Buying Real Estate in Florida -- An Overview of the Legal Process

Written by: Steven W. Ledbetter

Venice, FL | Avvo Rating: 6.9 | Client Reviews (2)

Add to list Print Send to a friend

An overview of buying real estate in Florida from making an offer to closing.

MAKING AN OFFER

Owners of real estate may sell their property either with or without the help of a licensed real estate professional ("Realtor"). However, finding and purchasing real estate is generally far easier when Realtors are involved. Once a purchaser and her/his Realtor find acceptable real estate to purchase, the Realtor will assist the purchaser in making an offer to the seller. The offer is typically submitted on a formal contract signed by the purchaser and presented with a deposit. The deposit is usually between 5% and 10% of the offered purchase price, but is often negotiable. If the seller accepts the offer, the seller will sign the formal contract and return it back to the purchaser. The deposit tendered by the purchaser will be placed in an escrow bank account with either the Realtor or the escrow agent.

FORM OF CONTRACT

There are two standard forms of real estate purchase contracts customarily used in Florida, the FAR and the FAR/BAR. Both are designed to be standardized forms and were prepared by the Florida Association of Realtors together with the advice of Florida attorneys. As such, neither form contract is intended to favor or protect one party more than the other in a typical transaction. If a purchaser is not familiar with Florida laws, it is recommended that a real estate attorney either prepare the contract offer or that the purchaser consult an attorney to review the contract prior to submitting the offer to the seller.

PURCHASE LOAN CONTINGENCIES

If the purchaser intends to borrow money to purchase the real estate, the financing section of the contract should be completed. The purchaser must make a good faith effort to obtain from the lender a written commitment to make the loan within the time period specified in the contract (usually not less than 30 days). If the purchaser is unable to obtain a loan commitment within the specified time period, then the purchaser can choose to either purchase the real estate without the loan using his/her own cash, or terminate the contract and receive a refund of the deposit. Termination of the contract is a very technical process; therefore progress of the loan should be carefully monitored so that the financing period does not expire before receiving the loan commitment.

INVESTIGATION OF THE PROPERTY

At the time an offer is made, the seller should provide the purchaser with a thorough written "disclosure statement" that identifies any problems related to the real estate. In addition, the purchaser will have the right to conduct various inspections of the real estate. The purchaser will usually have between ten days and thirty days to complete the inspections. The types of inspections can include the following: (i) the physical condition of buildings and structures (e.g., electrical wiring, plumbing, appliances, roof, etc.), (Ii) termites and other wood-destroying organisms, (iii) boundary surveys and flood zone verification, and (iv) review of homeowner/condominium associate rules and restrictions.

INVESTIGATION OF THE PROPERTY (continued)

The purchaser should have the official public records investigated by a real estate attorney to confirm the seller has clear and legal ownership of the real estate. The attorney will obtain a report of the official public records ("Title Search"), and carefully review it to determine the chain of ownership of the real estate and whether there are any loans, mortgages, or other liens or encumbrances that should be removed in order for the purchaser to obtain clear ownership of the real estate. As part of providing a Title Search, the attorney will also arrange for title insurance for the purchaser which serves as an insurance policy to protect the purchaser/owner from possible hidden title problems, easements, liens, etc. that were not revealed through the Title Search. As stated before, termination of the contract is a very technical process; therefore inspections must be completed quickly so that the seller can be notified of any problems before the the inspection period expires.

WHAT OCCURS AT CLOSING?

The formal process of transferring ownership of the real estate from the seller to the purchaser is called the "Closing". The Closing is performed by a "closing agent", which is usually the attorney who provides the Title Search. The Closing Agent shall prepare and oversee the signing of all the necessary transfer documents. In addition, if the purchaser acquired a loan to buy the real estate, the Closing Agent will also facilitate the execution of any loan documents and return them to the lender.

WHAT OCCURS AT CLOSING? (continued)

At the Closing, the purchaser shall deliver the purchase proceeds and related costs to the Closing Agent for disbursement and the seller shall sign a deed transferring ownership to the purchaser. The Closing Agent shall ensure that any mortgages, loans or other liens on the real estate and all costs related to the transaction are paid out of the purchase proceeds at the time of the Closing. After all mortgages, liens, and costs are paid, the remaining purchase proceeds are delivered to the seller. The common costs and expenses in a real estate transaction include government recording fees and related transfer taxes, Closing Agent fees and costs, costs of document preparation, expenses related to the loan, title insurance premiums and Realtor sales commissions, which the seller usually pays.

HOW DOES THE TRANSFER BECOME OFFICIAL?

As part of the Closing process, the Closing Agent submits the deed to the clerk of the public records for recording. The clerk records the deed by stamping on it a unique public records document number and the date and time of receipt. The recorded deed notifies the public that the real estate was transferred and that the purchaser is the new official owner of record.

WHAT IS REQUIRED OF NON-U.S. CITIZENS?

If the purchaser does not have a U.S. Social Security number or tax identification number, it will be necessary for the purchaser to obtain a tax identification number. The process generally involves the following: i. Filing a tax identification number (ITIN) application Form W-7 with the Internal Revenue Service (IRS); ii. Submit with the Form W-7 application a notarized/certified copy of the purchaser's original passport, together with notarized copies of other documentation that created the need to file tax reports (i.e., The recorded deed). iii. The IRS typically processes a W-7 application in about 6 to 8 weeks. In most situations, it is not necessary to obtain an ITIN before the Closing, but the application should be filed as quickly as possible. iv. The IRS will send written notice of the purchaser’s new ITIN directly to their country of origin home address.

WHAT HAPPENS AFTER CLOSING?

In approximately thirty days after the Closing, the Closing Agent will send the purchaser the original title insurance policy and the original recorded deed bearing the official recorded date and corresponding documentation number stamps. The documents should be kept by the new owner in a safe location.

WHAT DOES A PURCHASER HAVE TO DO AFTER CLOSING?

The purchaser/new owner of the real estate is not required to file any additional or continuing documentation as proof of ownership. However, owners of real estate are required to pay annual property taxes to the local county government which will send a real estate property tax notice to the owners each year.

PLEASE NOTE

PLEASE NOTE: The buying and selling of real estate has serious legal implications. It is strongly advised that a purchaser seek the counsel of a real estate attorney, especially if the purchaser is not familiar with the customs and laws of the state of Florida. The information contained in this document is not intended to be, nor should it be relied upon as legal advice. The contents are intended for general information only. Specific situations and questions should be discussed with a Florida real estate attorney.