What Remedies Are Available For a Breach of a Real Estate Contract in Florida?

Posted By on April 28, 2016

According to Florida case law as of the date of this article, a breach of a real estate contract can give rise to a specific performance claim (compelling the seller to sell or the buyer to buy) or a damages claim.  The contract should be reviewed to determine which of these remedies is available under the terms of the agreement.

See: In re Rabin, 361 B.R. 282 (Bankr. S.D. Fla. 2007)

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5 Must-Have Prerequisites for A Valid Contract to Sell Residential Real Estate In Florida

Posted By on April 26, 2016

In Florida, real estate transactions are governed by both real estate and contract law (other laws and regulations can also apply, like those related to mold, lead based paint, coastal control issues, etc.). As a result, transactions can quickly become complicated.

Most Buyers and sellers know that all real estate transactions should have a written contract in place to establish the obligations of the parties and to protect the parties from issues like those mentioned above.

Some believe, that it may be cost-effective to try and handle a real estate transaction among the parties without the assistance of a licensed real estate professional (like a “for sale by owner”), but there are risks with making that choice. Maybe the parties end up with a valid agreement; maybe they don’t.

For those who are trying to go at it on their own, here are five prerequisites to having an enforceable real estate contract in the State of Florida.

This is NOT a complete list, and within these 5 items not all nuances are discussed. This is simply a general overview of the material terms that should be included in any residential real estate sales contract in Florida.
 

FEMA - 13989 - Photograph by Andrea Booher taken on 07-13-2005 in Florida

Sales for Florida Oceanfront Condos: Lots of Legal Requirements


 

1. Who Are The Parties To The Transaction?

When there is a sale of a Florida home or condo, at least two parties are involved: a seller and a buyer. That’s obvious, right? Except when there’s not: e.g., there may be several owners who are required to sign the contract in order to have a binding agreement.

Sometimes, it easy enough to determine who the sellers are and who should sign the contract. For instance, a condo may be purchased by someone from a group of sellers who share ownership after an inheritance (the buyer can check the probate records).

If a grandfather bequeathed his oceanfront condo on Miami Beach to his grand-kids and they would rather sell it than keep it, then they are free to do so. However, the buyer will need to have all of the grand-kids sign the contract (and the deed) in order for the buyer to take the property free and clear of any title issues (and the buyer may need the personal representative of the estate or the trustee of a trust to sign off as well).

Another example of multiple sellers that’s not so easy to spot: life estates. Here, there are many reasons why someone might leave their home to their spouse with a “life estate,” with their children owning a “remainder interest” in the property. In this scenario, the widow continues to live in the home until she passes away or decides to move out. Her children hold a legal interest in the real estate, but they do not have the right to the property until the life tenant dies.

If the widow and her children agree, then they can sell the home without a problem. However, there cannot be a binding agreement to sell the entire interest in the property unless both the owners of the remainder interest and the owner of the life estate sign off on the transaction.

If the widow decides to sell and doesn’t involve the kids, then the widow can only sell her life interest. (The only way she can sell the entire interest is if she has an enhanced life estate deed. If not, then the children are indispensable parties to any transaction involving the sale of the entire interest in the property. See, Siler v. All Pro Realty Service, Inc., 491 So. 2d 331 (Fla. Dist. Ct. App. 1986).)

Tip: if the widow has a standard life estate interest in the property she can close the transaction by simply obtaining a quit claim deed from the kids to her as grantee or obtain a deed from the kids to the buyer.

2. Does A Sales Contract Have to be in Writing?

In Florida law, there are certain agreements that are considered so important to the public interest that they have to be documented on paper, in writing, in order to be considered legally binding. This concept is called the “statute of frauds,” and it bars any claim for breach of contract involving the sale of real estate unless their is an agreement “in writing signed by the party to be charged or his or her agent.” See, Wiborg v. Eisenberg, 671 So. 2d 832 (Fla. 4th DCA 1996).

Simply stated, contracts to sell real estate in Florida must comply with the statute of frauds: meaning, they have to be written. If the buyer and the seller make a deal and shake on it, even nailing down the purchase price and all of the essential terms and conditions, then they must put all those details down in writing or their agreement will not be enforceable under Florida law.

Which means, that if the buyer decides to back out of the agreement to buy the condo two weeks after the handshake or the oral agreement was made, then the seller has no legal recourse against that buyer for breach of contract. If the seller tries to assert a claim (and tries to keep the earnest money deposit), the buyer has a legal defense based upon the “statute of frauds.”

Similarly, if the buyer is hot to buy the condo but the seller changes her mind and there was only a handshake agreement, then the buyer is out of luck.  There’s no legal avenue to force the seller to go through with the deal (no specific performance).

For an example of a residential real estate contract form, check out this As-Is Residential Real Estate Agreement provided online by the Florida Realtors.

Tip: An enforceable contract for the sale of real property in Florida doesn’t have to be on a single page or in just one document; a legal sales contract can consist of several written documents (addendum) and they can be countersigned and copies can be considered as originals.

3. Property Description

All sales contracts for residential real estate must have a legally sufficient property description as part of the agreement (property address and/or legal description).

In fact, for a great many years, Florida courts have considered the description of the real estate being sold as one of the “most indispensable parts of an agreement to sell.” South Florida Citrus Land Co. v. Walden, 51 So. 554, 59 Fla. 606 (1910).

