Last Update: 4/17/18
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, Closing Disclosure, Loan Estimate, 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?
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.
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.
Closing Disclosure Statement
This form is required under federal law. It is provided to the buyer, 3 business days before the closing, 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 Closing Disclosure 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.)
The lender must give this document to the borrower within 3 business days of the lender receiving the borrower’s loan application. The document discloses to the buyer important information about the proposed loan terms, like the amount financed, the interest rate on the note, the estimated closing costs, the estimated amount of cash to close, the amount of the monthly principal and interest payments, prepayment penalty information, the amount of taxes and insurance that will be included in your monthly payment as well as other material information.
In some instances, (like when the home appraises for less than the purchase price, the borrower changes the loan type to a fixed rate or adjustable loan, or if the interest rate was not locked, etc.), a lender may increase the fees for the loan. If any of these situations occur between the time you first applied for your home loan and the closing, then the lender must, prior to closing, provide a revised loan estimate form setting forth the revised fees.
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.
What Should You Do?
A good piece of advice when you and your family are purchasing or selling your family home in one of the biggest transactions of your life is to talk with an experienced Florida real estate lawyer. Getting someone to review all of the paperwork isn’t as costly as most of us think it is. And, it’s always a lot cheaper than paying to fix a problem after a closing occurs. 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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