Last Update: 10/30/17
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).
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);
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;
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 here from other states, they may be surprised to learn how the expenses of selling and purchasing residential real estate are handled 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 allocated 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. For example, a savvy buyer that is aware that the seller is anxious to sell the property may agree to buy the property only if the seller pays all of 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 all cash (no mortgage financing) to pay the purchase price including the expenses of the transaction (which is common for international buyers like those coming 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 (usually FHA loans).
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.”
What Should You Do?
Negotiating closing costs can mean saving lots of money. 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 any expenses at all.
Today, for instance, a buyer of a Florida home or condo in Miami-Dade or Broward County should expect to pay approximately 4-6% of the sales price in total closing costs (assuming the buyer is borrowing money from an institutional lender).
Can those expenses be reduced? Can a lawyer find leverage to negotiate with a party to pay a part (or all) of these costs?
An experienced Florida real estate attorney may be able to make that happen, and often at a much more reasonable expense than the buyer (or seller) might assume to be the case.
A good piece of advice if you are buying or selling real estate in South Florida, is to speak with an experienced Florida real estate lawyer to learn about finding leverage to negotiate your closing costs. 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.
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Great article! How much is the percentage by law that a seller can cover of the closing costs?
I believe is 6% of the purchase price.
We were able to negotiate seller concessions towards my buyer’s closing costs. Does that concession cover the survey?