THE BRILEY & DEAL BLOG

Sunday, 21 December 2014 22:29

Tips For Buying Or Selling In Florida

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To start, don't let anyone tell you that buying or selling real estate here is something that is simple, or that you don't need professional assistance on.  If someone tells you (and I hear this quite often) "Oh honey, in our area residential real estate is really easy and simple, and you don't really need an attorney" the translation is usually "I have a vested interest or stand to make a bunch of money on this and I don't want a pesky attorney finding out something that could hold up the deal and me making that money."  After working as a real estate attorney for 20 years and after handling over 10,000 closings ranging from $1 to $120,000,000, I could tell you story after story to scare you but that's not the point of this article.  (If you do want to read some examples of what can happen, a Scary Stories article is coming soon!)  Simply let it be said that most people may buy a Coca Cola every day, but they only buy real estate once every 5 years or so.  That means that even if you brought yourself up to speed on the ins and outs of buying or selling back then, you may have forgotten most of what you learned, you may be in a different state or area where the rules are different, or new and different issues such as wetlands, zoning, remodeling, or waterfront could present themselves this time.  It is usually well worth the money to have a consultation with a professional that is looking out for YOU, and only YOUR interests.  In most cases that professional is an attorney concentrating his or her practice in real estate law.  THE FIRST THING FOR YOU TO KNOW IS THAT GETTING THE HELP OF AN ATTORNEY FOR YOUR TRANSACTION IS NOT EXPENSIVE- IN MANY CASES YOU WON'T PAY ANY MORE THAN YOU WOULD IF YOU JUST USED A TITLE COMPANY.  I charge $250 for a one-hour consultation and if our firm handles the closing there is no charge for an initial consultation.  While real estate agents can be very helpful, they are often serving in our area as a "Transaction Broker" which means that they are looking out for and loyal to the transaction as a whole, and not necessarily just your interest.  Additionally, I have taught the Listing Agreement and Contracts classes for NEFAR (Northeast Florida Association of Realtors) since 1998 and therefore each month get to meet all the new incoming Realtors.  I can definitely say that there are real estate agents with years of experience and lots of training and certifications who are very professional and qualified in their assistance... and then there are others that are new to the career and can offer only limited experience and education.  An attorney will have earned an undergraduate college degree, attended 3 additional years of law school graduate education, passed the bar exam, and has to meet onerous continuing legal education requirements to keep up with the latest changes in the law and current trends in his or her practice area.  In short, BUYING OR SELLING REAL ESTATE IS NOT THE PLACE TO BE PENNY WISE AND POUND FOOLISH AND FOREGO PROFESSIONAL LEGAL ASSISTANCE.  

LET'S GET STARTED BY COVERING SOME IMPORTANT POINTS. 

     Important Point #1:  YOUR DEAL MUST BE IN WRITING.  Verbal or oral agreements involving real estate are NOT enforceable in Florida.  Therefore, a "handshake" deal won't cut it.  For any agreement concerning real estate to be binding and enforceable in Florida, it must be IN WRITING.  This means that you are going to need a real estate contract for your deal.

     Important Point #2:  USE A REAL ESTATE CONTRACT THAT PROFESSIONALS ON BOTH SIDES OF THE TRANSACTION ARE LIKELY TO BE FAMILIAR WITH.  This saves time and money.  For most residential real estate deals in our market area (Greater Jacksonville Metro) the most commonly used contract is the NEFAR (Northeast Florida Association of Realtors) purchase and sales agreement, which many refer to as the NEFAR CONTRACT.  Other commonly seen contracts in our area include the FAR (Florida Association of Realtors) Contract, and the FAR/BAR Contract (a contract jointly developed by the Florida Bar and the Florida Association of Realtors).  All three of these contracts are familiar to most professionals in our area and since we don't have to sit down and read every word of the contracts, the important points can be filled in and time is saved!  These contracts have also been thoroughly vetted over the years to do a good job handling deals and addressing the typical issues while conforming to the latest trends and changes in the law.  These contracts will address important issues like Purchase Price, Deposit amount, contingencies including financing and due diligence, what happens to your deposit if you need or want out of the contract, what personal property is included, who is paying what closing costs, how are real estate agents involved and who is owed commissions, how will financing be handled, what timeframes are involved, and when and where will the closing happen.  Commercial transactions and sometimes unusual residential transactions can require that a special custom drafted contract be created but for most residential transactions the contracts referenced above work great.  If you would like our office to prepare your contract for you we charge $250 to prepare most residential contracts.  Just click on our home page where it says "Prepare my contract" and a simple form will allow you to transmit the information to us to quickly and accurately prepare your contract.

