Real Estate Overview
If you need the assistance of a qualified, licensed Florida real estate attorney, the Law Office of William J. Anderson, P.A. can help. We advise individuals and businesses in the process of selling or purchasing real estate. This includes reviewing and preparing purchase agreements, title searches, issue title insurance and all other necessary tasks to reduce the potential risks inherent in real estate transactions.
Residential Real Estate in Florida
Whether you are purchasing your first home, upgrading to a larger home, or selling your “empty nest”, buying a home should be an exciting and rewarding experience. For those seeking residential real estate advice, Mr. Anderson can reduce the stress out of buying real estate in Florida, and make certain that you have enough information to make informed decisions about your purchase. For helpful more information on home buying in Florida, see our:
· Homebuying FAQ’s
· Real Estate Facts for Buyers
· Real Estate Facts for Sellers
Buying a home is one of life’s most important purchases. Naturally, you will have questions and concerns about the process, the documents involved and whether you are making the right move at the right time. Below is some helpful information to familiarize you with the process. For further information and explanations, contact us.
1. HOW DO I KNOW IF I’M READY TO BUY A HOME? You can find out by asking yourself some questions:
· Is my source of income (usually a job) steady?
· Have I been employed on a regular basis for the last 2-3 years?
· Is my current income reliable?
· Do I have a good record of paying my bills?
· Do I have few outstanding long-term debts, like car payments?
· Do I have money saved for a down payment?
· Do I have the ability to pay a mortgage every month, plus additional costs?
If you can answer “yes” to these questions, you are probably ready to buy your own home.
2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?
Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.
3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?
The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing. Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and up keep which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.
4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
5. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT?
Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well and understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in the search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need.
6. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?
Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a ‘wish list.' Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.
7. WHAT SHOULD I LOOK FOR WHEN DECIDING ON A COMMUNITY?
Select communities that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.
8. WHAT SHOULD I DO I’M FEELING EXCLUDED FROM CERTAIN NEIGHBORHOODS?
Immediately contact the U.S. Department of Housing and Urban Development (HUD) if you ever feel excluded from a neighborhood or particular house. Also, contact HUD if you believe you are being discriminated against on the basis of race, color, religion, sex, nationality, familial status, or disability. HUD’s Office of Fair Housing has a hotline for reporting incidents of discrimination: 1-800-669-9777 and (1-800-927-9275 for the hearing impaired).
9. HOW CAN I FIND OUT ABOUT LOCAL SCHOOLS?
You can get information about school systems by contacting the city or county school board or the local schools. Your real estate agent may also be knowledgeable about schools in the area.
10. HOW CAN I FIND OUT ABOUT COMMUNITY RESOURCES?
Contact the local chamber of commerce for promotional literature or talk to your real estate agent about welcome kits, maps and other information. You may also want to visit the local library. It can be an excellent source of information on local events and resources, and the librarians will probably be able to answer many of the questions you have.
11. HOW CAN I FIND OUT HOW MUCH HOMES ARE SELLING FOR IN CERTAIN COMMUNITIES AND NEIGHBORHOODS?
Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a REALTOR, they may have access to comparable sales maintained on a database.
12. HOW CAN I FIND INFORMATION ON THE PROPERTY TAX LIABILITY?
The total amount of the previous year’s property taxes is usually included in the listing information. If it’s not, ask the seller for a tax receipt or contact the County tax assessor’s office. Tax rates can change from year to year, so these figures may be approximate.
13. WHAT OTHER TAX ISSUES SHOULD I TAKE INTO CONSIDERATION?
Keep in mind that your mortgage interest and real estate taxes will be deductible. A qualified real estate professional can give you more details on other tax benefits and liabilities.
14. IS AN OLDER HOME A BETTER VALUE THAN A NEW ONE?
There isn't a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn't mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don't want to worry initially about upkeep and repairs.