Usually, this is done as a “lot and block” or “metes and bounds” description of the property which includes a reference to where the deed is recorded (by book and page) in the county real estate records. See, Garvin v. Baker, 59 So. 2d 360 (Fla. 1952).

4. Consideration Must Be Included

Requiring that there be consideration for the sales contract in a residential real estate transaction is another mandatory term under Florida contract law. For any contract to be valid in Florida, “consideration” has to exist.

What is “consideration” in a real estate deal? It is the benefit or interest that was provided by the buyer to the seller that induced the seller to agree to sell the land (i.e. the money being paid or the property being exchanged).

5. Meeting of the Minds

Finally, the contract must reflect the agreement and understanding of the parties, buyers and sellers, regarding the material terms of the deal. Both sides must understand and agree on the deal i.e, that a certain piece of real estate is being sold at a certain price on or before a set date. The concept of having a common understanding of the terms of the deal is known as a “meeting of the minds.”

While the parties need not have a “meeting of the minds” on every little detail of their bargain, they do have to have a joint understanding of the material terms. The parties must agree to the offer, the acceptance, the consideration given, and the specific real property involved.

When might there be a failure of a “meeting of the minds” in a real estate sale? One example is when there is lack of accord on the number of acres involved in the transaction. If the sellers think there is 235 acres on the table, but they are off their count by 57 acres, then there’s not a valid contract. See, Perkins v. Simmons, 15 So. 2d 289, 290 (Fla. 1943).

As the Florida Supreme Court explains: “The parties must mutually assent to each of the terms and conditions of both the offer and the acceptance in order to be a meeting of the minds and the closing of a lawful and binding contract.”

Other Considerations

This list doesn’t include things like making sure that the parties have legal capacity to sign the contract or determining if there is a binding deal because there have been several counter-offers (for example, where the parties make several changes to the agreement that all parties do not initial or sign off on). Additionally, anyone considering entering into a contract to buy (or sell) a home or condo in Florida must understand that there are all sort of laws that must be adhered to in order to have an enforceable contract.

For instance, Florida Statute 720.401 states that where a mandatory Home Owner’s Association is involved, the sales contract must incorporate the HOA’s disclosure summary. If this HOA disclosure summary is not provided to a buyer before he or she signs the sales agreement, then that buyer has the power to void the contract and walk away under this Florida law. Florida Statute 720.401 even goes so far as to provide an example of the form that is to be used for this disclosure summary.

Questions About a Florida Residential Real Estate Sales Agreement?

If you are either a seller or buyer of a home or condo here in South Florida, then you need to know how Florida real estate and contract law applies to the situation in order to protect your legal rights. Do you have a binding contract? Can you get your earnest money returned? Can you force the seller or buyer to close the deal (specific performance)?

A good piece of advice if you are faced with any of these issues, is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Who has the right to bring a statutory action for partition?

Posted By on April 25, 2016

According to Florida case law as of the date of this article, generally, a fee title holder of an undivided interest in a parcel of real property has the right to bring a statutory action for partition without any concern about his or her reasons for seeking partition.

See: Garcia-Tunon v. Garcia-Tunon, 472 So. 2d 1378 (Fla. Dist. Ct. App. 2d Dist. 1985).

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Is a partition provided for only those who have joint interests?

Posted By on April 21, 2016

According to Florida case law as of the date of this article, yes, a partition is provided only for those who have joint interests such as joint tenants, tenants in common, or joint heirs against their co-heirs.

See: Garcia-Tunon v. Garcia-Tunon, 472 So. 2d 1378 (Fla. Dist. Ct. App. 2d Dist. 1985).

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Options to Purchase and Rights of First Refusal in Florida

Posted By on April 19, 2016

Usually, the main parties to a residential real estate transaction are the seller and the party to whom the seller chooses to sell, otherwise known as the buyer. However, there are times when a third party becomes an indispensable party to a real estate transaction.  This is because of the third party’s power to purchase the property despite the seller’s desire to sell to a buyer of his or her choosing.

It’s a nice place for this third party to sit, having the right — the ability to buy or not — to prevent another party from purchasing a piece of real estate, right?

Sellers, however, may not think it’s so nice. For a residential seller, it can be frustrating to have a property ready for sale and not be able to sell it to a party that is ready, willing, and able to make a deal.

Still, it’s legal to do in Florida, but how? There are two ways that this can happen under Florida law which are (1) an option to purchase; and (2) the right of first refusal.

 

South Palm Beach condominiums from lagoon

South Palm Beach Condominiums: Prime South Florida Real Estate


 

1. Option to Purchase

In Florida, a seller and a buyer can enter into a legally binding contract that creates an “option,” to purchase real estate. These agreements can look a lot like a real estate contact with provisions that detail the terms of the tranaction. Things like the legal description of the property (book and page or metes and bounds); the names of the seller and the potential buyer; the sales price; cash or financing terms and more.  See, Old Port Cove Holdings, Inc. v. Old Port Cove Condominium Ass’n One, Inc., 986 So. 2d 1279 (Fla. 2008)

Key here, though, are the provisions that give the “option holder” the right to “exercise an option” to purchase.

Most options have a deadline and during the option period the seller cannot sell the real estate to any other party (unless of course, the option holder waives his or her rights to purchase the property). The seller is legally prevented from selling the real estate while the option holder decides whether or not he or she wants to buy the property.

