forth things like, the amount financed, the interest rate on the note, the amount of interest paid over the life of the loan, the amount of the monthly principal and interest payments, prepayment penalty information, information related to late fees and whether or not the loan may be assigned, among other things.

If there have been any changes to your mortgage terms since you applied for your home loan (the lender will provide a good faith estimate in advance of the closing setting forth the loan terms), then the lender must formally inform you of those changes at closing. This notice is given to the buyer from the lender showing any difference in the loan terms between application and signing the loan documents at closing.

Affidavits and Declarations

The buyer may also have to sign, in front of a notary public, several affidavits dealing with various issues concerning the purchase of the new home or condo. Affidavits are legal documents where the Buyer swears to the truthfulness of the information contained therein.  The affirmations will vary depending upon the property and the buyer. For instance, there may be a Affidavit requiring the buyer to disclose that he or she is known by several alias or that he or she understands that there will be fees and dues assessed by a condominium association which the buyer will be responsible for paying as part of his or her duties as the property owner, or that the condo is intended to be an age-specific (55+) community. 

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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.

Closing a Florida Residential Real Estate Transaction

Posted By on April 7, 2015

The event where a Florida condominium or single family home changes hands, where ownership of the property goes from the seller to the buyer, is called the “closing” or the “closing of the transaction.” When the buyer leaves the closing table, he or she leaves with keys to the front door; the remote for the garage door; the code to the alarm system; and legal title to the property as its new legal owner.

 

Many South Florida condo buyers may not know the complications of a Florida real estate closing.

What is a Real Estate Closing?

In Florida, a real estate closing is a settlement and finalization of a real estate sales transaction. For residential real estate, a closing will usually involve the buyer signing things like the home loan documents (i.e mortgage, note, truth in lending disclosure, closing statement or HUD, etc.) in order to allow the seller to be paid the agreed-upon sales price for the property. The seller can expect to pay for things like real estate commissions, prorated condo dues and ad valorem property taxes, as well as any attorneys fees or closing fees at the time of closing.

Closings are often held at the offices of a title company or real estate brokerage, or at a real estate lawyer’s office. The “closing date” will appear in the purchase and sale agreement (aka “contract”).

Once the transaction closes, a few weeks will pass from the time that the buyer and seller sign the closing documents to the time that the Warranty Deed or Quit Claim Deed and other legal documents are recorded at the county courthouse and they are returned to the buyer along with their title insurance policy.

10 Steps to a Florida Residential Real Estate Closing

Getting from the buyer’s first introduction to the property to that closing table can be a lengthy and complicated process. Here are ten steps that most Florida buyers and Florida sellers go through to get to closing.

1. Earnest Money Deposited

When the buyer finds a home or condo that she likes, she makes an offer on the property to buy it and provides “earnest money” as consideration to be held by the escrow agent (when representing the buyer, we usually recommend that our office hold the deposit).

2. Apply for a Home Loan

The buyer finds a lender who will loan money for the purchase of the condo or home and applies for a residential mortgage. Most transactions allow for the contract to be contingent upon the buyer obtaining conventional or FHA financing for the purchase.

3. Appraisal of the Property

A licensed appraiser selected by the buyer’s lender visits the property and prepares an appraisal of its value.

4. Title Insurance

A title insurance agent issues a title insurance commitment that shows the owner of the property according to the public records and lists any liens or other encumbrances against the real estate and lists all of the requirements for the issuance of a final owner’s title insurance policy.

5. Inspection for Termites and Damage to the Property

Given Florida’s humid and hot climate, termites are a real threat to real estate improvements here and professional inspectors will check the property for evidence of termites and issue a report.  The buyer will also inspect the roof, the electrical, the pool, appliances, etc. to determine if they are in working order. (If the property is sold “As-Is” the buyer still conducts inspections to learn what, if any, issues the property may have.)

6. Survey of the Property

A real estate surveyor will confirm the real estate boundaries of the property to make sure, among other things, that the property description is accurate, their is ingress and egress to the roadway or right of way, and report any encroachments or easements that can adversely impact the value of the property.

7. Hazard, Wind and Flood Insurance for Buyer

In Florida, flood insurance may well be required by the lender (see FEMA maps) for the residential real estate as well as windstorm coverage, which depends on the zone location of the property.

8. Preclosing Inspection of Property

Before closing, an inspection or walk-through of the property to insure that any agreed-upon fixes, furnishings have been removed, missing shutters replaced, or other hurdles to closing the transaction have been completed.

9. Closing Documents Prepared and Reviewed by Buyer and Seller

The parties, and their lawyers, need to review the final documents that will be signed at the closing table and make any changes that are needed. These documents can include the following in a Florida residential real estate closing:

  • Promissory Note
  • Warranty Deed
  • Truth in Lending Disclosure
  • Bill of Sale for furnishings – like hurricane shutters, pool equipment, washer and dryer, refrigerator, etc.
  • Affidavits and other title clearing documents (e.g., representing the house was the homestead of the seller or the seller is not a foreign person subject to FIRPTA)
  • HUD-1 Statement.