15. WHAT SHOULD I LOOK FOR WHEN WALKING THROUGH A HOME?
In addition to comparing the home to your minimum requirement and wish lists, use the HUD Home Scorecard and consider the following: Is there enough room for both the present and the future? Are there enough bedrooms and bathrooms? Is the house structurally sound? Do the mechanical systems and appliances work? Is the yard big enough? Do you like the floor plan? Will your furniture fit in the space? Is there enough storage space? (Bring a tape measure to better answer these questions.) Does anything need to repaired or replaced? Will the seller repair or replace the items? Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round? Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.
16. WHAT QUESTIONS SHOULD I ASK WHEN LOOKING AT HOMES?
Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller's or real estate agent's answers are clear and complete. Ask questions until you understand all of the information they've given. Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive. The HUD Home Scorecard can help you develop your question list.
17. HOW CAN I KEEP TRACK OF ALL THE HOMES I SEE?
If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. And don't hesitate to return for a second look. Use the HUD Home Scorecard to organize your photos and notes for each house.
18. HOW MANY HOMES SHOULD I CONSIDER BEFORE CHOOSING ONE?
There isn't a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one. Just be sure to communicate often with your real estate agent about everything you're looking for. It will help avoid wasting your time. YOU'VE FOUND IT
19. WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME?
An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs that are needed. The Inspector does not evaluate whether or not you're getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced. It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house as is." Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection t clause gives you an 'out" on buying the house if serious problems are found, or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.
20. DO I NEED TO BE THERE FOR THE INSPECTION?
It's not required, but it's a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you'd like to purchase and it is a good time to ask general, maintenance questions.
21. ARE OTHER TYPES OF INSPECTIONS REQUIRED?
If your home inspector discovers a serious problem, a more specific inspection may be recommended. It's a good idea to consider having your home inspected for the presence of a variety of health-related risks like mold, radon gas, asbestos, or possible problems with the water or waste disposal system.
22. HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME?
If the house you're considering was built before 1978 and you have children under the age of seven, you will want to have an inspection for lead-based point. It's important to know that lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed temporarily by repairing damaged paint surfaces or planting grass over effected soil. Hiring a lead abatement contractor to remove paint chips and seal damaged areas will fix the problem permanently.
23. ARE POWER LINES A HEALTH HAZARD?
There are no definitive research findings that indicate exposure to power lines results in greater instances of disease or illness.
24. DO I NEED A LAWYER TO BUY A HOME?
In Florida, an experienced real estate lawyer is highly encoraged in the purchase of a home. A lawyer will assist you with the complex paperwork and legal contracts. A lawyer can review contracts, make you aware of special considerations, and assist you with the closing process.
25. DO I REALLY NEED HOMEOWNER'S INSURANCE?
Yes. A paid homeowner's insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home buying process can save you money. Insurance agents are a great resource for information on home safety and they can give tips on how to keep insurance premiums low.
26. WHAT STEPS COULD I TAKE TO LOWER MY HOMEOWNER'S INSURANCE COSTS?
Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding. Purchasing a home security system and Hurricane resistant glass windows also may lower your insurance costs.
Real Estate Facts for Buyers (Back to top)
Preparation is the key for a successful home purchase. Below is some helpful information on specific tasks our attorneys undertake to facilitate the process, as well as terms that you will encounter to take some of the mystery out of your purchase. For further explanation of these terms or additional information, contact us.
The Function of a Real Estate Attorney
The attorney that you choose to represent you for the negotiation of the purchase of your home is one of the most important decisions you will make in the Home Buying Process. While your real estate salesperson or broker will work with you to make a decision on which home may satisfy your particular needs, your attorney is the only party who will be working solely for your benefit during the Home Buying Process.
In representing a prospective Purchaser, an attorney performs the following functions:
a) Reviews and negotiates the Contract of Sale;
b) Oversees the process of your home purchase, ie., complying with the terms and conditions of the contract;
c) Reviews the Abstract of Title;
d) Coordinates the closing of title and the mortgage loan with your lender.
