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Buying a Home in Florida
Buying a home can be a
traumatic experience, but it doesn’t have to be. Every year, we help dozens of
families, individuals, and investors with the sale and purchase of their
property.
The majority of our
clients are from out of town, often from outside of the US. We work with a
network of professionals – including mortgage brokers, title agencies,
attorneys, and other Realtors – to help make your transaction as smooth and
stress-free as possible.
We’ve created this guide
to help you understand how the home buying process works here in Florida.
House
or Condo? Villa or Townhouse? Hi-rise or Patio home?
The first hurdle you need
to get past is one of terminology. There are a wide variety of different types
of homes available in Sarasota, so your first decision is to determine which
type best suits your needs and lifestyle.
There are two major
classes of homes. Single Family homes are traditional detached homes with a yard
or garden. Condominiums are multiple-family homes where you own your home but
share the land (and often other amenities such as a pool, tennis courts, or
beach access) with the other homeowners in your condominium. There is also a
third class of property – called “maintenance free homes” - where you own the
home and land, but the homeowners association provides some or all of the
exterior maintenance.
Here’s a brief breakdown
on the pros and cons of each:
Traditional
single family homes
are the most common type of housing in Sarasota. You own the house and the land
and are typically responsible for all maintenance of the property. Home prices
vary widely according to the size of the house and the property. Typical 3
bedroom, 2 bath homes prices start at about $225,000 and go up to several
million dollars. Of course, location pays an important role in determining the
price of a home. Homes closer to the beach command much higher prices than those
homes further inland. In addition to their higher cost, coastal homes cost more
to maintain, and they also carry much higher flood and wind insurance premiums.
Many of Sarasota’s oldest and finest homes are located on some type of water,
either on the Gulf of Mexico, Sarasota Bay, or one of the hundreds of man-made
canals that were cut into the edge of the bay to create more waterfront homes.
The majority of newer
homes are located in deed-restricted subdivisions. The deed restrictions place
limits on what owners can and can’t do with their property. Each subdivision has
its own homeowners association, and the association is responsible for
enforcement of the deed restrictions. Some deed-restricted communities also
provide some shared amenities like a pool, recreation area, or tennis courts;
these are also managed by the homeowners association. Some subdivisions are
gated, either using an electronic access control system or a live guard. While
these offer an extra degree of security, they are costly to operate, and all of
the homeowners share that extra cost.
Many new home developers
offer maintenance-free single family home communities. These communities combine
the privacy and larger living space of a single family home with the convenience
of condominium-style maintenance. In a typical maintenance free community, the
homeowners association takes care of most exterior maintenance, including the
lawn and garden. Of course, owners pay a monthly or quarterly fee for
maintenance, but the fee typically isn’t much more than you’d spend for
maintenance on your own. These homes are ideal for part-time residents who
prefer the privacy and freedom of a single family home.
Condominiums
- once found only in
Sarasota’s coastal and downtown areas – are making their way inland as well. The
majority of condos in the Sarasota area are low-rise (up to 4 floors) and
mid-rise (up to 15 floor) apartment buildings with one or more condo units per
floor. In addition to traditional apartment-style condos, there are a large
variety of condos including town homes (two-story, multiple-unit buildings) and
patio homes (one-story condos with a small yard or garden). There are even a few
condo communities that offer free-standing single-family homes as condominiums.
When you purchase a
condominium, you are buying the interior of the building as well as a fractional
share of the common grounds, the building itself (often called “the shell”), and
the land. Condo owners pay a monthly or quarterly maintenance fee that covers
insurance on the building and common areas, exterior maintenance, landscaping,
and security costs. Many condos provide pest control and basic cable TV as part
of the condo fee. Buyers should be aware that the condo fee is not
all-inclusive. Condo associations may require owners to pay a special assessment
to cover unusual expenses such as a major roof repair.
Because many owners share
a single piece of land, the cost of a condo is often lower than a comparable
single-family home. This is especially true for beachfront and downtown condos,
where the scarcity (and resulting high cost) of land has put single-family home
ownership out of the reach of most buyers.
Condominiums are governed
by a condominium association, and most condos have extensive rules and
regulations designed to protect the rights, privacy, and property value of all
of the owners in the association. Because each condo has a unique set of rules
and regulations, prospective buyers of condos are allowed three days (15 days
for brand-new buildings) to review the condominium association documents.
