What are the steps leading up to making an offer?
Prior to making an offer on a property it is important that you have been provided with some important facts:- we cover these at our briefing (so often British buyers fail to receive the required information from Realtors with an eye to making a sale).
Once you have determined an offer price you feel comfortable with your Agent will write it up using the standard contract form (detailed in the section below). The offer should include all contingencies that you wish to include ie, subject to mortgage, house inspection etc. Its essential that all the points you specify are included - as if the offer is accepted and signed by the seller, the contract is legally binding.
If the owner rejects the contract, he may make a counter-offer by changing some of the terms in the contract - including your offer price, All changes made to the printed contract form must be initialled by all parties and changes instigated by a buyer must be sent to the seller. The contract document can go back and forth a few times until agreement is reached.
A deposit has to accompany the offer - this is placed with a neutral third party, called an 'escrow agent', it is usual for the contract to specify a further deposit a few days afterwards if the contract is accepted.We have discovered a number of cases where British buyers have lost these funds - we cover the key points to be aware of during our briefing sessions.
What type of contract is used?
In Florida the Florida Association of Realtors and The Florida Bar have prepared a standard contract for the sale and purchase of houses. Beware if the Real estate Agent does not use this contract. The details of the real estate contract will determine what you can buy and how you can buy it.
The contract for sale and purchase sets forth the legal description of the property, the purchase price and terms of financing. Any restrictions and clauses are laid out and dates for the exchange for deeds and monies. (The closing date). Other important information is laid out including, which payments the seller and buyer are responsible for such as surveying, termite inspections, repairs, title costs etc.
If you are entering into an agreement to buy a new home off-plan then a different contract is used to that required to purchase an existing or resale home. The contract sets out the legal description of the property, the purchase price and the terms of payment. It also includes the time limit within which it must be accepted by the seller and the terms of financing.
Once signed a Florida a contract for sale and purchase in Florida is binding upon both seller and buyer - the seller cannot sell the property to someone else whilst the contract is in force.
Is the conveyancing process in Florida similar to the process in the UK?
No-no-no - whatever anyome tells you - NO!
In Florida many transactions are carried out by Title Companies. Quite often if you are taking out a mortgage the Mortgage Company / Bank will select the Title Company.
A Title Company or Lawyer (Attorney) selected by The Bank is not there to give legal advise to the Buyer or Seller. The function is to protect the interests of The Bank, which may not be the same as yours. Banks can add miscellaneous charges to closing statements; it is unlikely that The Bank's Attorney will query these. If you use your own Attorney you need to advise the Bank immediately - to avoid paying the cost twice.
Many Brits are misled on these points and end up with problems which is why a clear independent briefing before considering buying a property in Florida is so important.
What is Title Insurance?
Buying a home is one of the largest investments most of us will ever make. How can that investment be protected? People generally understand the need for homeowner's or hazard insurance to protect their home against losses due to fire, theft, etc. However, defects in the title to one's home may pose an even greater risk to your investment. You could lose all or part of your investment in your home because of defects in the title to the property.
A "title" is the means by which a person acquires a right of ownership in real property. A title gives the owner the right to possess, use and enjoy the real property as well as the right to sell and/or convey the real property. When real property is sold and/or conveyed, a title search and examination of the public records should be done to detect problems and defects in the title such as unpaid mortgages, unsatisfied judgments, unpaid taxes, etc.
In addition, there may be problems or defects in the title, which are not disclosed by the title search. Some examples of these hidden defects are fraud, forgery, undisclosed heirs, people who are married conveying without their spouse joining in the conveyance, transfer of title by a person without legal capacity, etc. Title insurance is your only protection against a loss from any competing claim of ownership against your real property. If you have title insurance, the policy will protect and defend your investment against claims such as these, whether the claim is valid or not, at no additional cost to you.
Unlike most other types of insurance, the premium for a title insurance policy is paid only once and usually at the time you purchase your home. However, its protection lasts for as long as you or your heirs own the property.
What you need to know about “the Time is of the essence:” clause in the Florida Real Estate contract?
It’s a common scenario, particularly in the current buyers market. You, the buyers are not fully aware of the importance of the phrase “Time is of the essence” and you do not get your second deposit to the agent of the Title Company in time.
The seller has two other buyers lined up to buy the home – maybe even one who’s willing to pay a little more than you. The contract falls through and you are back to square one. How do you avoid this problem?