     Important Point #3.  MAKE A LIST OF THE THINGS THAT ARE IMPORTANT DEAL POINTS FOR WRITING YOUR CONTRACT.  If you use an attorney, he or she will guide you through this, but it still helps to be prepared.  Important things include of course (A)  PURCHASE PRICE.  Remember to make your first offer a bit lower than where you want to end up in most cases.  You can always raise your offer, but it's hard to go the other direction!  (B) BINDER DEPOSIT.  Sometimes appropriately called an "Earnest Money Deposit"- this money is paid usually to an escrow agent (most often the closing attorney's trust account or sometimes the real estate agent's brokerage trust account) and shows that you are "earnest" about the transaction and that you have at least some money to put towards the deal in the beginning.  IN MOST CASES THE BINDER DEPOSIT REPRESENTS THE MAXIMUM EXTENT OF YOUR LIABILITY IF THE TRANSACTION FALLS APART.  The contract will contain contingency clauses like financing, inspections, etc. that if not met will allow you to get out of the contract and get your binder deposit back, but let's say all those contingencies have passed and the day before closing you find out that you are being transferred on your job and therefore can't close.... in such a case you would be in default under the contract, but most of the time the worst that can happen to you (under the NEFAR, FAR/BAR, or FAR contracts) is lose your binder deposit.  Remember that for other contracts that might not be the case- when you use non-typical contracts you have to READ THEM in full to make sure there are no "gotchas" like that!  How much of a binder deposit should you pay?  Well, based on the foregoing analysis, you would think that less is better, but remember- the point is to appear earnest... so offering too low of a binder deposit may make you look like you are not serious or maybe don't have the means to really get the money together to make the deal happen. The low end of binder deposits is usually about 2% and the high end about 10%.  (C)  CLOSING COSTS:  Who will pay what?  It is typical in our area that the Buyer pays any closings costs associated with financing the transaction, and the Seller pays pretty much everything else.  Typically those other things that the Seller usually pays include deed stamps (.7% of the purchase price), the owner's title insurance policy (about .5% of the purchase price for transactions under $1MM and for transactions over $1MM .5% for the first $1M and about .25% for the amount over $1MM), the title search (usually about $100), and the closing attorney or settlement agent fee (usually ranges from $250-$550).  Costs the Buyer will typically pay which are associated with financing the purchase include Note Stamps and Intangible Tax (total of .55% of the loan amount), recording fees for the mortgage (about $100 usually depending on how long the mortgage is), and any other fees charged by the lender like credit report, application, underwriting, or other fees.  (D)  TIMELINE FOR CLOSING.  Think through how much time will be needed to get to the closing table.  Usually after the contract is signed you will have 10-15 days to inspect the property for any issues and reach an agreement on how to address any issues with the Seller, you'll need to apply for your loan if you are getting one and get approved... which is usually about 30 days, and then you'll need to get everything ready and together to close.  If everything moves along perfectly and you are getting a loan, it's pretty tough to close any sooner than 30 days after the date of contract signing, and more typically 45 days.  Some upcoming changes in federal law which go into affect Aug. 1st, 2015 will probably add 2 weeks to this, making it realistic that you can close about 60 days after signing the contract.  (E)  FINANCING. Are you going to need financing?  If so, you'll probably need about 30 days to get approved which means you'll want to include this contingency in the contract so that if you don't get approved you can get your binder deposit back.  Think through whether you will be getting FHA, VA, or Conventional Financing... each has its own pros and cons, and such issues are addressed further in our Financing Article.  (F) ANYTHING PERMANENTLY ATTACHED TO THE WALLS FLOORS OR CEILINGS AUTOMATICALLY GOES WITH THE HOUSE. ANYTHING NOT ATTACHED DOES NOT. Therefore, if you want the refrigerator, a countertop microwave, a big jacuzzi sitting on the back deck that plugs in, or a washer or dryer to go then you must specifically include those items in the appropriate part of the Contract.  Conversely, is there an antique chandelier in the dining room that has been in the Seller's family for 100 years?  If so, it may not be going with the house and if you are the Seller you need to remember to EXCLUDE such an item in the contract or else it will be deemed to go with the house.  (G)  INSPECTIONS/DUE DILIGENCE.  Basically, it is up to a Buyer to investigate the condition of the Property and whether it is suitable for what the Buyer intends to do with it.  You should NEVER ASSUME that a property can be used for anything other than what it is currently being used for!  In other words, if it is vacant land, then don't assume you can build ANYTHING.  If it has a single family residence on it, then it's usually safe to assume that a single family residence can stay on it.. get the picture?  If you want to make any big changes or additions to how the property is being used then IT IS UP TO YOU TO MAKE SURE THAT YOU CAN DO WHAT YOU WANT!  I get asked all the time "If someone sells me a lot that means I can build on it right?"  The answer is an unqualified NO!!  There are many restrictions like zoning, wetlands issues, covenants and restrictions, and comprehensive plan designations that can limit what can be done with a property.  Usually a Buyer will want to have the property inspected to see if any repairs are needed.  If you are getting FHA or VA financing, then an inspection is required by those government agencies.  I mentioned above that in most cases under the NEFAR, FAR, and FAR/BAR contracts you'll have about 10 days to get the property inspected and then usually about another 5 days to reach an agreement with the Seller on repairs.  If you can't reach an agreement on who will fix what, then you must be sure and give written notice that you want to cancel before the contingency expires, in which case you can't get your deposit back and move on to look at other properties.  Sometimes you'll need to investigate things other than the property's condition like zoning matters, comprehensive plan requirements, or covenants and restrictions.  In such cases you may need to change the language of the contract to allow yourself more time.  Your attorney will be able to give you advice and guide you on important issues like these. Finally, after you conduct your inspections and due diligence you must make sure that if any repairs are to be made or if you need more time or whatever agreement is reached that a WRITTEN amendment to the contract memorializing such agreements is made and signed by both parties!  Remember, to be enforceable it has to be in writing!  