Essentially, from the seller’s perspective, he or she has made a deal to sell the home to the option holder if the option holder so chooses to buy. It doesn’t matter if Bill Gates swoops in and offers twenty times the price, the seller cannot sell because he or she is bound by the terms of the option agreement.

During the option period, the option holder can decide to buy the property under the terms that have been spelled out in the agreement or do nothing at all (or they can sell the option to someone else). If the option holder does nothing, then usually the option expires by its own terms once the deadline passes.

The option holder usually has no legal duty to do anything while it holds this power. Doing nothing and allowing the deadline to pass is usually enough to terminate an option agreement. If and when that happens, the seller is then free to sell the home to any party he or she so chooses (like Bill Gates).

2. Right of First Refusal

Under Florida law, a contract can be created between an owner of a home or condo and someone interested in buying that property that gives the interested party a right to be the first choice as buyer if and when the owner decides to sell the real estate (this scenario often occurs with condominium associations).

Here, the owner isn’t actively wanting to sell the property and isn’t looking for a buyer. Instead, there is someone who is interested in purchasing that property should the owner decide to sell.

Essentially, the party with the right of refusal wants the first bite of the apple, should the owner decide to sell. Legally, that first bite of the apple is called the “right of first refusal.”

A right of first refusal is also a legal agreement recognized under Florida law. Here, it is a contract where a right to buy a piece of property is held by a specific party should the owner decide to sell; the party holding the power will have the right to purchase that real estate before any third party can buy it. If a third party offers to buy the home or condo at a set price, and for certain terms and conditions, the owner must disclose these details to the person who owns the right of first refusal. The right of first refusal then requires the seller to sell the real estate to the owner of the right of first refusal at the same price and under the same terms and conditions as those offered by the third party.

It’s only after the right of first refusal has been declined, that the seller can sell their property to the third party.

Can a Florida Seller Force The Sale of Their Home When There is an Option to Purchase?

Sellers have all sorts of reasons for entering into an option to purchase agreement; however, for some sellers, the fact that there is a third party holding the right to buy their property is of great concern.

These property owners can become frustrated or anxious to get a deal done; they want to get to closing and finalize the transaction.

If the party holding the option to purchase isn’t taking fast action, what can that seller do? Can he or she force a final sale to that slow-moving party?

It depends.  The language of these agreements will need to be reviewed. The provisions of these agreements will control what the seller can and cannot do to force a sale.

In an option to purchase, the seller has made an agreement to sell to a third party, which the seller usually cannot revoke — the seller has agreed to sell at a set price and based upon certain terms and conditions. Forcing the person to exercise that option may not be available under the contract, but the savvy seller may be able to “sweeten the deal” in other ways and entice the option holder to accelerate things and close the deal sooner than later.

How? The seller could agree to install new hardwood floors, contribute to the buyer’s closing costs, or to put up a fence, or to vacate the condo quickly. Each deal is different, but smart negotiations might get that deal done quickly.

Why Do Some Sellers Enter Into Options to Purchase and Rights of First Refusal

These contracts may seem strange, or even suspicious, to some people — why not just go ahead and sell the property outright instead of selling these contingent rights to a third party? However, for many sellers and buyers, these are good things to have (in some instances, the seller has no choice, including where the property is a condominium with the association holding a right of first refusal).

For instance, there may be neighbors on a Florida canal that agree to offer each other the “first right” on each other’s property should one of them decide to sell; this keeps the waterfront protected and intact. Family members who own adjoining parcels, likewise, may find that Options to Purchase or Rights of First Refusal are smart ways of protecting a family heritage and inheritance.

Moreover, the Florida Legislature has recognized some situations where these types of agreements are good things. For instance, in Florida Statute 723.701, rights of first refusal were allowed for Florida mobile park home owners’ associations, where these property owners were legally entitled to notice of the intent to sell and to the right of first refusal of the mobile home park.

Options to Purchase, Rights of First Refusal, and Closing a Residential Sale in Florida

If there is some confusion between you, as a seller, and a potential buyer, over a right of first refusal or option to purchase, then you may need to figure out all the legal issues that come into play in your situation. Can the property be sold? Who can buy it? What are your rights? What are the rights of a third party buyer here?

A good piece of advice if you are faced with any of these issues, is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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How Do You Know If The Chain Of Title To Your Florida Real Estate Is Clear?

Posted By on April 12, 2016

Title Issues And Title Insurance

At the end of most Florida residential real estate closings, the goal of the seller is to walk away from the closing table with money from the sale of his or her home. Easy enough. However, a buyer usually has a few goals he or she wants to achieve at the closing table.

Sure, getting the keys and the garage door openers and taking possession of a home is satisfying and is pretty easy to do. However, sometimes achieving the buyer’s goal of receiving clear or “marketable title” to that property can be difficult, especially after the recent foreclosure fiasco.

Neither the buyer nor the seller has a goal of ending up in court in a battle over title issues.

Under Florida law, land records are recorded with the county clerk for the county where the property is located. Those records establish “title” to the property and that’s where legal title is confirmed and controlled.  If you review the land records of your County here in Florida, you’ll be able to see old, handwritten land records that transfer title to some property going back hundreds of years, to the original land grants given by the King of Spain when Florida was held as a Spanish territory.

Like this one:

 

Spanish Land Grant Papers of John B. Gaudry page 8 of 53

Above: page from 1817 Spanish land grant papers of John B. Gaudry, a Spanish nobleman who established a plantation near what is now DeLeon Springs, Florida, for a tract of land next to the St. Johns River.


