Anyone interested in buying a home in Florida can surf through Zillow or Trulia or Realtor.com and find all sorts of beautiful dwellings that are for sale. When someone gets serious about a property, the next step for them is to enter into negotiations for the purchase of the place.
Based upon our experience representing buyers and sellers in residential real estate transactions, many do not enter into this bargaining process with sufficient understanding of the legalities involved in making an offer and accepting the deal, much less how vulnerable each side is to harm during the closing process.
For Sale by Owner Transactions offer lots of benefits to both seller and buyer – as well as many legal pitfalls.
Consider the following information that any residential real estate buyer in Florida should know:
1. Not All Properties Are the Same to the Lender
Especially here in South Florida, there are all sorts of places for sale to those looking to buy a home. There are “single family dwellings” – the standard stick-and-brick house found in suburban communities of all sizes, shapes, and price ranges. There are also “units” in a condominium, as well as townhouses, and even manufactured homes or houseboats.
Realtors that show homes to prospective buyers may take their prospects to a variety of properties, to see which tempts the buyer more. Older buyers may not have considered a manufactured or modular home until the realtor shows them a nice set up in an age-exclusive over-55+ community filled with amenities like swimming pools and access to the neighboring golf course. Newlyweds may have dreamed of their little blue heaven as a small home with a front porch and picket fence, only to find that the oceanfront condo with concierge service really fits their needs.
There’s no rule that the buyer has to buy a certain type of property. It is wise for that buyer to understand how different kinds of housing come with different types of lending. For instance:
- Loans for condominiums may be available through the FHA, but the condominium itself will need to be on a list of approved condominiums. Go here to read more on the FHA requirements for condo projects.
- Manufactured or modular homes may be available as “chattel loans” if the buyer is not buying the land on which the home sits (but instead is renting a lot in the community). These are personal property loans, which can close much quicker than a standard real estate loan but may come with higher interest rates and shorter terms.
Before putting an offer on your prospective home, investigate your lending options. There may be unique lending options that work to your advantage which the realtor will not know, or not explain to you.
2. The Listing Price Is Not the Sales Price
Selling residential real estate usually involves realtors who advertise the property for sale in their own brokerage advertising as well as the MLS (Multi-Listing Service). For many buyers, this looks like the sales price, but it’s not.
Bankrate reports that the National Association of Realtors sells 67% of its homes below the listing price. That’s well over half! The article goes on to suggest that you offer 5% less than the listing price, but that’s a national ballpark figure.
If you decide to offer an amount that is less than the listing price for a Florida home that is for sale, that is legal (and usually smart) to do. How much you should shave off the listing price in your offer is an individual matter, taking into consideration the condition of the home, the state of the market, and more.
3. Earnest Money Deposit Is Not a Payment to the Seller
When you make a formal offer on a dwelling, it is a written document that details what you are willing to do to buy the residential real estate. It is not legally required to accompany that offer with any cash; however it is customary to do so.
This is called your “earnest money.” It is not given to the seller, but held in limbo by the Real Estate Broker or an attorney until the closing is finalized (or the deal falls through).
At closing, the earnest money amount is considered part of the negotiated down payment. If the deal falls through, the buyer should get the earnest money refunded to him or her.
4. Buyer Can Change His Mind
There may be times when a buyer gets cold feet or has second thoughts about the home. Sometimes unforeseen events take place: the wedding is called off, and the buyer does not need the new family home, or there is an unexpected medical diagnosis for a family member.
If the buyer acts fast, he or she may be able to withdraw the offer on the residential property (no matter how upset or livid the Realtor). The offer is not contractually binding until it is accepted. If the seller has not accepted the offer, then the buyer can withdraw it.
This is called a “revocation” in Florida contract law. It is extremely important to follow the precise legal steps in order to have an effective revocation of an offer to purchase a home. Failure to follow the law exactly can result in the seller suing the buyer for damages and/or specific performance of the “contract.”
5. You Do Not Have To Work With a Realtor
There is no law that mandates the buyer must work with a Florida real estate agent. Most agents that buyers meet are those who are the “listing agents” for the property, and are representatives of the seller.
However, the buyer does have the option of having their own real estate agent, who acts as the “buyer’s agent.” The buyer can also work with a real estate attorney to represent his or her interests in the negotiations. Or the buyer can go it alone.
Whatever decision the buyer makes, he or she must confirm the offer comports with Florida contract law, as well as the applicable state and local real estate laws. This can be very complex, which is why there are standardized forms used by most real estate agents and brokers.
6. Elements of a Legal Offer
You do not have to use the standard forms provided by the real estate agent, but you must comply with the legal requirements for a valid offer to purchase residential real estate.
There are mandatory elements that must be included in order for the offer to be valid. These include the time and date the offer is being made, and the specific price that is being offered to purchase the property with clear title. The full and complete names of both the buyer and the seller must be included, as well. It must be signed by the buyer who is making the offer.
Any specific arrangements have to be stated in the written document that forms the offer. If the seller told you that he would throw in the appliances if you made an offer, make sure this is included in the provisions. There should be a stated closing date.
After the offer is completed, it is presented to the seller for his or her review.
It is not a contract until the seller accepts its terms and conditions. The seller may accept the offer. The seller may decline the offer. The seller may turn around and give the buyer a “counteroffer” for the buyer to consider.
Having a real estate attorney helping to present the offer can be very important to the buyer when making an offer on a home in Florida.
For instance, the lawyer may consider aspects to title that must be met by the seller, as well as detailing how the earnest money deposit will be protected and confirming that there is a correct legal description of the property.
The lawyer can also delve into issues like the different kinds of inspections that should be done on the home. In Florida, all sorts of inspections besides the standard home inspection may be advisable. See, “10 Reasons To Have A Home Inspection In South Florida.”
7. Contingency Provisions in the Offer
The offer can be valid without any contingencies, but the wise buyer is sure to include contingencies in any offer for the purchase of residential real estate in Florida. There can be the simple contingency that makes the offer contingent upon the buyer getting financing for the purchase.
Another common contingency involves the condition of the home. The offer must be specific that the buyer will not be held to the deal if the inspection comes back with bad news. This language should include not only the standard inspection, but those dealing with termites, radon, etc.
There can also be complicated contingencies, which may involve all sorts of individual issues pertaining to the unique characteristics of the property. For instance, if the home sits on land that is near an environmentally protected area (there are a great many here in Florida), then the offer may be contingent upon confirmation that the buyer will be able to build a pier, a swimming pool, or a second story loft.
For more, read: What Do You Do When You Discover the Value of Your Property Isn’t What the Real Estate Agent Told You?
How Can A Florida Real Estate Lawyer Help a Potential Home Buyer?
Home buyers do not have to have legal counsel in order to negotiate and finalize their purchase of a new home. Many buyers choose not to do so (some of them are now clients in litigation involving the home or the transaction).
For most people, buying a home is a major life event. It is a stressful and overwhelming transaction. The closing alone can take hours, with hundreds of documents to sign. These deals can even be scary to some buyers!
Hiring an experienced Florida real estate lawyer may be less expensive than most home buyers realize. In many situations, the client discovers that having an attorney’s representation in the transaction has saved him a lot of money.
If you are considering putting down an offer on a residential property here in Florida, then consider speaking 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.
For more, read:
6 Tips For First Time Home Buyers In Florida
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