In theory, an attorney should be retained BEFORE an offer is made to purchase a home. As a practical matter though, most purchasers looking at homes are concerned with the non-legal aspects of selecting a home, such as location, size, type and amenities, and defer the selection of an attorney until after a home is selected and a basic agreement is reached on the price and other general terms.
IF YOU CHOOSE TO FOLLOW THIS TRADITIONAL APPROACH AND HAVE AN OFFER ACCEPTED, DO NOT ATTEMPT TO GO ANY FURTHER WITHOUT CONSULTING AN ATTORNEY.
THE HOME BUYING PROCESS
Before you take the plunge, you should be aware of what you will be encountering during the coming months.
The Binder - When you are ready to tender an offer to purchase a home, your sales agent or broker may ask you to execute a Binder Agreement to present to the Seller. A Binder is a written offer to purchase a home at a given price with additional provisions regarding mortgage financing and personal property to be included in the sale. It is usually accompanied by a nominal earnest money deposit (between $100.00 and $500.00) to show the serious nature of your offer.
Once accepted by the Seller, a Binder has been interpreted to be a formal agreement. A Purchaser can risk the loss of their earnest money deposit if provisions are not made for a “change of heart.”
A Binder should be used by a Purchaser only as “an agreement to agree.” It should always be subject to review by an attorney and the execution of a formal contract containing the basic terms of the offer. In addition, if the offer is being made on an existing home, the binder should also be subject to a satisfactory inspection of the dwelling by a licensed engineer.
The Inspection - Generally, when a purchaser purchases an existing home, it is offered by the Seller in “ AS IS” condition subject to the promise, or warranty, by the Seller that the major operating systems shall be in working order at the closing of title. An engineer’s inspection goes beyond the basic operating systems and reviews the entire structure. An engineer’s inspection is not a guaranty; it is an informational report to be used by a Purchaser as a guide to make the final decision to purchase a home. The cost of the inspection is borne by the Purchaser (see closing costs below).
The Contract - Once an offer is accepted and the purchaser has decided that the home is structurally sound, the Purchaser and Seller proceed to contract with the assistance of their respective attorneys. The Contract, usually drawn by the Seller’s attorney, states the responsibilities of the Purchaser and Seller. Your attorney should review these technical aspects of the contract with you, in particular, your responsibilities and the conditions under which you are agreeing to purchase the home. Once the contract is executed, the parties are bounded by the terms and conditions negotiated by the parties. It is the primary role of the Real Estate Attorney to ensure that Purchasers fully understand their obligations BEFORE they execute the contract
A basic real estate contract contains the essential terms of the transaction, names of the parties, purchase price, terms of financing the purchase, the personal property to be included in the sale, and approximate closing date.
It is customary for a Purchaser to be prepared to deposit up to ten (10%) percent of the purchase price, in escrow, with Seller’s attorney, as a contract down payment can be negotiated between the parties on a case by case basis.
In addition, the contract should contain three (3) key contingencies:
a.) Good and Marketable Title - A Seller must be able to transfer “good and marketable” title to the property; Basically, the Seller must transfer title free and clear of all judgments, mortgages and other liens which may exist against the property. In addition, the property must be free of violations of any ordinances of any local municipal attorney as part of the title search, which is obtained after the contract has been executed. If the Seller cannot convey title, the Purchaser may cancel the contract and the contract down payment shall be returned.
b.) Mortgages - Almost every real estate contract is subject to the Purchaser being able to obtain a mortgage commitment from a lender. A Purchaser is usually 30 days to obtain a loan commitment by the Seller. A Purchaser must act in good faith, promptly apply for a mortgage loan, and fully cooperate with the request of this lender during this process. If the Purchaser cannot obtain a mortgage commitment, usually either party may cancel the contract, ad the contract down payment shall be returned.
c.) Termite - In most cases, the contract shall also be subject to the Purchaser obtaining a satisfactory inspection for termites, or other wood destroying insects, from a licensed exterminator. In some cases, the firm performing the Purchaser’s engineering inspection can also perform this inspection. In the event termites are found, it is usually the responsibility of the Seller to cure the termite infestation and to repair any damage. If the Seller refuses to comply, the Purchaser may cancel the contract.