 

Florida Real Estate Title and Title Insurance

If you are buying a new condo in a newly developed condominium or a home in a brand new community, then your risk of a title problem is likely less than someone buying an established single family home in Hollywood or Fort Lauderdale, or a waterfront condo in Hallandale Beach, Miami or Palm Beach.

With real estate that has a longer transaction history, making sure that the buyer leaves the closing table with marketable, clear title can be difficult at times. Not only does Florida have a complicated history of real estate ownership, given that lands here have been under the laws not only of Spain, but Great Britain, France, Mexico, and even the Confederacy as well as the federal and state governments, but there’s the reality that title is not a single issue, but in a reality a bundle of legal rights.

Title is a Bundle of Legal Rights

In Florida, real estate title can include not only rights to access and use the land, but also water rights, mineral rights, and more. And Florida real estate title can be shared not only between spouses and family members, but between creditors, heirs, business partners, and even the company that repaired the swimming pool.

Banks Want Protection

Title is such a complicated matter that no bank will agree to lend money for a home without a title search being done by a reputable title company or real estate lawyer. And, that bank will also insist upon having a title insurance policy with the lender named as an insured party, insuring that title as being clear and marketable before the loan will be disbursed to the borrower.

Title insurance works to protect the beneficiary listed on the insurance policy from problems discovered after the closing. The bank’s title insurance policy will cover its loan amount in the event that there’s a problem with the collateral.  Some banks, although rare, may insist on title insurance of up to 125% of the loan amount, just to cover some of its expenses in the event a title issue arises or in the event of a foreclosure.

Note, the bank’s title insurance policy won’t help a buyer (or property owner), which is why most, if not all, buyers purchase their own separate owner’s title insurance policy as part of their closing costs (the premium paid for a title insurance policy is sometimes paid by the buyer, sometimes by the seller – see our discussion on negotiation of closing costs).

Title Commitments

What about researching the records?  Before the closing takes place, a title company (through its title agent) will issue something called a “title commitment” which outlines all of the requirements (and exceptions to title) that must be met in order for marketable title to be transferred from the seller to the buyer at the closing table.

A “title commitment” lets the buyer know what requirements must be met before he or she is safe to hand over their cash to the seller. It lets the seller know what has to happen in order to deliver to the buyer marketable title, which is a requirement under most standard residential real estate contracts (see the “Title Evidence” section of your real estate contract which is usually the first paragraph under the part of the contract called the “Standards For Real Estate Transactions”).

Problems With Title To Florida Real Estate

Notwithstanding the fact that title insurance exists to protect the parties to a real estate transaction, buyers and sellers still need to understand the complexities of title because they still can be harmed by a title defect, or “cloud on the title” after the closing. Having an insurance policy doesn’t mean the property is bullet proof.

Title insurance is not a guarantee that there are no title issues – it just means that a due diligent review of the real estate records did not reveal a defect of record. A title problem can still appear after the closing.  After all, mistakes are made; reviewers miss issues all of the time, including mistakes in the legal description.

What might those problems be?

An experienced Florida real estate lawyer will have all sorts of war stories to share on strange ways that real estate closings were impacted by a title problem. And unfortunately, some of these stories will include a lawsuit being filed  by one of the parties.

Examples of Florida title issues:

  • A lien filed in the real estate records on the eve of closing by a company who has not been paid for work done on the property (like the swimming pool company that has not been paid to repair the pool by the seller);
  • A deed that is invalid because of the death of the grantor before closing;
  • A deed that is presented as a single person owner but the owner is still legally married;
  • An easement that gives someone else (a person, a company, a government entity) right to access or use the land which wasn’t recorded in the land records;
  • An easement that gives someone else (a person, a company, a government entity) right to access or use the water rights, mineral rights, air rights, etc., which wasn’t recorded in the land records;
  • Claims for unpaid taxes, including inheritance taxes or gift taxes, against the prior owners of the land;
  • Claims for unpaid condo fees;
  • Claims to the home or condo as part of a divorce settlement or final judgment in the divorce proceeding; and
  • Fraud or other falsehood regarding true owner of the property by the seller or by another party in the chain of title.

Florida Foreclosure Fraud Issues

A huge problem for many Florida residential real estate closings today are the title problems caused by all of the foreclosure fraud that took place not to long ago. Any buyer that is interested in a home or condo is wise to be concerned if there was a foreclosure in its history.

The “robo-signing” frenzy of the foreclosure mills has made many real estate titles vulnerable to challenge or subject to a cloud on its title. For the buyer to have clear title to these properties, it may be necessary to review the underlying foreclosure case. Additionally, the buyer should have some confirmation that the person who was foreclosed upon doesn’t still have a legal claim to the house because of some “robo-signing” issue.

Another problem here is adverse possession claims. In some foreclosures, like those where the owners vacated the home years ago and left it to the bank, there may be squatters who might challenge or cloud title when a buyer is finally found for the place. If the squatters paid property taxes, for instance, they may argue they have legal rights to the land.

Are You Required To Have Title Insurance?

Title insurance policies are not required by Florida law. There’s no legal requirement that a title insurance policy be purchased in order for a Florida real estate transaction to close.

While the bank issuing the home loan will require one, that is a contract term between you and the bank — it’s not a Florida statute or federal regulation that is forcing the bank to require title insurance at the closing.

