For many Foreign buyers, an adequate knowledge of the intricacy of real estate transactions, as well as legal and tax issues are essential before committing to invest in Florida real estate. This is a Step by step information for the foreign buyer of Florida real estate properties.
A quick Internet search will reveal many different opinions on whether to buy now or wait. It could very well be the right time for YOU to buy, based on lower property pricing and historically low mortgage rates. Educating yourself about the current market situation, and determining your needs and time frame is essential before you decide to invest in a home. Many people believe that because property values have fallen so low, homes are now undervalued. While there are certainly some homes on the market now that ARE undervalued; priced lower than what the market can bear, not all homes are underpriced. REO homes (those that are now bank owned due to foreclosure or deeds in lieu of foreclosure) are not necessarily priced below fair market value.
In those contracts are included the usual clauses regarding designation of the parties, of the property, the price, the inspection procedure; eventually the appraisal, the payment conditions. (That means if it is a cash based transaction or if it is conditioned on getting a mortgage loan) There are “AS-IS”contracts which could allow the seller to refuse any repairs in the property, after an inspection is conducted, giving the buyer the option to cancel the contract if he is not comfortable with the amount of repairs recommended in the inspection. The offer is made by means of a contract, signed by the buyer and presented to the seller through the participating brokers. It is usual to accompany the offer with a good-faith check of US$ 1,000 which demonstrates the seriousness of the offer.
The real estate agent has the obligation to present all offers to the seller. The seller will respond by either accepting the offer, reject it, or make a counter-offer. Usually if he does not respond within a specific date, the offer is considered cancelled. A counter offer will modify the amount, or any other condition presented in the initial offer. The negotiations conducted in this manner will possibly end in a contract, signed by both parties. We name this an “executed”contract. Usually these contracts will require the buyer to complete his deposit with a specific date and it is common to deposit 10 % of the sale price but it could be more or less. This deposit will be kept in an”Escrow Account” which is a “Trust Account” used by the Attorney or the Title company chosen by the buyer.
It is common to have the inspection (if agreed upon) performed within 5 to 10 days. When it is a sale of a NEW condominium the buyer has the option of canceling the contract within 15 days after he has received all the required documentation from the Condominium Association, as well as their Financial Statements and Budgets. If it is the RESALE of a condominium property (NOT NEW) the term will be 3 days instead of 15 days. Commissions are generally 6 % (although that could vary) and are usually paid by the seller and will be shared between the seller and the buyer agents. When the sale has been made through the listing agent, without the cooperation of another broker, then the listing agent will be entitled to the full commission. There is no advantage for the buyer to try to deal directly with the listing broker since it will not reduce the commission paid by the seller who is already obligated by his agreement when putting his property for sale. The buyer will have – in my opinion – a much better leverage when he uses his own agent who will choose between thousands of options instead of trying to steer a client to a specific property where he is the listing agent. The closing and recording of the sale are usually done at the office of an attorney or the office of a title company, and both of them will work with the mortgage bank (if there is one involved) and will further coordinate all documents, recordings, payments to third parties and handling of the funds. Residential real estate taxes paid annually are presently about 1.75% per year of the market value or a 2% of the assessed value (which is the value that the county appraisal has given to the property – and is usually lower than the market value). These percentages could eventually change when cities and counties increase their millage (percentage by which the assessed value is multiplied in order to obtain the tax amount). Foreign buyers cannot take advantage of the Homestead Exemption, which reduces the assessed value by $50,000 for calculation of taxes, and is reserved to homeowners who have made the property their permanent residence. Buyers’ expenses are variable – in case of a CASH purchase including the title insurance, recording fees, and all other expenses, they fluctuate between a total of 0.80 % and 1.0% of the purchase price. In case of financing the purchase through a mortgage all the expenses of the loan must be added. There will be taxes of 0.55 % (from the loan value) on the mortgage, appraisal fees, and additional expenses that banks and mortgage companies will charge. Apart from “Points” charged by the bank to reduce interest rates, the total mortgage expenses in this case could be between 2.0 % and 3.0 %.
Historically, the United States has experienced many recessions. In fact, boom and bust cycles are an economic norm. While this recession has been the most severe since the Great Depression, no one doubts that it will end and housing values will rise again. Historically, property has been a great investment. It is very likely that those who purchase now will reap the financial benefits in a few years.
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