10. Money Ready for Exchange

The earnest money deposit, the additional buyer proceeds, along with the mortgage loan funds will be transferred from the closing agent to the seller once the buyer is authorized to close the transaction (e.g., the mortgage lender gives it approval to close the loan transaction).

Why Should a Lawyer Conduct The Closing?

Florida buyers and Florida sellers are fortunate when they have a smooth closing process where problems — sometimes serious ones — don’t occur. Having a Florida real estate lawyer represent the buyer or seller to get through the closing process is always helpful and often much less expensive than people think. In fact, in most instances having a real estate lawyer close your transaction will cost no more than a title company will charge to conduct the closing.  And, if there is a problem, there’s no need to worry about running around to find a lawyer to represent your interests, he or she is already there to help.

See: 19 Reasons to Hire a Real Estate Lawyer When Buying or Selling a Home.

 

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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.

Questions To Ask Before Buying a 55+ Condominium in Florida

Posted By on March 31, 2015

Retiring in South Florida is the dream for many Americans, and for those who do retire here in the MiamiDade – Broward – Palm Beach counties area, that often means moving into a beautiful condominium with beach access or ocean views. Condo living offers a great many advantages for retirees, and condominiums in our local communities are often marketed to those aged 55 and older. These “55+ condos” are located all over South Florida.

 

There’s good reason for this. The Florida Department for Elder Affairs reports that the retirement industry is the 2nd largest economic sector in the State of Florida, which means our state relies upon retirees for their economic contributions here.

And out of all of Florida, the top three counties most popular with senior citizens here are those in our neck of the woods:

  1. Miami – Dade (1st);
  2. Palm Beach (2nd); and
  3. Broward (3d).

Senior Communities and 55+ Condos

Retirees opting for the Florida condo lifestyle here are looking for freedom from things like mowing lawns or shoveling snow. Many are also wanting peace and quiet and the enjoyment of sharing their condo common areas with fellow retirees. Lots of people moving here after raising their families and building their careers do not want to deal with kids in the swimming pool or teenagers in the parking lot.

Which is why age-specific condominium communities have become so popular here in Florida, and why the government has approved the 55+ condominium as an acceptable form of discrimination against some buyers.

However, those interested in buying a Florida Condominium in a 55+ Condo community need to know that not only are these condominiums not necessarily without families or young people residing there (see our earlier post for details), the Condo Board of Directors which runs the condominium itself need not be filled with people over the age of 55 either.

To find approved 55+ Communities approved by the Florida Commission on Human Relations within a specific county, check:

Miami-Dade 55+ Communities
Palm Beach 55+ Communities
Broward 55+ Communities.

The Tricky Twenty Percent (20%)Resident Rule

Federal law controls “55+ condos” housing.  Under federal statute, some form of discrimination is allowed for senior communities such as 55+ condominiums, but only 80% of the condominium must be have units where at least one person is over the age of 55 years. (This is occupancy, not ownership.)

Which means that up to 20% of the condo units in a Florida 55+ Condo unit need not have people over the age of 55 years living in them. But does it mean that these younger residences, who may not have the same concerns, wants, or needs as the retirement folk, can live here and throw a wrench into the purpose and plan of a retirement community?

That remaining 20% causes lots of confusion. Age-restricted Florida condominiums vary here, and the condo documents control. There are two approaches here:

1. Some 55+ condos will have governing documents that specify that a surviving spouse, or surviving child, who is living with the older resident at the time of his or her death may remain in the condo even if they are under the 55 year age limit.

2. Other 55+ condos have documents with provisions that state the individual condo unit can have any age resident, even babies, as long as the 80% residency requirement for the 55+ community has been met for the Fair Housing Amendments Act.

Common 55+ Condo Questions

Here are some common 55+ Condo Concerns that potential buyers as well as current residents may have:

1. Can the condominium lose its 55+ Community status with the State of Florida?

Yes. There are legal requirements that must be met at least every 24 months and if the Condo association isn’t keeping up with that responsibility, then the state agency may revoke the 55+ status.

2. Can we be sure that no loud kids or unruly teenagers are living in the Condominium because of language in the Condo Documents?

No. While there may be condo rules in the condo documents that prohibit permanent residences under a certain age (say, 16 years), the Condo Board cannot legally bar the sale or the rental of a condo unit to someone with kids under that age. The Fair Housing Act was amended in 1989 to stop discrimination based upon “familial status” and this change in the law voids those old condo document provisions that barred teenagers and young children from living in the communities here.

Those wishing to live in a retirement community need to make sure that it is marketed and maintained as a “55+ Community” and that it is in compliance with the federal fair housing laws.  Not all condos are “55+ condos” and not all condos marketed as “retirement communities” are “55+ condominiums” as recognized by federal law.