4.) Preparation for Closing - Once all the contingencies are met, the Seller and Purchaser are prepared to proceed to closing. The setting of the closing is usually coordinated by the Purchaser’s attorney. The following parties must appear at a closing; the Seller, the Purchaser, their respective attorneys, the lenders attorney and real estate broker(s). In addition, the Purchaser must gather the required monies to pay the balance of their down payment plus their closing costs (discussed below).
5.) The Closing - A Real Estate Closing may appear to be a bewildering flurry of papers, but it boils down to three independent events occurring simultaneously. First, the Purchaser receives title to their home. Second, the Bank closes it’s loan and issues its loan proceeds to the Purchaser, who in turn transfers them to the Seller as part of the balance of the purchase price. Third, the Attorney guarantees both the Bank and the Purchaser that the Purchaser is obtaining good and marketable title. After the closing, you will receive a Closing Statement from your attorney detailing the financial aspects of the closing and copies of the documents executed at the closing.
Please be reminded that each property is unique and each contract has its own characteristics and problems, which may be encountered. A good real estate attorney will assist you to avoid the pitfalls that may arise so that your home purchase will proceed smoothly from start to finish.
CLOSING COSTS
Closing costs are those expenses associated with the purchase of a property other than the contract down payment. Closing costs fall into two major categories: Bank Related Expenses and Title Related Expenses.
Bank Related Expenses - These expenses are those incurred in obtaining the mortgage to complete your purchase. They include:
Points - A point, equal to one (1%) percent of the amount of the mortgage, is a fee paid to either the lender, or its designate (in the case where a mortgage broker has placed the loan), for the opportunity to obtain a mortgage loan from that lender. Points are 100% tax deductible when the mortgage is used to purchase a primary residence.
Mortgage Bank’s Attorney - Unfortunately, a Purchaser is customarily obligated to pay the Bank attorney’s fee, in addition to their own attorney’s fee, as a condition of obtaining the mortgage. This fee ranges from $400 to $700 depending on the lender.
Tax Escrow - Most lenders will undertake to pay the real estate taxes on properties it grants mortgages against. In order to have sufficient monies to pay these taxes, a lender will require a Purchaser to deposit 1/12th of the annual real estate tax bill in an escrow account with the lender, along with the monthly mortgage payment. In addition, a Purchaser will be required to make an initial deposit, usually equal to 50% of the annual tax bill, in order to have sufficient funds set aside to make the first tax payment after closing of title.
Private Mortgage Insurance (PMI) - Anytime a Purchaser borrows in excess of 80% of the purchase price from a lender, that lender will require that the Purchaser obtain private mortgage insurance from a third party provider. The Lender will arrange for this coverage and pass the cost through to the Purchaser. This coverage must remain in place until the principal balance of the mortgage falls below 80% of the value of the property. The first year’s premium must be paid at closing, and varies according to the amount of the mortgage.
Homeowners Insurance - A Lender will also require that a Purchaser maintain homeowners insurance in an amount necessary to replace the dwelling house. In addition, most lenders require that the first year’s premium be paid in advance of the closing.
Misc. Fees - Lenders shall also assess various fees depending upon their internal procedures. Some of these fees include: Tax Service Fees, Document Preparation Fees, and Application and credit Fees. These fees vary depending on the particular lender.
TITLE RELATED EXPENSES - These expenses are those required to complete the transfer of title and to record the necessary documents associated with the closing. They include:
Title Insurance - Required by all mortgage lenders, title insurance guarantees that the Purchaser is obtaining good and marketable title from the Seller. This one time expense, set by statute, varies according to the purchase price of the home and the amount of the mortgage.