(Note: In instances where there is a cash transaction, some buyers, but very few, purchase Florida real estate without a title insurance policy (a practice that I believe is unwise). If later on they discover a title problem, in order to resolve the issue, their only recourse may be to bring a lawsuit against the seller, who may be long gone by then.)

Having a Florida Real Estate Lawyer for Your Residential Closing

The advice of an experienced Florida real estate lawyer can be of great help to you and your family in the purchase or sale of your family home or condo – particularly when the complex issue of real estate title is involved. Having an attorney review the situation before the deal is finalized at closing isn’t as expensive as some assume it to be, and in some situations having that expertise to help get the deal done can be invaluable. It may help the buyer and seller from being forced to sue each other in order to clear the title to the property.

A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights before closing on your new home. The good news is, that most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

For more, read our post: 19 Reasons to Hire a Real Estate Lawyer When Buying or Selling Florida Real Estate.

 

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Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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10 Popular Articles About Florida Real Estate Closings

Posted By on March 30, 2016

Since we receive many calls about real estate closings (from both buyers and sellers), I thought it would be a good idea to share some articles we have written in the past about Florida closings that answer some of the most frequently asked questions. Here are 10 articles that we hope you will find helpful:

Click Here To See All Of Our Real Estate Closing Articles

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Florida Residential Closing Costs

Posted By on March 15, 2016

We all know that when a home owner places their house or condo up for sale, they will incur expenses to sell the property (even if they are selling the property without a real estate agent). Florida residential property does not get sold without the home owner having to incur some costs and expenses. Some sellers will try and keep those costs down by shifting some of the costs to the buyer, but there is always some expense in getting a house sold.

The same is true for buyers. Buyers have expenses related to finding the right property to purchase, including inspections to make sure the property is in good working order and there are no defects.

How much are these costs and expenses? It really depends upon the particular transaction (is it a cash transaction, and what is the purchase price, etc.): there’s no set amount for what a buyer will have to pay as part of purchasing his or her new residential property (For example, the cost of title insurance will vary depending on the amount of the purchase price).

 

Miami Omni 2006

 

What Are The Expenses To Sell and Purchase Florida Residential Real Estate?

All of the expenses that are incurred by either the seller or the buyer in the process of selling and purchasing residential real estate are collectively called closing costs. In other words, everything that has to be paid aside from the purchase price is an expense of the purchase and sale.

For people buying real estate in Florida,  it’s been reported that Florida has some of the highest closing costs in the country, at least according to Bankrate. Their research showed that in 2014, for example, mortgage closing costs for Florida were the 8th highest in the United States. Which means that for some buyers coming to Florida they may be surprised at the expenses that they will incur in buying their new home or vacation property.

What Are The Different Kinds of Closing Costs?

Closing costs are divided between the parties; the division depends on several factors, including what part of the State the property is located in and the type of Contract that is being used to memorialize the terms of the sale.  In South Florida, closing costs are typically paid as follows:

1. Seller’s Closing Costs

Municipal Lien and Tax Search to determine if the city or county are owned any funds and determine if there are any outstanding violations against the property;
The cost of obtaining a pay off any existing loan or mortgage;
Preparation of the closing documents (Warranty Deed, Bill of Sale, Owner’s Affidavit and any other documents necessary to clear any title issues);
Recording Fees on the Deed, the Satisfaction of Mortgage and any other documents needed to clear title;
Documentary Stamps on Deed (70¢ /$100 of the sale price in Florida as a general rule)
Commission to the Real Estate Broker (and their Agent) for marketing and selling the property;
Title Search on the property (to confirm clear title and to clear any liens or clouds on the title before closing);
Property Tax (share that seller is responsible for paying pro-rata);
Estoppel Certificates from the association which shows if there are any outstanding fees due the association and if there are any pending or confirmed special asssements;
Condo Fees (share that seller is responsible for paying pro-rata);
Homeowners’ Association Fees (share that seller is responsible for paying pro-rata).

2. Buyer’s Closing Costs

Property Tax (share that buyer is responsible for paying pro-rata);
Homeowners’ Insurance;
Condo Fees (share that buyer is responsible for paying pro-rata);
Homeowners’ Association Fees (share that buyer is responsible for paying pro-rata);
Mortgage Recording Fees;
Appraisal;
Settlement Fee – the amount paid to the closing agent to close the transaction;
Survey of the Property;
Inspection of the Property;
Title Insurance Policy for the Buyer on the property (Usually, the seller pays for a title insurance policy for the buyer as protection that there is good legal title passing to them in the purchase);
Excise taxes related to the closing documents (For example, the Promissory Note – see Florida Statute 201.02 et seq);
Flood Insurance Policy (something that is required in many parts of Florida).

3. Additional Buyer’s Closing Costs If There Is A Mortgage Involved

Loan Discounts (Points) (there are two kinds of points: (1) fees to pay the loan originators, or “origination points” and (2) expenses to cover the prepaid interest on the mortgage, or “discount points.” They can be negotiated with your lender);
Title Insurance Policy for Lender (the bank will require that the borrower pay for title insurance on the property, this is a separate policy from the title insurance that the seller buys for the buyer, as shown above);
Document Stamps on the Mortgage (35¢ per $100 as a general rule) (tax to cover costs of obtaining a mortgage – see Florida Statute 201.02 et seq);
Intangible Tax on the Mortgage (.002 x amount of home loan) – the State of Florida imposes a tax on loans;
Inspection for Termites – these are often required by the lender, especially if the borrower is obtaining an FHA loan;
Inspection for Flooding Risk (”Flood Certification”) – lenders require this for Florida property;
Credit Report for Bank — lender will charge the borrower for the cost of confirming their FICO Score and credit-worthiness
Lender Document Preparation – preparing the note, mortgage, disclosure statements, etc.;
Fees for Escrow of Property Taxes and Hazard and Flood Insurance Premiums;
Appraiser’s Fee (Appraisal is required for a home loan) – lender will require that a third-party appraiser confirm the fair market value of the home before agreeing to lend the purchase price.

