INSPECTION CONTINGENCIES
Most real estate purchase and sale contracts allow a buyer 10-15 days to conduct various inspections pertaining to the property. But the types of inspections and the post inspection rights of the buyer and seller may vary amongst forms.
Some inspection clauses allow the buyer to terminate the contract and receive a return of their deposit if the results of the inspection are unacceptable to the buyer in the buyer’s sole discretion. This clause is sometimes referred to as a “free look”. Other clauses obligate the seller to make certain repairs up to a limit that is agreed upon during contract negotiations. Another potential difference is that some inspection clauses allow the buyer to self-inspect the property while others may require that a licensed inspector conduct the inspections. Although not required in the Sarasota area, some other state contract forms require a seller to pump a septic tank every time a property sells. Someone new to the area should consider hiring an attorney to better understand their contractual rights and obligations before signing a contract.
FINANCING CONTINGENCIES
Buyers who are obtaining mortgage financing will generally insist that a financing contingency be provided within the contract. Certain mortgages, such as VA and FHA allow the buyer to terminate a contract and receive a return of their deposit if the appraised value obtained by the mortgage company is lower than the contract purchase price and the seller is unwilling to lower the price upon receipt of the appraisal. Other financing contingency clauses might include deadlines for the receipt of the appraisal or a homeowner’s insurance binder. The failure to monitor these deadlines could result in a buyer forfeiting their deposit in favor of the seller, who, in turn, may be obligated to share the deposit with the broker(s). It is important to note that most of the real estate purchase and sale forms used in Florida contain blank spaces wherein time frames should be inserted by the Realtor or attorney completing the form. As an example, the standard forms require a buyer to make formal mortgage application within five (5) days from the day the contract is signed. A buyer who signs a contract while on vacation, may not be able to meet the deadline and should ask that it be changed.
REVIEW OF DOCUMENTS GOVERNING A HOMEOWNER OR CONDOMINIUM ASSOCIATION
Florida law allows the buyer of a condominium a rescission period in which to review the governing documents and financial statements of the condominium association. If the buyer finds something unacceptable, they may terminate the contract and receive a return of their deposit. The rescission period is fifteen (15) days for the purchase of a new condominium directly from a developer and three business (3) days for a condominium resale from an individual owner. Delivery of the Minutes from the association meetings is not required, and therefore, if a buyer would like to review the association’s Minutes from recent meetings, an additional clause must be prepared to include a review of the Minutes within the rescission period.
For new home purchases, builders typically deliver the homeowner’s association documents via electronic delivery and have the buyer acknowledge receipt. There is no requirement that the seller in a resale transaction provide any governing documents or financials to a buyer. If a buyer desires a document review period, one must be added to the contract.
EXAMINATION OF TITLE
Most contracts require that the seller deliver a clear title to a buyer subject only to certain matters of record such as easements and community restrictions, for example. Typically, a title insurance commitment is delivered to the buyer by the closing agent, which may be a neutral title insurance company, the seller’s attorney, or the buyer’s attorney. The buyer then has a limited amount of time to object to the status of the title. Failure to timely object could result in a buyer being required to close with title defects. In the Sarasota area, the buyer typically selects the closing agent and pays for the title insurance premium. Therefore, a buyer is better served when selecting an attorney closing agent who provides representation rather than a neutral title insurance company.
At Gibson, Kohl, we want to help you understand your contract and guide you through the closing process. For more information visit our website or call our office. We look forward to hearing from you.