Documentary Stamps on the Deed and Note- In order to transfer real property by recorded deed in the State of Florida, documentary stamps must be paid on the deed. These are calculated based on the selling price, at the rate of 70 cents per $ 100. For example, on a $ 150,000 house, you would pay $ 1,050. If you are obtaining a mortgage, then you will pay to the State of Florida documentary stamps on the amount of the note secured by the mortgage at the rate of 35 cents for each $100 of mortgage. So, for example, if you have a $100,000 note, you would pay $350 in documentary stamps on the note.
Intangible Tax on the Mortgage - Either the buyer or seller will also pay an Intangible Tax at the rate of 2 mills (.002) on the mortgage amount. So, for example, a $100,000 mortgage would require $200 in Intangible Tax.
Recording Charges- Following the Closing, the deed and mortgage (and possibly other documents) are recorded in the public records of the county where the property is located. The fees for these recorded charges are collected at the closing. The first page of a recorded document is calculated at $10 and each subsequent page is $8.50. These charges recently rose from $6/$4.50 following the passage of Florida Senate Bill 2962.
Real Estate Facts for Sellers (Back to top)
Homesellers often have more to worry about than buyers because in addition to the paperwork and questions surrounding the sale of their existing home, they must prepare for the purchase (and move to) a new home. Below is some helpful information to help facilitate the process, and make certain that you maximize your sale. For further explanations or additional information on Florida residential real estate sales, contact us.
Be Prepared: Have your Paperwork Ready!
Before you start showing your home to potential buyers, you should be prepared to present the documents that you will need for your sale. They include:
The Deed - This is the legal document, which transferred title to you when you purchased your home. If verifies that you are the rightful owner of your property, describes the legal bounds of your property, and defines the manner in which you may transfer your property to a third party.
The Survey - This is the map outlining the legal boundaries of your property and how you home is situated on your property. The recital of your property lines should match those contained in your deed.
Certificate of Occupancy (C.O.) - This is the document which verifies that your home met the requirements of your local building code at the time that it was built. Depending upon the age of your home, you should have a C.O. for each permanent structure on your property. This includes any additions or extensions as well as detached garages, in ground pools, cabanas and certain decks and patios. You may not be able to close on your sale if you do not possess all of your C.O.’s.
Mortgage and Note - In a high interest rate environment, a mortgage which may be assumed by a purchaser is a valuable asset. If your mortgage is not assumable, it will have to be satisfied at closing. A copy of your last mortgage statement will assist your attorney to obtain payoff figures to satisfy any outstanding mortgages or other obligations.
Tax / Utility Bills - Although these are not critical, an informed buyer may ask about the real estate taxes and fuel charges.
If you have any questions about these documents, call our offices for help.
SELLER’S ECONOMICS: How much are you really getting for your home?
No matter when you purchased your home, selling it for a profit is always a warm and fuzzy feeling. Before you throw a log on the fire, don’t forget there are costs in selling a home. They include:
Brokers Commission - If you are working with a real estate broker, you are responsible for the payment of the sales commission. The brokers commission is usually negotiated at the time your home is listed with the broker on a case-by-case basis.
Satisfaction of Mortgage(s) - Don’t forget that you may have a mortgage or other liens to satisfy from the proceeds of your sale.
Real Estate Taxes / Adjustments - Although you may have found a buyer for your home- it is still your home until you deliver a deed and move out. You are responsible for the payment of all taxes and utilities until you deliver possession to your buyer.
Documentary Stamps on the Deed- In order to transfer real property by recorded deed in the State of Florida, documentary stamps must be paid on the deed. These are calculated based on the selling price, at the rate of 70 cents per $ 100. For example, on a $ 150,000 house, you would pay $ 1,050. This is customarily a seller’s charge but can be negotiated in the contract to be charged to the buyer.