Real Estate Closing FAQs
Q. My realtor suggested that I close my transaction with his in house title insurance company rather than an attorney. Who does the title insurance company represent?
A. A title insurance company does not and cannot represent any party throughout the closing. It is important to note that even an attorney employed by a title insurance company cannot represent you. Generally, realtors suggest the use of their in house title insurance company because it is a convenience for them. Only an attorney can represent you throughout your transaction and generally at a cost that is competitive with a title insurance company.
Q. Should I hire an attorney before I sign my Purchase and Sale Contract?
A. Most Purchase and Sale Contracts in Florida contain a clause stating that the parties thereto have the right to consult an attorney prior to signing. Although many realtors understand the clauses in the Contract, they are not allowed to explain the legal ramifications to you. We can protect your interests better the earlier you contact us. We can also provide your realtor with a contingency allowing us to review your Contract after you sign it.
Q. Must I hire an attorney for my closing?
A. Unlike other states, it is not a requirement that an attorney conduct your closing. However, since the cost of title insurance does not increase when an attorney represents you at a closing, most buyers hire one. While title insurance companies are generally reliable and efficient, their services are limited to conducting the closing. Their employees are incapable of drafting, reviewing or interpreting your Contract. In addition to providing those services, we can assist you in negotiating the terms of your Contract. For example, we prepare Florida Wills for many of our satisfied real estate clients.
Q. What closing costs am I required to pay at closing?
A. The payment of closing costs is a negotiable term under your real estate contract. However, it is customary in Sarasota County, Florida that the buyer pay the following costs at closing:
- Title Insurance related Costs. These include the fees to search and examine the title to the property, the cost of the title insurance policy and the closing fee. (Please click here for closing cost estimator)
- Survey. It is generally recommended that a survey be purchased prior to closing for all properties other than condominiums. However, if the seller has a recent survey and is willing to sign an affidavit saying that the property has not been altered, a new survey may not be required. If the property is in a flood zone, an elevation certificate will also be required. The price of a survey can vary depending on the size and location of the property. The cost of a typical residential survey ranges from $400.00 to $800.00.
- Wood Destroying Organism Report. The average cost is $50.00. We recommend that all buyers obtain one regardless of the age and construction of the home.
- Recording Fee. The cost to record Deeds and Mortgages in the Public Records is $10.00 for the first page and $8.50 for each additional page. Most Deeds are less than 2 pages. The average Mortgage is 16 to 30 pages.
- Costs Associated with Mortgage Financing. If you are financing your purchase, your lender will provide you with a Good Faith Estimate of Closing Costs. The Good Faith Estimate will include the above described costs as well as the Lender’s costs.
Q. What is Title Insurance and must I have it?
A. If you are financing your purchase, your lender will require that you purchase title insurance insuring the mortgage given at the closing. A simultaneous policy can be issued insuring the buyer for an additional $25.00.
Q. Must I be present for my closing?
A. No. Many of our clients are domiciled in other states or countries and purchase real estate in Sarasota for investment. We serve them either via e-mail or Federal Express. Of course, we provide detailed instructions for proper execution of the documents.
Q. What types of claims would a Title Insurance Policy guard against?
A. There are many claims covered under a typical Title Insurance Policy. A few are listed below:
- False impersonation of a seller or other persons previously in title;
- Improperly executed Deeds;
- Deeds executed without a required spouse’s signature;
- Undisclosed heirs or descendants of former owners of your property;
- Survey matters;
- Liens appearing after closing but prior to recording of instruments.
Q. I’m paying cash for my property. Do I need a survey and title insurance?
A. Although neither a survey nor title insurance are required under Florida law, we highly recommend that you obtain both. Title insurance protects you from matters such as false impersonation of a seller, forgery, improperly executed Deeds, Deeds executed without a required spouse’s signature, fraud, undisclosed heirs of former owners, and survey matters and the cost to obtain the title insurance is relatively inexpensive compared to the cost of your investment and the attorney’s fees that would be charged without the purchase of title insurance. Unlike homeowners and automobile insurance which are paid annually, title insurance is paid once and remains effective for the entire time that you own your property.
Q. My husband and I live part of the year up north and part of the year in Florida. Can we have homestead tax exemption in two states?
A. There are certain circumstances that may allow you to have homestead tax exemption in Florida and another state, although most married couples do not meet the guidelines. The local property appraiser currently has an affidavit that must be signed by the parties to qualify.
Q. I will need approximately $50,000.00 to bring to my closing. What forms of payment are generally acceptable in Florida?
A. We generally recommend that you have your closing funds wire transferred to our trust account the day before closing to ensure that we can disburse timely. We also accept bank certified or cashier’s checks. However, we do not accept personal checks, brokerage account checks or out of state credit union cashier’s checks unless they are received 10 business days prior to closing to allow adequate clearing time.
Q. I am buying a house that is in a deed restricted community. Are there any homeowners association documents that legally must be given to me?