     Important Point #4:  MAKE SURE THAT YOU UNDERSTAND WHAT TAXES, HOMEOWNER'S ASSOCIATION FEES, CONDO FEES OR CDD FEES, ETC THAT YOU WILL BE OBLIGATED TO PAY.  It might shock you to learn that there are communities in our area where if you bought a typical $400,000 house and didn't even have a mortgage that you would owe about $6,000 a year in property taxes, and then another $300-$400 a month in CDD and HOA fees!  That means that without a mortgage you would still have to pay about $900 a month to live there!  It is required by law that all HOA, Condo, CDD, and other fees be disclosed to you accurately on an addendum to the contract.  Be sure and do your homework on these fees and costs when you first become serious about a property.  Also make sure that you check to see if there are any planned, forecasted, or even possible assessments- especially if the property is a condominium.  In recent times we have seen assessments levied against condo units that approximated 25% of their total value!  

     Important Point #5:  MAKE A GOOD DECISION ABOUT WHERE THE CLOSING WILL BE HANDLED.   Like making any other good consumer decision, you should base the decision on who you are going to allow to handle this most important transaction for you on where you will get the best quality service for the most competitive price.   In Florida, closings don't have to be conducted by attorneys as in some states.  The only requirement for someone to handle a closing in  Florida is that they be a notary, and if title insurance is being issued, that they are licensed by the State as a Title Insurance Agent.  If you choose to close with a "Title Company", which typically describes a non-attorney closing agent, keep in mind that the services that Title Company can provide are limited to issuing the title insurance, preparing the form closing documents, and administrating the closing.  A Title Company cannot draft legal documents, give legal advice, or provide you with attorney representation.  Some larger Title Companies do have attorneys as employees, and in such case those attorneys can answer legal questions for you or draft documents if necessary.  As such, it is very important for you to ask if you are considering using a Title Company, as opposed to a law firm, to conduct your closing as to whether or not they have an attorney on staff that can help with such things.  Be sure and ask if the attorney is on staff and available to help you- many smaller title companies will try to create the impression that they have attorney's on staff by saying that they "have an attorney available" or that an attorney is available through their title underwriter.  Such attorneys do not work for the Title Company, usually are not located in the Title Company office, and usually are not nearly as available as an in-house staff attorney. You might be suprised to know that in the greater Jacksonville area there are about 500 licensed title agents!!  The quality of the staff and training, the office quality and location, the computer equipment, and your experience will vary greatly among that huge number of service providers.  At this point you may be asking, "Why wouldn't I just use an attorney for my closing?"  Our answer is of course that you should!  In most cases, an attorney closing agent can provide a greater palette of services than can a non-attorney provider and usually at the same or better pricing!  Ask about your closing agent's experience, number of staff, check out the location of their office, and request their pricing for services.  Recently the American Land Title Association (ALTA) has created a "Best Practices" certification standard for ALL closing agents in the U.S., attorney, or non-attorney.  This standard is being adopted by most quality closing agents across the country and the date for certification compliance is August, 2015.  After that date I would suggest that you eliminate from your consideration any closing agent that is not "Best Practices" certified by ALTA.    

     Important Point #6:  DON'T BE AFRAID TO ASK FOR HELP!  This is going to be one of the most important transactions of your life, it involves huge sums of money, and it is not the place to be winging it!  Remember, an attorney is educated, licensed, and qualified to represent you and address your concerns.  There are many attorneys in the greater Jacksonville area that concentrate their practice in real estate law and are ready, willing, and able to assist you and to make sure that your real estate closing goes smoothly and efficiently.  We would be honored if you choose Briley & Deal to assist you.  

We wish you the best of luck with your real estate closing and look forward to assisting you!

Sincerely,

Blake F. Deal III

Managing Partner

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