Make sure you fully understand that almost every Florida Real Estate contract has a clause called “Time is of the essence”. In plain English this means that every action required by either the buyer or the seller has a date attached to it. If either party fails to comply with the date of the required action, the other party can call the contract null and void.
In addition, if you as the buyer fail to perform, the seller may be able to keep your deposit as liquidated damages. The best case scenario is that you end up with a dispute over the deposit which could take twelve months or more to settle.
To make sure you do not lose out on the home of your dreams pay particular attention to the five most important points where “Time is of the essence” can come back to bite you.
Deposits.
In a typical contract the buyer will give a smallish deposit with the initial offer, with a second deposit due within a specific number of days. If you fail to get this second deposit to the appropriate party (Realtor®, Title Co. Escrow agent etc) by the due date the seller could declare you in default and sell the property to another buyer, in addition to possibly keeping your initial deposit.
Time to accept the offer.
If the contract is going back and forth between seller and buyer while price negotiation is taking place both parties need to pay particular attention to the clause “Time for acceptance”. If either party fails to meet these time scales the offer or counter offer could be withdrawn.
Mortgage/Financing contingency.
If the contract is subject to mortgage financing be sure that both application and approval dates are realistic and adhered too. In a rising market the seller just might use this condition to drop the buyer and seek a higher price elsewhere.
Who is responsible for Title Insurance?
If the seller is responsible for providing a title insurance commitment by a certain date and fails to deliver the buyer may well use this as a way out of the contract and claim default by the seller resulting in a return of the deposit.
Property Inspections.
Please remember, as a buyer you typically have a very limited time frame to have your home inspection carried out. This really is where the phrase “If you snooze you loose” makes perfect sense because if you do not complete these inspections within the given time frame you probably have lost that right and will not be able to claim any compensation for repairs or even worse you may be stuck buying a home that requires costly repairs you were unaware of.
Remember.
Dates contained within a contract are just that “A Contract” you will not be able to change them without the other parties consent. Don’t think that this will always be given. Buyers and sellers may have opposing agenda. Always be sure that you can comply with each date contained within your contract.
All about payments and deadlines
Between signing your contract and closing the sale there may well be a number of deadlines to be met. If you have bought a preconstruction property then throughout the period of construction there will often be a schedule of payments : for example, ten per cent of the sale price may be due on the laying of the foundations. This is something the buyer needs to be aware of, ensuring their lawyer checks the contract and flags this up.
If the property is resale (and even more so where under the contract the property is sold 'as is') you should have ensured that an inspection or home survey is carried out before closing the sale, so that any repairs that need to be made are carried out and written into the contract. The buyer may also be responsible for guaranteeing that certain documents are returned to the lender or seller within this period to ensure the smooth transfer of property.
The most important part of this period is to make certain that payment of funds for your deposit reach the seller's broker by the deadline set in the terms of the contract. If this doesn't happen then the contract may well be terminated and you could lose your deposit. This can be problematic if you're wiring money from the UK and it is vital that this is done with time to spare.
You should also check with your banks as to how long this procedure may take because it varies from between one and seven days to reach the States, so it's vital to ensure that this reaches Florida before your deadline because you can be liable for huge, ongoing financial penalties. These can vary according to the terms of the contract. Remember also that closing is not just about the documents, but just as importantly about securing the financial backing.
A significant part of setting the closing date is the issue of the certificate of occupancy which has to be issued by the County, stating that the property is in a fit state for habitation. It is not untill this is issued that a date for closing the scale can be set.
Condominiums
There are special disclosures and rights associated with the purchase of a Condominium including a cooling off period.
What is a Closing?
The final act of a property purchase is the closing or settlement, the date of which is stated in the contract. Closing involves the signing of the deed of sale, transferring legal ownership of a property and the payment of the balance of the purchase price plus any other payments due (eg. closing costs, taxes and insurance). The balance of the price, after the deposits and any mortgages are subtracted, must be paid by the buyer with a certified cheque. The parties are given a closing statement that sets out all the costs and fees for which they are responsible (Called a HUD Closing Statement).
Before the deed of sale is signed, the closing agent checks that all the conditions contained in the preliminary contract have been fulfilled. The closing agent collects any fees or taxes due, witnesses the signing of the deed and arranges for its registration at the local property register. The closing agent does not however, verify or guarantee the accuracy of statements made in a contract or protect against fraud.