Who Paying the Closing Costs for the Sale of a Home or Condo in Florida?

For buyers coming to Florida from other states, they may be surprised to learn how the expenses of selling and purchasing residential real estate are handled here in Florida. For example, the party who pays certain expenses is different within the state itself: how closing costs are handled in Broward and Miami-Dade Counties are different than how they are processed in Palm Beach County and all other counties.

For the majority of the United States, the buyer and the seller split the expenses of the sale: they share in the closing costs. In some states, like Kentucky, the seller pays for everything. Not Florida!

Here, who pays what for closing costs can be part of the negotiations of the sale. Savvy buyers knowing that the seller is anxious to move the property may agree to buy the place — if the seller takes on the responsibility of paying all the closing costs.

In other situations, a buyer may be so interested in getting the property that the buyer will offer to pay the seller’s closing costs as an incentive to get his offer accepted. Here, the buyer may have the cash to cover all the expenses of the sale (which is common for international buyers like those coming here from Latin America and China to buy Florida condos). Or the buyer may be able to include the total amount of the closing costs in their mortgage, if the lender is agreeable.

Another option: the seller and the buyer may agree that the seller will provide a flat amount to cover closing costs, and the buyer will be responsible for any expense that exceeds that amount. For instance, their deal may state, “Seller agrees to pay up to $4000 to the Buyer to cover his closing costs.”

A Florida Residential Real Estate Lawyer Can Help With Closing Costs

Negotiating closing costs can mean saving lots of money, either in the home loan itself or in the cost of the sale itself for either the seller or the buyer. Having a Florida real estate lawyer’s help can be invaluable not only in finding ways to negotiate for a lower closing cost – but maybe finding a way to avoid having to pay that expense at all.

Today, for instance, a buyer of a Florida home or condo in Miami-Dade or Broward County should expect to pay around 4-6% of the sales price in total closing costs (assuming the buyer is borrowing money from an institutional lender).

Can they lower that amount? Can they negotiate with the seller to pay a part (or all) of these costs?

An experienced Florida real estate attorney can answer these questions for them, and often at a much more reasonable expense than the buyer (or seller) might assume to be the case.

A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights to negotiate the costs to close your transaction. The good news is, that most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

_______________

Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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6 Practical Things A Buyer Should Do Right After A Real Estate Closing

Posted By on March 1, 2016

For Florida home buyers, 2016 looks to be a great year to buy a new home in the Miami Dade / Broward / Palm Beach areas.

Why?  Economists are predicting that mortgage interest rates will remain at “historically low levels” this year, with Freddie Mac expecting a 30 year fixed rate mortgage to average lower than 4.5%. As a result, experts are predicting even more home purchases in the coming year than in 2015.

This is great for both buyers and sellers and our local economy. From a Florida real estate lawyer’s perspective, this is a great time of year to educate and prepare these parties about the closing process. This is especially true with all of the big changes brought about under the CFPB related to closings. Buyers that fail to protect themselves are vulnerable to being victims; too many of our clients have come to us with problems that could have been negotiated and resolved before closing if they had known what to do beforehand.

Accordingly, we’ve provided a series of blog posts here to help people who are in the process of buying a new home or condo here in South Florida, including:

  1. Florida Home Buyer Closing Day Checklist;
  2. 4 Conditions A Buyer Should Require Before Closing On A Florida Home;
  3. Real Estate Closings: 4 Things to Know About Closing on Your New Home; and
  4. Florida Real Estate Closings Are Important: Checking Paperwork Details May Have Saved Florida Homeowners From Foreclosure Filing by Bank of America Eight Years Later.

Today, we are adding to our series of articles on closing information by discussing things that a Florida home buyer should do AFTER they’ve closed on their new home or oceanfront condo.

 


 

6 Things A Home Buyer Should Do After Closing

 

1. Take A Moment

First things first, now that you are a new home owner you should stop for a moment and congratulate yourself. It’s a big deal! Not only have you successfully navigated all of the steps to find the right house, in the right neighborhood with the assistance of the right real estate professional — you’ve also successfully obtained a home loan (in most cases) and you’ve closed on the property after dealing with all of the due diligence and bank issues (underwriting, income and asset verification, credit inquiries, inspections, appraisal, survey, title insurance, etc.). Congratulations!

2. The Closing Paperwork

As discussed in our earlier post, you will have accumulated a lot of papers and file folders over the course of buying a home, which will include the documentation that you brought with you to closing, of course. You will also have all the paperwork that was provided to you at closing (good faith estimate, bill of sale, owner’s affidavit, etc.).