3. What about when a Florida 55+ Condo is Inherited by Someone Under 55 Years of Age?

Whether or not that condo unit can be used as the home or residence of that person, who is under the age of 55, depends both upon Florida law and the particular condo documents that control that condominium. Heirs and beneficiaries may or may not be able to live in that sunny, oceanfront Florida condo — it depends.

Thinking About Purchasing or Protecting Your 55+ Florida Condo?

If you have questions about a Florida 55+ Condominium, then working with a Florida condo lawyer to determine what applies to the condominium under federal law, state law, and the individual condo documents is important — especially in situations where you are concerned that there is a threat to continued statutory Adult Community status under the Florida Fair Housing Amendments Act.

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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.

When Is a Florida Real Estate Agent or Broker Guilty of the Unauthorized Practice of Law?

Posted By on March 24, 2015

Buying or selling a home or condominium here in South Florida involves lots of paperwork, much of it legal documents like contracts with the real estate agent or broker (a listing agreement); as well as sales contracts, deeds, title searches and title commitments, disclosures and more. In fact, almost every kind of Florida real estate transaction (residential or commercial), or the rights to land, will have several legal documents that must be signed as part of the transaction.

Most documents related to real estate transactions involve Florida law and legal issues.

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In Florida, real estate agents and brokers are educated on aspects of Florida real estate law as part of the testing requirements for their state real estate license. The agents and brokers must know about laws regarding zoning, their fiduciary duties to their clients, why clear title is so important, and much more in order to provide professional support to their clientele.

However, at no time is a Florida real estate agent or Florida real estate broker to practice law. It is against the law in the State of Florida for an agent or broker to do so; doing so is called the “unauthorized practice of law.” Why? Real estate law is complex and it’s easy for innocent people to get hurt by people who give advice when they aren’t properly educated and licensed to do so.

Were You Referred to a Florida Real Estate Lawyer for Legal Questions?

When a buyer or seller or landlord or tenant has a legal question, it’s very tempting for the real estate professional (including the property manager) to answer the question — and this temptation seems to grow the longer that person is employed in the real estate industry. However, the public needs to be well aware that just because an agent, broker, or manager has been “doing this for years” does not mean they are correct in their knowledge of Florida law and how it applies to the particular situation.

Practicing law here in Florida is defined by Florida statute. It involves giving advice that needs legal knowledge — and that means someone who is licensed to practice law by the State of Florida.

Can A  Real Estate Professional Give An Opinion?

Nevertheless, all too often, real estate agents and brokers skirt the edge of the envelope or go over the line and practice law without a license. For example, if a buyer or seller asks a broker or agent to check out the title to a piece of property, that’s not allowed. Title is a real estate issue of depth — and figuring out if a home or land has a “clouded title” is not only complex from a legal issues standpoint, it can be tricky from a legal research view, as well.

Florida Statutes 475.25(j) has been passed by the Florida Legislature specifically to address this situation. Under this law, no one with a Florida real estate license is allowed to give any opinion on the title to real estate. What they can, and should, do is obtain the legal opinion on title from a Florida real estate lawyer and then pass that legal opinion on to their clientele.

Florida Statute 475.25(j) states that a real estate professional is subject to losing their license if he or she:

“[h]as rendered an opinion that the title to any property sold is good or merchantable, except when correctly based upon a current opinion of a licensed attorney at law, or has failed to advise a prospective purchaser to consult her or his attorney on the merchantability of the title or to obtain title insurance.”

What About Real Estate Contracts?

Working with the Florida Bar (the official organization of Florida lawyers), the Florida Association of Realtors publishes standard real estate contracts that real estate professionals can use in the State of Florida for real estate transactions. You can check a form to see if it is one of these standardized documents by looking at the bottom of the form for a copyright reference.   For example, here is an online example of a “FARBAR” residential real estate purchase contract form. 

These forms can be used by real estate agents when a buyer wants to make an offer on a condo, for instance. The public should be aware that even these standardized forms carry some risk of the Unauthorized Practice of Law by a non-lawyer.  A common problem here is an agent that drafts an “addendum” to the standard form. These Addendum are legal documents and legally binding. (The public should also know that these standardized Contracts have several important sections that must be filled-in by the parties, including sections relating to who pays for certain expenses, whether or not the contract is assignable, when deposits are due, when inspections should be completed, cancellation provisions, etc.)

If the Addendum later results in that contract being unenforceable under Florida law, then the real estate agent and his or her real estate brokerage firm can be legally liable for the damages resulting from the deal gone bad — and the real estate professional could be accountable for practicing law without a license.

What Should You Do If You Need An Addendum?

Check with the Florida Bar Association and/or the Florida Association of Realtors to see if there is an authorized Addendum that meets the exact needs of your situation; otherwise, ask a licensed Florida real estate attorney to draft it. It may not be nearly as costly as you think and it will undoubtedly be cheaper than dealing with a flawed legal document in the future.

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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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