Finding Your Dream Home –
and the Money to Buy It!
Once you’ve made the condo
vs. single-family home decision, it’s time to start the search for your new
home. Unless you plan to pay cash for your new home, there are two important
steps you should take before you start looking for your new home.
First, find a good,
reputable mortgage broker that is licensed to do business in Florida and who has
actually closed a loan in Florida. Some out-of-state mortgage brokers are not
familiar with the way things are done here, and that unfamiliarity can cause
major problems at closing time.
Second, ask the broker to
take your credit application and provide you with a pre-approval letter. This
process used to take weeks but many mortgage firms can give you an answer within
minutes. The pre-approval letter states that the lender has examined your credit
and financial status and is willing to write a loan for a specific amount. This
is different than a pre-qualification letter, which simply states that the
lender has briefly examined your credit and is willing to take your formal loan
application.
When you do find the right
home, the pre-approval letter shows the seller that you are a serious, qualified
buyer. This gives you a big advantage over other buyers who have not yet
obtained financing.
Money Magazine has an excellent mortgage calculator on
their web site that can help you determine how much house you can afford.
Using Internet Search
Tools
Thanks to the Internet,
you have a number of tools to help with your search. We have a search tool on
this site that allows you to search through the listings on the Sarasota MLS
system; you can also use the search engines on Realtor.com and Century21.com to
search a broader area.
While these sites have
excellent search features, they don’t tell you much about the area. That’s why
it’s important to have input from a local real estate professional. We live and
work in the area every day and are intimately familiar with all of the
neighborhoods and condominiums in the area. We also have direct access to the
three Multiple Listing Service systems in our area, and we can e-mail listing
information to you from any of the three systems. We can even set up an
automatic search for you that will immediately notify you as new listings come
onto the market.
While we love (and use)
Realtor.com, please keep in mind that it often takes several days for new
listings to appear on Realtor.com. In many cases, new listings appearing on
Realtor.com are already under contract. We recommend that you use the Sarasota,
Venice, or Statewide MLS search features on our web site, since these are
updated constantly with little or no delay.
No online search tool can
replace the experience of seeing a home in person. We suggest that you use the
online search tools to get a general sense of the homes available in the area.
When you’re ready to come to Sarasota and look at prospective homes, we will
work closely with you to learn your preferences and needs so that we can narrow
the field of potential homes to a manageable number.
The Buying Process
Once you’ve found the
perfect home, the real work begins. In this section, we’ll give you an overview
of the buying process so that you’ll know what to expect.
Step
1: The Offer
The first step in the
purchase process is to write an offer to purchase. In Florida, most Realtors use
a standard contract approved and distributed by the Florida Association of
Realtors. This document is called the FAR-8 contract, and it may include one or
more standard addenda documents designed to cover special situations.
 In
many states, an attorney must create real estate contracts. Florida
law allows real estate agents to
use a “fill in the blanks”
contract. Every real estate attorney in Florida is familiar with the FAR
contract, so there typically is no need to have an attorney review the contract
before closing.
To start the process, you
and your Realtor will fill out a new contract, specifying the purchase price,
amount of mortgage (if any), closing date, amount of deposit (also called
earnest money), amount of additional deposits, inspection dates, and other
terms and conditions of your offer. This can be done in person, but we often
create the contract on our computers and e-mail a copy to the buyer for
signatures.
Once we have a signed
contract, we present the offer to the seller’s Realtor. The contract requires
the seller to respond to the offer within a specific time frame, usually by 5:00
PM the following day. If the seller chooses not to respond to the offer, the
offer expires and the buyer is under no obligation to purchase the property.
Step 2: The Counter-Offer
In many cases, the seller
will not accept the initial offer made by a prospective buyer. If the seller
does not agree to the price or terms of the offer, the seller will make a
counter-offer back to the buyer.
If there are only a few
changes to be made, the seller’s agent will simply mark through and change the
original offer. The seller will initial each of the changes, indicating his or
her agreement to the revised terms and conditions.
If there are extensive
changes to be made, the seller’s agent may also choose to use a counter offer
addendum form. This is a single page document that amends the terms of the
original offer.