Property is sold subject to the condition that it's accepted in the state it is in at the time of closing, so you should be aware of anything that occurs between signing the contract and closing. Before signing the deed of sale, check the property has not been damaged in any way. This can be done via a walk through inspection as near the closing date as possible - its worth having your home inspection with you to review any points he identified in his inspection report. Also do a final inventory prior to closing prior to closing to ensure the seller has not removed items included in the price. This is the area where as real estate agents we need to work closely with you - things can go wrong!
Its usual for both parties to be present at the closing - which takes about 60 minutes -although if you are an Overseas Buyer the transaction can take place as a mail away (documents are completed via post). This system can be arranged by your Realtor, closing agent or Attorney.
One important point, it is often necessary for an overseas buyer to sign certain documents in the presence of a notary, who will witness signatures. the American embassy can advise of locations.
If the seller is a foreigner and not a US resident, the closing agent is obliged to withhold 10 percent of the purchase price (credited to the seller's income taxes on the capital gain) when the property is sold. This is a legal obligation which falls under federal law rather than state or country law, and is known as FIRPTA (the Foreign Investment in Real property Tax Act). The only exception to this rule is where the buyer is a resident who is buying to permanently relocate, and if the property is sold for less than $300,000. This is obviosly only a concern for a buyer when they come to sell their property, if they are not US residents. In certain appropriate circumstances, your accountant or lawyer may be able to assist you in avoiding this or seeking a refund.
After the closing agent has signed the deed of sale you will be given a certified copy. A notarised note is lodged at the county property registry office and the new owners name is entered on the registry deed.
Buying new of plan is something Brits in particular think is an easy option and fail to realise the legal implications - we focus on this point in detail at our briefing. The dangers of getting it wrong are flagged up in the article below from a leading Attorney specialising in Brits buying property in Florida - if you do decide to buy property in Florida we recommend you use his services.
1. Developers in Florida do not all have one "standard contract" as they often put it. There is no such thing in Florida. They will each have their own custom-drafted purchase agreements which are of course drafted in their favour and which they will maintain are nonnegotiable. Many will set out in the purchase agreement that the purchase agreement was negotiated so that if there are any unclear clauses that the courts will not construe the terms against themselves as the drafters of the document. Be aware that there are many clauses in the purchase agreement where you are required to confirm receipt of documents or that documents were made available for your inspection which have never before been discussed with you or in fact provided to you.
2. Developers may have certain clauses in their contracts which are required to be included under Florida law but, contrary to what some will absurdly claim, the Florida Attorney General does not review and approve their purchase agreements. The state of Florida is only interested in ensuring that those few required clauses are included, they have no interest nor the resources to consider the complete text of all developers' documents.
3. Developers often will have their lawyers who drafted their contracts act as the title closing agents (who at your cost will do the title research and preparing of conveyancing documents) but would prefer buyers are left without the benefit of legal advice on the basis that the legal side has been taken care of. However the buyers' lawyer work is complementary as buyers without lawyers will often not know their rights, not know how best to hold title, not understand the meaning and legal implications of the terms of the particular developer's purchase agreement, not be aware of the tax implications and their particular options under international tax treaties, not take any particularised UK and US estate planning advice, not have anyone to review the closing documents nor provide advice as to whether they have received good title.
4. Developers and their agents will often tell buyers that they need not worry about seeking their own lawyer as there is title insurance that will cover any potential problems. What developers do not tell you is that title insurance, like any insurance policy, has exceptions. Furthermore, they or their lawyers/closing agents won't normally send you a copy of the commitment for title insurance along with its list of exceptions to coverage until long after closing so you won't know what they won't insure. Additionally they fail to provide to you before closing a copy of the proposed deed giving you the property. The deed, title commitment and exceptions should always be reviewed as errors are made which may be caught and corrected. This is commonly caused because the closing agents do not speak with the buyers to confirm matters. I have seen in my review before closing many cases where such documents did not identify the property and/or the owners correctly, where the owners title insurance only covered the value of the mortgage, and other significant errors.
5. Developers will often require in the purchase agreement that buyer waive their legal right to have deposits up to 10% of the purchase price held in escrow. Having the funds in escrow would mean that should a developer go bankrupt, a bankruptcy trustee could not attach the assets as he could those not in escrow. Often the purchase agreement will have two tick boxes but the one waiving the right has already been ticked. Developers can charge interest on any equivalent amounts borrowed or take out a bond to allow you to have your money kept in escrow but many will not discuss or agree this.
