Whether you are buying or selling a property in Florida, the process can be extremely complex. Please never hesitate to ask questions. The most popular questions are: “Explain a trust deed, escrow, title, contingencies, lenders, etc.” We work for you. Please stop us if we ever use real estate terms with which you’re unfamiliar.
These are conditions to be satisfied by a certain date to the satisfaction of the person requesting them. There are usually several contingencies to be met in a sale; the “biggies” are loan approval and physical inspections. The contingency options are pre-printed in the Florida Residential Purchase Agreement; the buyer and seller agree on the length of time for removal.
This means two things: 1) a mutually agreed upon period of time for the Buyer and Seller to perform all of the detail work in the Sales Contract; and 2) the Escrow company itself, which is a neutral third party in your transaction. The escrow company prepares paperwork, handles the title insurance, gets the loan documents signed, guarantees that reporting requirements for the state and county are met, receives and pays out money to the correct parties only after all the terms of the sales contract have been fully satisfied. Usually, a buyer and seller split the escrow cost.
Home Warranty Plan
This is a maintenance insurance plan for your home. The policy covers most of the problems that can go wrong with a home during the first year. IT IS VERY IMPORTANT TO UNDERSTAND THAT THEY DO NOT COVER EVERYTHING. READ THE POLICY. THEY MAY EXCLUDE THINGS THAT YOU THINK WOULD OR SHOULD BE COVERED.
If a covered problem occurs, the Buyer calls the warranty company and they send out a repair person. The Buyer pays a service call fee and the company picks up the rest of the charges to repair the problem or replace the item.
The home that you want to buy will likely be inspected by a licensed termite professional. This is part of the contract; check with your lender to learn if they will require it. The termite inspection will cover the sub area to the attic. The inspector will advise you of any problems with termites, dry rot, or cellulose debris (junk wood under the house that termites can eat), shower pan leakage, etc. Generally, the Seller will pay for any needed work to get a “clear” termite report, although this is negotiable. The termite report will outline recommended work and estimated costs. If you are a Seller, we recommend good termite companies that do a very complete job without overcharging.
It is important to get the home inspected by a licensed contractor who does professional home inspections. Get a thorough inspection from the foundation to the chimney to the main line sewer, with a written report of any problems. Home inspections are paid for by the buyer. (Additional inspectors, such as chimney inspectors or geological inspectors cost extra.) It’s worth it, and can really educate you about your house and any historical, present or future issues. Don’t even think of buying a house without one! The inspections usually take place as soon as the offer is accepted.
Your loan is attached to the property through a trust deed. This is a legally recorded lien against the property. When we use the term “lender”, it’s a generic term meaning a bank, credit union, or a mortgage banker or broker. It’s important that you shop for the best loan and we recommend contacting more than one lender. The lender you select should be somebody that you can “go live” with when you have questions — be very careful when using mortgage brokers through the Internet for this reason. Lenders continually come up with new loan “programs” which are new types of loans. Please see our FHA guideline page. Here’s a little more about each type of loan:
ARMs (adjustable rate mortgages [loans]) are the easiest loans to qualify for. It is important to understand how these can adjust — and the rate can adjust monthly. These are tied to one of four government indexes, 6-month T-Bill, 1 Year Treasury Securities, 11th District Cost of Funds, and the LIBOR-the London loan index. The middle two are the most popular. The bank takes the index and adds on their margin, or profit. This is the interest rate you pay. The lower the margin the better. This will differ depending on what index you use. Don’t be distracted by the initial “teaser” interest rates — and as you probably know, artificially low rates have helped lead to the current credit crisis. Compare the “fully adjusted” rates. ARMs were not very popular in recent years but are gaining in popularity once again.
PMI is Private Mortgage Insurance. If you get a loan from the bank greater than 80% of property value, they require you to get PMI. This coverage protects the bank in case you default on the loan. PMI is payable until the loan-to-value lowers. Good news: PMI may be a tax-deductible expense.
Points & Loan Fees
Anytime you hear the word point, just think “percent.” 1 point means 1% of the loan amount.
Misc. Loan Fees
Besides the points plus a few hundred dollars, lenders charge for a few other items. Appraisal, Credit Report, Tax Service, etc. are standard ones. You will receive an estimate of these costs from the lender once you have filled out your application. This is so there are no nasty surprises just before closing. How much are these costs? Usually about 1% to 3% of your loan. You pay them at closing in one lump sum.
Although this is negotiable, the buyer’s title insurance is usually paid by the Seller and the lenders title insurance is paid for by the buyer to insure proper ownership of the property. The title company will search each property to uncover liens of all types, easements, and a smorgasbord of other problems that could plague a new buyer and “cloud” the title to the property. They make sure that the property taxes are paid and the old loans are paid off and the liens are removed.
Who We Represent If You Are the Buyer:
We represent you in the purchase of property. We invest a lot of time and effort to find just the right house for you. If you see a sign or an ad on a property that you like, just call us. We will get all of the information on it. Same with something you see on-line. We will save you lots of time. If you stop by an open house, just tell the agent that you are working with us. They will be very nice and show you through. Let us know if they try to solicit your business because that is unethical behavior on their part.
When you select a house that you want, we will discuss the price, terms and contingencies that make up your offer. After we prepare the offer and the other related documents, we sign the Purchase Agreement which becomes the Sale Contract upon acceptance. We present the offer to the Sellers through their Agent. There may be an immediate acceptance or there may be Counter Offer(s). When we come to full agreement, all parties sign the sales contract and counter offers and escrow is “opened.”
During the escrow period, we will conduct all inspections (see above). There may be additional negotiations, as well. Your Lender will have you fill out the loan paperwork, appraise the property, approve your loan, and then draw loan documents. We will help you every step of the way. We are then ready to close.
Who We Represent If You Are the Seller:
We represent you in the sale of your property. After we establish the fair market value for your property, we’ll list your house and market it in order to attract a buyer.
When a buyer makes an offer, their agent meets with us and presents the offer. We will discuss the price, terms and contingencies that make up the offer. There may be an immediate acceptance or there may be Counter Offer(s). When we come to full agreement, all parties sign the documents.
Then we open escrow, the period of time where all parties remove their contingencies and fulfill their contractual obligations. The Buyers’ lender will appraise the property, approve the loan, and then draw loan documents. Although there may be additional negotiations, the seller has much less to do. You will sign the Grant Deed along with the Escrow Instructions. You also will have the home inspector, the appraiser, and the termite inspector looking at your house.
For Buyers and Sellers:
Escrow takes in all the money, monitors the progress of the parties, executes the rest of the documents, arranges for title to transfer to the buyer and pays all the bills. After title transfers from seller to buyer, Escrow is “closed.” All costs associated with the sale are then paid from the seller’s proceeds. Buyer and seller have different costs to pay associated with their side of the transaction.
In summary, thank you for letting us be of service to you. Buying your new home through Luxury LifeStyle Realty is a privilege we hope we have earned. We get paid for our services but we try to make sure that you get your money’s worth. We are not interested in just “selling you a house.” We want to earn a permanent business relationship with you, through good service and follow-through. By doing so, when you have an opportunity, you can feel comfortable recommending our firm. It is in our best interest to be the best Realtors you have ever met.