In either case, the
seller’s agent returns the marked-up offer back to the buyer’s agent for review.
At this point, the buyer may either accept the modified offer, or decide not to
purchase the property. An offer may go back and forth between the buyer and
seller several times before an agreement is reached.
If the buyer and seller
fail to come to agreement on the offer, the offer expires and the buyer’s
deposit money is refunded.
Step 3: The Contract
Once the buyer and seller
agree to the terms and conditions of the buyer’s offer, the offer to purchase
becomes a legally binding contract. At this point, several clocks start ticking.
Under the standard terms of the contract buyers and sellers have to meet certain
deadlines or one of the parties may be in default. In particular:
1.
Any additional deposits specified in the offer must be made on or before
the date specified in the contract.
2.
If you are purchasing a condominium, you have the right to review the
condo association documents, including the most recent financial statement and
any rules and regulations. If you do not agree to the terms and conditions of
the condo association, you have three days (for resale condos) or 15 days (for
new construction) to rescind your contract. The document inspection period
begins from the time you receive the condominium documents.
3.
The buyer has 10 days to have a home inspection performed by a
professional home inspector. Once the buyer receives the results of the
inspection, the buyer has 5 days to submit a written repair request to the
seller.
4.
If the buyer is obtaining a mortgage, the buyer has 5 days to apply for
financing with a lender.
5.
The buyer must obtain a loan commitment within 30 days of the original
contract date, unless another date is specified in the contract.
6.
The closing must take place on or before the date specified in the
contract. If the closing must be delayed for any reason, the buyer and seller
must both agree to the original closing date.
In Florida, a licensed
title agency or real estate attorney handles real estate closings. In some
counties, it is customary for the seller to pay for the title transfer and title
insurance; in other counties, the buyer pays. Normally, the party who is paying
for the title insurance gets to choose the title agency or attorney.
During this critical
period, we closely monitor all activities and. We personally attend all
inspections, and we keep in touch with the buyer, the seller’s agent, the lender
and the title agent (or attorney) to insure a smooth and successful closing.
Step
4: Inspections
Under the terms of the
FAR-8 contract, the buyer is entitled (at his/her own expense) to have the home
inspected. There are several types of inspections that may be performed:
1.
Home Inspection: This is a comprehensive inspection, performed by a
certified home inspection specialist. The inspector typically checks all of the
major systems in the house, including the foundation, walls, roof, appliances,
heating and cooling systems, water heater, and swimming pool. This inspection
typically costs between $250 and $500, depending on the size of the home.
2.
Wood Destroying Organism (WDO) Inspection: The home is inspected by a
licensed pest control technician, who checks the home for termites, wood boring
beetles, fungus, and other wood-eating organisms. Many lenders require this
inspection, and it costs between $35 and $60.
3.
Mold Inspection: If you or someone in your family is especially sensitive
to mold, we recommend that you get a mold inspection. We also recommend this
inspection if the main home inspection turns up any evidence of mold or prior
water or roof leaks. Mold inspections cost between $500 and $1000.
4.
Radon Gas: The United States Environmental Protection Agency (EPA) rates
West Central Florida “Low Potential” for Radon gas. Nevertheless, the EPA
recommends that all prospective homebuyers have their new home tested for Radon
gas. Radon gas testing starts at about $300. See
http://www.epa.gov/iaq/radon/zonemap/florida.htm for more details about
Radon in Florida.
5.
Although the contract doesn’t require it, you may also want to have a
surveyor locate your lot corners. (Many lenders require a survey in any case.)
If your new home is in a flood zone, you may also need to obtain a
Certificate of Elevation in order to obtain flood insurance. If the property
has been surveyed in the past and there are no obvious encroachments (fences,
driveways, etc.) on the property, you may not need a new survey. Some lenders
will allow you to use an old survey as long as the current owner signs an
affidavit stating that there are no encroachments on the property. You do not
normally need a survey for a condominium. Surveys cost about $350 and up,
depending on the size and shape of the property.
If the home or WDO
inspections reveal any deficiencies, the seller may be required to correct those
deficiencies before the closing. The FAR contract specifies that the seller must
correct warranted items (which typically includes all functional aspects of the
house) up to 1.5% of the total purchase price. In addition, the contract
requires sellers to correct problems caused by wood destroying organisms up to
1.5% of the purchase price.