6. Developers will often require you to sign the purchase agreement first and return it to them with deposits but may hold off signing it (and making the purchase agreement a contract) for months. In many instances you may not get a copy of the purchase agreement signed by their authorised officer. I have seen one instance where a developer had held onto the purchase agreement about five months allowing the buyer to believe that they had a contract. When the seller tried to unilaterally change the lot and I was instructed to contact them to inquire on what grounds did they rely on, they declared they had not signed the purchase agreement and were in fact holding over 100 other buyers' purchase agreements and it was up to them as to which if any they would sign.
7. Developers, even those in the Orlando area selling 90% or more of their properties to UK buyers will often write into their purchase agreements clauses which impact UK and other foreign buyers severely. For example, they will set out that they are entitled to give only five days notice of closing and in a separate clause state that notice is legally deemed delivered on the date it is first posted in the US mail. If it takes six days or more to get to the U.S., the UK buyer will not get the notice and is liable under a separate clause concerning liquidated damages, to lose all of their deposits (normally 20% of the purchase price).
8. Developers and their closing agents will provide you the closing documents with very little time (normally a day or two) to consider them and require you to see a notary for the execution of them. In Florida alone, there are 400,000 notaries public (mostly nonlawyers) while in England and Wales there are approximately 900 (of which 850 or more are lawyers). Developers and their closing agents take little interest in your difficulties in finding a notary public to make an appointment or be available at a moment's notice and of UK bank holidays or weekends when these notaries are unavailable.
9. Developers will build into the contract ridiculous timescales notwithstanding they know none of their buyers will be in a position to meet them. For example they will often require the buyer to apply for a mortgage within five days of signing the purchase agreement and then not send out to their UK prospective buyer the mortgage application with the agreement. When this is raised they will verbally agree that it cannot be done but will state that they have no intention of declaring a breach as long as you get the documents back to them What makes this an unsatisfactory response and these kind of clauses dangerous is that there is normally a "time of the essence" clause which would allow them to declare a breach upon any failure by a buyer to meet time requirements. This would mean that the buyer loses all his deposits and in some cases even the deposits he has contractually agreed to pay in the future.
10. Developers will often dissuade or even forbid your using a home inspector to inspect their property before completion. Some maintain they are insulted that you even bring up the point. This is strange though as in the western U.S. it is the norm like here to use a home inspector. They will frequently write into the purchase agreement that you can attend a walk-through of the property with one of their representatives or if you cannot make it their representative will do the walkthrough on your behalf. It's your money, would you prefer an independent professional or one of their employee salesagents to try to find faults in their property? Some developers who do allow inspections will only allow you to use inspectors who conveniently have insurance already in place covering the developer, thereby forcing you to often use a "tame" inspector.
Buying a newbuild property in Florida may be a dream for you but for the developers and their agents it's just business. They may take shortcuts where they presume you as a foreign national don't know any better. They need to make money and don't want to spend too much time explaining things to people. You need to ensure that you go into this with your eyes open. Don't accept verbal agreements from them, always get it in writing. If at all possible get a faxed letter signed by them. If you post things to them, send it by courier so you can prove you complied with any requirements, don't trust that the documents might not be lost in their offices. Watch out for your interests and your purchase process should go smoother.
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When you require further in-depth information & to be as fully briefed as possible prior to emigrating or buying/selling property in Florida we offer the following briefings:-
Thinking about buying a property in Florida - click here
Thinking about selling a property in Florida - click here
Thinking about emigrating to Florida - click here
Just want to be sent details of suitable agents with excellent testimonials and a proven track record of working with British buyers – click here
Andrew Bartlett an acknowledged expert on property trends and relocation in Florida, writes articles and answers readers’ questions for several British publications including Florida Magazine, Escape Magazine, Place in the Sun, Sunday Times, America, and The Red guide to buying Property in America and is regularly consulted by journalists and broadcasters. His consumer web guides have received numerous accolades.
Andrew was a Senior Government Official for 20 years before relocating to Florida several years ago where he was headhunted to set up specialist British property and relocation teams for Coldwell Banker and Remax - America’s largest estate agents. He then established a uniquely impartial and independent relocation and property briefing company working between Britain and Florida. He has written a number of watchdog style articles warning Brits planning to buy property in Florida or considering emigration about misleading and dangerous selling practices.