A: No. The seller must disclose, among other things, the fact that there is a homeowner’s association and the nature of assessments collected. However, there is no requirement that the seller provide you with a copy of the governing documents or the financial documents. However, there is a specific Homeowners’ Association/Community Disclosure, required by Florida law, which must be provided when you sign your contract. The disclosure clearly informs you of some of the key aspects of homeowners association membership and it must include the following statement, which gives you the right to cancel your contract if you do not receive the appropriate disclosure:
“IF THE DISCLOSURE SUMMARY REQUIRED BY SECTION 720.401, FLORIDA STATUTES, HAS NOT BEEN PROVIDED TO THE PROSPECTIVE PURCHASER BEFORE EXECUTING THIS CONTRACT FOR SALE, THIS CONTRACT IS VOIDABLE BY BUYER BY DELIVERING TO SELLER OR SELLER’S AGENT OR REPRESENTATIVE WRITTEN NOTICE OF THE BUYER’S INTENTION TO CANCEL WITHIN 3 DAYS AFTER RECEIPT OF THE DISCLOSURE SUMMARY OR PRIOR TO CLOSING, WHICHEVER OCCURS FIRST. ANY PURPORTED WAIVER OF THIS VOIDABILITY RIGHT HAS NO EFFECT. BUYER’S RIGHT TO VOID THIS CONTRACT SHALL TERMINATE AT CLOSING. BUYER SHOULD NOT EXECUTE THIS CONTRACT UNTIL BUYER HAS RECEIVED AND READ THIS DISCLOSURE.”
Although disclosure of the actual association documents is not required you may ask your attorney to add a contingency to your contract that will allow you a reasonable time to cancel your contract if the governing documents are unacceptable to you, in your sole discretion.
Q. What costs can I expect to pay at closing?
A. The payment of closing costs is a negotiable term under your real estate contract. However, the seller generally pays the following fees:
- Documentary Stamps on the Deed. This is equal to 70 cents per hundred dollars of the sales price. (Please click here for closing costs estimator.)
- Any costs associated with clearing title defects. These costs may include obtaining and recording documents such as Affidavits, Satisfactions or Releases.
- Attorney’s fees. If the seller hires his or her own attorney to review the closing documents, this charge will generally appear on the closing statement.
Q. What is a 1031 Exchange and under what circumstances may a seller benefit from one?
A. A 1031 exchange is a vehicle under the Internal Revenue Code that allows a seller to use the proceeds from the sale of investment property for the purchase of replacement investment property. As long as the rules are strictly adhered to, the procedure allows a seller to defer the payment of capital gains taxes. Please call our office if you require additional information.
Q. The buyer of my property has hired a home inspector and asked me to make numerous repairs to the property. Which repairs am I required to make?
A. The terms of your contract dictate which repairs are required. Your contract also specifies a time frame in which you must respond to the buyer’s request. Please call our office if you would like assistance in interpreting your contract.
Short Sales and Foreclosures
Q. I owe more on my mortgage than my home is worth. A friend suggested that I consider a “short sale”. What is involved?
A. A short sale is when a mortgage lender agrees to satisfy a mortgage for less than the full loan amount owed on a property. While each mortgage lender has a slightly different approval process, there are some similarities. First, your lender will ask you to submit general financial information including but not limited to bank statements, tax returns, pay stubs and a budget. Next, your lender will ascertain the value of your property. Our attorneys have successfully negotiated short sales on behalf of our clients.
Q. If my mortgage lender approves a “short sale” will it forgive the debt?
A. Not always. Sometimes a mortgage lender will approve a short sale only if you agree to sign a note for a negotiated amount. Our attorneys have successfully negotiated favorable terms on behalf of our clients.
Q. I am interested in purchasing a bank owned property in Florida. Do I need an attorney?
A. When purchasing a bank owned property you will generally be asked to sign a contract and/or addendum written by the bank’s attorneys with terms favorable to the bank. The bank typically offers to pay the buyer’s closing costs in order to control the transaction and closing. With the money saved on closing costs, we suggest that you hire an attorney to represent YOUR INTERESTS. Our fees for doing so are reasonable.
Q. I am refinancing my home that I just purchased last year. Do I have to purchase title insurance again, and if so, why?
A. Regardless of the length of time you have owned your home, your lender will require that you purchase title insurance to protect the lender’s interest. However, you will receive a re-issue credit if you provide us with your prior Owner’s Title Insurance Policy. The re-issue credit could be several hundred dollars depending on a variety of factors. Some firms fail to advise borrowers of the availability of the re-issue credit. It is our policy to always issue our clients with a re-issue credit if one is available. The credit is given regardless of who issued your Owner’s Policy.
Q. I am purchasing a condominium unit and my Realtor told me that I have the right to review certain documents. What documents is she referring to? Where do I get them?
A: In the State of Florida, the purchaser of a condominium from a non-developer has the right to review certain documents prior to closing if he or she makes a written request for copies from the seller. A purchaser has the right to cancel the contract within three (3) business days of receipt if the documents are not acceptable to the purchaser. A purchaser may request more than three business days in the contract. The documents to be provided are as follows:
- Articles of Incorporation
- Rules and Regulations
- Declaration of Condominium
- Most recent year-end financial statement
- “Frequently Asked Questions and Answers” document (this form is established by statute and summarizes certain important aspects of condominium ownership including explanation of voting rights, unit use restrictions, leasing restrictions, whether the unit or association is obligated to pay rent or land use fees for recreational or other commonly used facilities, a statement identifying the amount of assessments levied against each unit type, explanation of the basis upon which assessments are levied, and list any court cases in which the association may face liability of more than $100,000.00); and
- Governance Form (This is a 5 page form published by the Department of Business and Professional Regulation Division of Florida Condominiums, Timeshares and Mobile Homes. It summarizes condominium operations including board meetings, finances, as well as unit owner rights and responsibilities).
Any costs of obtaining these copies should be paid by the seller. If you have not received the copies prior to closing, the closing may be extended for up to 3 days after receipt. A party buying a condominium owned by a developer has fifteen (15) days to cancel the contract instead of three (3). Any right to terminate the contract ends upon closing, even if you have not received the documents or even if you have received an incomplete set of documents.
Contact us to learn how we may assist you. Our offices are open from 8:30 a.m. until 5:00 p.m., Monday through Friday. We have three convenient locations to better serve you.