If you are looking to become a real estate agent in Florida, it is imperative that you understand the fundamentals of a Florida Real Estate Contract.
What is a Real Estate Contract ?
A real estate contract, by definition, is a legally binding document between parties, that states the terms and conditions of the purchase and sale of real property. A real estate contract is also known as a real estate purchase and sale agreement, and standardized documents that have been approved by the Florida Association of Realtors and the Florida Bar, are generally used.
A Florida Real Estate Contract must be in writing and contain the following, in order to be legally binding;
- The parties to the contract – Buyers and Sellers identification
- Identification of the Real Property by means of a legal description and street address
- Identification of Personal Property, which could include “white goods”
- Purchasing Price of the Property
- Effective Date – Time for accepting offers and counter offers
- Closing Date when the money will be paid and the title of the property will be transferred to the buyer.
- The Signatures of the parties involved in the real estate transaction.
As-Is Contract in Florida
An “As-Is” contract, means the seller is not obligated to make any repairs to damages, or defects to the property. The responsibility then lies on the buyer to carry out due diligence when deciding on the purchase, and to organize the necessary inspections, to fully ascertain the condition of the property before the purchase of real property is concluded.
Marketable Title in Florida
Marketable Title means that is the seller’s responsibility to provide evidence that the property that they are selling is clear of any liens or title defects. Liens and defects that could affect the properties marketable title include
- Inaccurate recording of ownership
- Undiscovered encumbrances
- Unsatisfied judgments
- Boundary, Easements or Survey Disputes
Marketable Title Act Florida
Florida State Legislature passed the Marketable Records Titles Act (MRTA) in 1963. The purpose of passing the Act was to abolish old recorded claims on property that have no relevance or effectiveness in today’s laws and legislation. All claims on the title of the property that were 30 years or older were abolished. This is enacted by establishing the “root title” or the date the earliest deed was recorded on the property. MRTA laws and exemptions are contained in CHAPTER 712 Florida State Statute.
Real Estate Inspection Contingency
A buyer of real property should always order a home inspection to ascertain the condition of the property they are looking to purchase, and any defects or repairs that need to be carried out prior to closing the real estate transaction. If a buyer fails to notify a seller of the inspection results and any repairs that need to be made, they will waive their rights to the seller to be obligated to mend any damages. When the home inspection has been completed any repairs or defects should be disclosed to the seller, whereby the seller is then obligated to follow the terms and conditions of the contract and complete the necessary work.
Real Estate Inspection Period Florida
Under a regular real estate contract in Florida, unless otherwise stated in the contract, a buyer has 15 days inspection period from the date the contract was signed to order the home inspection and notify the seller of the results. The seller then is obligated to follow the terms and conditions of a purchase and sale agreement and carry out necessary repairs. It is also extremely important that the buyer orders a home inspection when entering into an “As-Is” contract to clearly understand the condition of the property they are looking to purchase, and the repairs that the buyer will need to carry out. The buyer then has the right to terminate the as-is contract agreement, within the inspection period.
Real Estate Financing
“Cash-Closing” is where a buyer purchases a property in full, without the need for any loan or mortgage.
3rd Party Lenders – Applying for a loan or mortgage through 3rd party lenders, such as banks, is the most common financing option to buyers in Florida.
Certain buyers will also have other financing options, depending on the type of property they are purchasing such as;
VA Loans (Veterans Association) – for members of the military and veterans, and spouses of members, who have died while on active duty
FHA (Federal Housing Administration) Loans, for buyers with low-to-moderate income, or low credit scores that would make eligibility for a 3rd party loan difficult or unachievable.
Closing Costs in Florida Explained
When the real estate contract is concluded by both parties, fees must be paid by both buyer and seller. The title to the property is then passed to the buyer.
Buyer Closing Costs Florida
Closing costs due from the buyer can include –
- Stamp and Intangible Tax on Mortgage
- Survey, Inspection and Appraisal Fees
- Mortgage and Lender Origination Fee
- Recording Fees including fees for recording Deed;
- Buyer’s Broker/Attorneys’ Fees
Seller Closing Costs Florida
Sellers will also be due to pay certain fees at the closing of a real estate transaction which includes;
- Recording and Title Search Charges and Fees
- Deed Stamp Taxes
- Seller’s Broker/Attorneys’ Fees and Commissions.