As soon as possible after closing, take a minute to go through all the documentation that you received. In particular, check out the following and make sure that you have these documents and that they are accurate:

  • Closing Disclosure
  • Promissory Note
  • Mortgage
  • Deed to the Property Showing You as Owner
  • Title Insurance

If you discover a problem, then it may be important that you solve that problem immediately. Did they forget to give you the final title insurance policy? Have them send it over. Does the title insurance policy have exceptions that weren’t include in the title insurance commitment.  This is a bigger issue: call a lawyer for guidance.

3. Your Address

Changing your address should be done within a short time after you’ve closed on the home. Why? Your legal residence impacts all sorts of things, like who you can vote for in the next election, and how much your car insurance premium might cost (rates may go up or down depending upon the location).

Changing your address means forwarding your mail with the United States Postal Service. It also means notifying various agencies and companies of your new home, such as:

4. Monthly Budget

Buying a new house means that you are going to need to buy some new things. These may be minor, one time expenses, like a new lock for the backyard gate or a couple of new trash cans. It can also mean that you’ll be spending lots of cash on things like draperies, blinds, security systems, and new kitchen appliances.

There may be other expenses that will increase as part of your monthly, ongoing expenses. Sit down as soon as possible after closing and make sure you’re ready for things like:

  • New monthly HOA fees (for the Homeowners’ Association)
  • New monthly Condo Association fees if you have purchased a condo
  • Saving for Upcoming Property Taxes (if they aren’t part of your escrowed account)
  • Homeowners’ Insurance Premium (if it’s not covered in your escrowed account)
  • Emergency Fund for surprise repairs and expenditures that your new home may need (like the garage door opener that fails three months down the road, for instance)
  • Fund to cover any increase in your HOA or Condo Association fees or special assesments (because over time, they likely will be increased to cover increased maintenance costs, etc.).

5. Your Homeowner’s Insurance Policy

When you buy a new home, you will get new insurance coverage to protect you from unexpected loss. Here in South Florida, most home buyers are aware that they need to protect against the risk of water-related damage like mold or flooding from hurricanes.

However, shortly after closing it’s a good idea to review your policy and double check that you’re covered for all the risks that you feel are necessary. Also, there may be ways to get a lower premium if you do certain things.

So, read the policy for things like:

  • Adequate flood coverage
  • Hurricane coverage
  • Mold coverage
  • Discounts for smoke alarms
  • Discounts for security systems
  • Riders for expensive personal property (engagement rings or artwork).

6. Your Monthly Mortgage Payment

Read over your mortgage documents again. Make sure you know when your first payment is due and know how many days after the due date that you can make a payment before you have to pay a late fee. Look to see if there is a pre-payment penalty, just in case you decide to make extra payments.

Also, check to see if it is likely that your loan servicer is going to change. Will you be sending payments to a different address than that set forth in your disclosure statement?

What Else?

After you buy a new home, the deed is recorded in the Florida real estate property records. Each county clerk is responsible for keeping these public land records up to date and accurate. Since they are public records, lots of companies like to scour these records so they can sell new home owners all sorts of products and services.

Some of these things do not involve a lot of money. Cable or satellite TV service companies may offer new home offers special discounts, and these may be great deals with real savings, for example.

However, there are other marketers that new Florida home owners need to be careful about and investigate before doing business with them. These include:

  • Offers for home equity lines of credit
  • Offers for new credit cards
  • Offers for home improvements (a swimming pool, for instance, or a new deck, energy-saving windows, etc.)
  • Offers for “mortgage protection (life) insurance” (these policies usually cost more and a standard life insurance policy can accomplish the same thing)
    Offer for a bi-weekly payment plan on your home loan (key here: you can do this yourself, you don’t need to pay someone to do this for you!).

What Happens If You Have Trouble After Closing?

If you find that you are having physical problems with your new home, including roof leaks and plumbing issues, or if you are finding it hard to make your mortgage payments after you’ve bought your home — either six months down the road or six years — then it’s important that you don’t get overwhelmed by the situation and do nothing. That’s going to increase your stress as well as make the situation worse.

You have options. If the problems relate to the condition of the property, the first things to do is to review the seller disclosure statement you received when you signed the contract to purchase the property to see if the problem was disclosed (and the inspection report). If the issue relates to affordability, negotiating with your lender on ways to work things out and avoid foreclosure is possible, especially now that new laws and regulations are in place in the aftermath of the recent Foreclosure Fraud scandal.

Either way, a good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. The good news is, that most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

_______________

Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
If you found this information helpful, please share this article and bookmark it for your future reference.

Florida Home Buyer Closing Day Checklist

Posted By on February 23, 2016

In a Florida residential real estate purchase, few days are bigger than the day that the transaction closes. Sure, there is the excitement of beginning the process of finding a home or condo to buy here in South Florida, and the thrill of finally choosing a particular property and having your offer accepted.

However, when a buyer leaves the closing table he or she’s no longer a buyer: they become an OWNER.

From the perspective of a Florida real estate lawyer — especially after the recent foreclosure fraud catastrophe — the day of closing is the day of making sure the buyer knows exactly what it is they are buying and signing. (For more on Florida foreclosure fraud, check out our free e-book, “The Non-Lawyer’s Guide to Foreclosure Fraud 2011.”)
 

Condos are a very popular form of home ownership in South Florida.