The
1.5% repair reserves are not cast in stone. Some sellers may specify a smaller
repair reserve. In addition, some homes are sold “As-Is with right to inspect”,
meaning that the seller is selling the home with no repair reserve. In As-Is
sales, the buyer has the right to inspect the home within 10 days, but the
seller is under no obligation to make any repairs, even if those repairs are
necessary for the buyer to obtain financing.
Step 5: Preparing for the
Closing
As soon as your offer
becomes a firm contract, we send a copy of your contract to the title agency or
law firm who will be handling the closing. We create a checklist of due dates to
make sure that your closing takes place on time. We stay in touch with you and
all of the parties involved in the transaction (seller’s Realtor, title company,
lender, insurance agents, etc.) to make sure that there are no last-minute
surprises.
During this period, the
title agent will contact you to confirm your full legal name, mailing address,
and other identification information.
If you are purchasing a
condominium or a home in a subdivision with a mandatory homeowners’ association,
you may need to apply for membership in the condo or homeowners’ association.
The association may require a formal or informal membership interview. We will
work with you to obtain the necessary application forms.
Shortly before the
closing, the title agency will send us a preliminary closing statement, called a
HUD-1 form. This form is long and complicated, and we will go over it with you
in detail before the closing.
The
US Department of Housing and Urban Development (HUD) has an
excellent series of
articles explaining the closing process on their web site
at
The HUD Web Site. The article includes a sample HUD-1 form, and explains how
to read the form.
You will need to make
arrangements to transfer funds from your bank account to the title agency before
the closing. Most title agencies can accept wire transfers, which is a secure
electronic transfer of funds performed through the American Banking
Association’s private network. You may also choose to bring a certified check to
the closing. As part of the pre-closing process, we will help you determine the
best way to initiate the transfer of funds. Note that closing agents will NOT
take a personal check, even for a few dollars. For this reason, we recommend
that buyers send a little more money than the closing statement indicates in
case there are any last minute changes to the closing statement. The closing
agency will write you a check for any overage.
If you are financing any
portion of your new home, your lender will require you to obtain an insurance
policy before the closing. The policy must name the lender as a payee in the
event of loss. Depending on the location of your home, you may also be required
to obtain flood and/or windstorm insurance coverage.
Step 6: The Closing
At last, your offer has
been accepted, you have your financing lined up, all of the inspections have
been completed, and you’re ready to close on your new home. In many cases, the
closing is the easiest part of the entire transaction. Some buyers seem to think
that the closing is some sort of mystical ritual, but it is really very simple:
1.
The title agent reviews the HUD-1 statement with both parties to make
sure that everyone agrees to the charges and credits on the HUD-1 statement.
2.
The buyer provides payment in the form of a mortgage note, wire transfer,
check, or some combination of these. Any funds placed as a deposit with the
selling real estate broker are presented to the title agency on behalf of the
buyer.
3.
If the buyer is obtaining a mortgage, the buyer signs the new mortgage
and note. The title agency immediately sends the new mortgage and note to the
lender. Many lenders will not transfer the loan proceeds to the title agency
until this step is complete.
4.
If there is an existing mortgage on the property, the title agency makes
sure that the existing mortgage is paid from the sale proceeds. The title agency
issues a check to the seller for the sale proceeds, minus any loan payoff, real
estate commissions, and other charges.
5.
The seller signs a warranty deed, transferring ownership of the property
to the buyer.
6.
If the buyer is purchasing title insurance, the title agency issues a new
title policy to the buyer, with the lender (if any) shown as a loss payee.
7.
At this point, the closing is complete, and the buyer owns the property.
8.
After the closing, the title agency records the note, mortgage, and new
deed with the Clerk of the County Court.
These steps don’t always
happen in this order, and they don’t have to happen in person. Because many of
our buyers and sellers are out of town, we often handle closings by fax, e-mail,
or overnight courier. We’ll work with you to determine the best way to handle
your closing.
Now You Know…
We hope you’ve found this
crash course on Florida Real Estate to be helpful. If you have any questions,
please feel free to call or e-mail us, and we’ll be glad to answer them for you.
For more information on
choosing a buying a home, see
this series of articles on Realtor.com.
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