 
For more about the details of a Florida residential real estate closing, check out our earlier posts including:

 

Our Common Sense Closing Day Checklist

Since this day is so important in the home purchase life cycle, we are sharing the following information and suggestions for residential home buyers who are ready to close on their new Florida home or condo:

1. What To Bring To The Closing

Most buyers that come to the closing table need to come with more than just a pen ready to sign all those closing documents. They will likely also need the following:

A. The Closing Funds

According to the standard FAR/BAR contract, Florida residential buyers need to bring to the closing a cashier’s check with them in the amount set forth in the closing disclosure given to them by the closing agent. Unfortunately, even though the FAR/BAR contract states a cashier check may be used, most closing agents will only accept wired funds.  This is because there have been so many fraudulent transactions in South Florida involving fake cashier’s checks.

B. Checkbook

Smart buyers will have their checkbook ready, too, in case there are any last minute items that have to be paid before the closing can be finalized. Using a personal check is not acceptable for paying the full purchase price, but they may be fine for smaller amounts, like covering the pro-rata share of a service contract or purchasing some of the seller’s furnishings.

C. Identification

In Florida, the buyer will be asked to confirm his or her identity. Expect to show your current driver’s license and one other form of photo ID (especially if there is a federally insured mortgage involved).

D. Co-Borrower on the Loan

If there will be more than one person taking responsibility for paying the home loan, then they will need to be present at the closing table along with the buyer. Co-borrowers) will need to sign the mortgage documents at closing alongside the primary borrower. (This is also true where the property is being purchased in the name of one spouse –  the non-purchasing spouse still has to attend the closing to sign the mortgage, even though he or she is not a borrower – this relates to Florida’s homestead law.)

2. What To Do At Or Before The Closing

When you are buying real estate in Florida, you have a lot of work to do before the deal closes, including:

A. Final Walk-Through

Smart Florida home buyers will have a final walk-through the day of the closing, or the day before closing, to verify that the condition of the property has not materially changed since the date they made their offer to buy the property. Buyers can do this alone, or with one of their professionals if a specific type of problem is a concern. For instance, if there was a crack in the swimming pool, the buyer may want to see the pool one more time before buying the home – and he may want to bring his pool expert with him, just to make sure that he’s getting a fully repaired swimming pool.

There’s always time to negotiate a problem that is discovered during a final walk-through; however, it’s too late to negotiate after you’ve closed on the deal.  If you discover a problem the day before closing, then you are going to want to ask lots of questions about it at the closing table — and you will want those questions answered to your satisfaction before you agree to finalize the transaction.

B. List of People to Call If Needed

The home buyer should have a list of people who they can call for help to answer any questions or concerns that pop up during closing. These include their loan officers, inspectors, appraisers, and trusted advisers (like their general contractor).

C. List of Questions to Ask at Closing

Having questions answered is a part of closing, and no home buyer should hesitate to speak up and ask questions at the closing table. Even more important than feeling confident to speak up is to ask these questions before signing any documentation.

Common questions that a buyer might want to ask:

1) Is my homeowner’s insurance included in my monthly mortgage payment?
2) Are my prorated property taxes included in my monthly mortgage payment?
3) If the answer to either of these questions is “no,” then the buyer needs to ask how much these amounts will be, when they are due, and where the payments are to be sent.
4) (For condos) What are the current Condo Association fees? When are they due? Where are these payments sent? Is there a payment coupon?  Have the special assessments been paid?
5) How do I file for the Homestead exemption? Where do I get the paperwork to do so?
6) When will I receive my original Deed and when will I receive my title insurance policy?

D. Your File of Documents

There may be the need to reference certain information at closing. This means everything from the MLS listing the buyer received from their real estate agent about the home or condo (does the square footage match with closing documents, like the appraisal?) to the Good Faith Estimate they received from their lender, as well as any notes made during telephone conversations with real estate agents, loan officers, termite inspectors, bank officers, etc.

Documents like (1) proof that there is home owner’s insurance in place and (2) the initial inspection report are good to have on hand, too.

This may mean the buyer will bring lots of paperwork to the closing. That’s fine. They shouldn’t be intimidated or concerned — real estate professionals are accustomed to dealing with lots of documentation. It’s expected.

3. Problems Do Occur At Closing

Closings can be stressful on occasion, and the buyer needs to be prepared for that possibility. Not every scheduled closing happens as planned; they can be (and often are) rescheduled or delayed. There are also closings with unexpected surprises which can be extremely emotional situations for both the buyer and seller.

For instance, a home buyer may discover that his or her lender has decided not to go through with the home loan after all. Eleventh-hour decisions not to fund a home loan can happen.

Why?  Often it’s because the lender has discovered the potential borrower has changed his or her position by doing something like losing a job or going out and getting a new car loan right before closing on the house. That increased debt on the buyers’ financial statement may change their debt to income ratios making him or her ineligible for the mortgage.

How Can A Florida Real Estate Lawyer Help?

For many Florida home buyers, having an experienced Florida real estate attorney to work with them in getting their residential real estate purchase completed and finalized can make all the difference between a smooth closing and a stressful and angst-ridden transaction that may or may not close that day.

In most instances, the earlier that the real estate lawyer comes on board, the better: you may want your lawyer to review the contract before you sign to make sure the contract addresses issues like the property appraising for no less than the purchase price or to make sure the seller provides adequate disclosures about the condition of the property and to make sure the buyer is only paying their customary costs to close the transaction. At closing, you may want a lawyer to review the seller documents, the closing disclosure (to make sure you are only paying your share of the closing costs) and to review the title work to make sure everything is correct and customary.

A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. The good news is, that most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

_______________

Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
If you found this information helpful, please share this article and bookmark it for your future reference.

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