In Florida, the residential real estate closing process begins with the execution of a real estate contract and is finalized by the execution of closing documents on the closing day. Below is a step-by-step breakdown of a common Florida residential real estate closing:
The contract sets forth all of the terms of the transaction including the property being purchased, the purchase price, and the closing date. The contract sets forth all of the critical dates of the transaction and is an extremely powerful document. Unfortunately, many buyers and sellers wait until after the contract is signed to seek the advice of a real estate attorney, which leads to unforeseen issues and less protection.
The deposit amount is set forth in the contract and often is payable by the buyer to the escrow agent within three days of the real estate contract being executed. The deposit provides protection to the seller in the event the buyer breaches the contract. Ten percent of the purchase price is often the standard amount of the deposit.
3. Residential Mortgage Application
The majority of residential buyers obtain a loan to purchase the property. The real estate contract will provide for a financing contingency, which give the buyer a certain amount of days to receive approval from a bank of a loan. If the buyer is unable to obtain financing, the buyer can cancel the contract within the contingency period and receive their deposit back.
Often times, especially when the buyer is seeking a loan, an appraisal of the property will be done by a licensed appraiser. The failure of the property to appraise for the purchase price may lead to the buyer being unable to obtain a home loan.
5. Property Inspection
Florida real estate contracts provide for a property inspection period during which the buyer can inspect the property. It is recommended that the buyer hire a certified inspector to conduct the inspection. Even “As-Is” contract provide an inspection period. Anything found that is not satisfactory to the buyer can unable the buyer to cancel the contract and receive the return of their deposit, so long as the inspection period has not expired. Many buyers use the inspection report to negotiate a lower purchase p[rice or for the seller to make the repairs before closing occurs.
A real estate survey is often an overlooked aspect of the residential closing process. The survey will confirm the boundaries of the property to ensure, among other things, that there is access, that the legal description is accurate, and that there are no encroachments. Common encroachments often include fences going over onto a neighbor’s property or a neighbor’s fence encroaching onto the property being purchased. The survey can also confirm that the buildings setback requirements are met.
7. Title Commitment and Clearing Title
A real estate closing is conducted by a title agent, which is also referred to as the closing agent. The closing agent can be a title company or real estate attorney who has the status of title agent. Using a real estate attorney, who is also a title agent, can often times save the seller significant money while also receiving a higher level of service. For further information on the difference between title companies and real estate attorneys click here.
A title commitment reveals any liens, encumbrances or other matters that affect the status of the property. Certain items must be cleared for the closing agent to issue title insurance; however, like any other insurance policy, title companies often will exclude certain covered matters. It is very important as a buyer to have a real estate lawyer review the title commitment to ensure you are receiving the best coverage possible.
8. Pre-closing Walk-Through
The pre-closing walkthrough occurs the day before closing to ensure that there have been no material changes to the property since signing the contract and that an agreed upon repairs have been made. Although small nail holes and other moving related dings are to be expected, the preclosing walkthrough protects the buyer from new issues that have arisen since their prior inspection.
9. Closing Day
The Closing Day is the day the closing documents are executed and the money is transferred to the seller. Common residential real estate documents include a warranty deed, closing statement or closing disclosure, mortgage, promissory note, and bill of sale. Other affidavits or documents may be required depending on the specific situation.
After the Closing has occurred, the warranty deed is recorded in the public records along with any mortgage and the seller is paid the proceeds of the transaction. Third parties such as the realtor and surveyor and closing agent are also paid at this time. Once the necessary documents have been recorded, the closing agent will issue a title policy to the buyer insuring the buyer’s title in the property.
Why Should I use Real Estate Lawyer?
Buyers and Sellers are fortunate to have no issues or problems occur during a real estate closing. Having a real estate attorney from the onset helps reduce the risks of problems causing the transaction to fall through and often can be less expensive. Often times, a transaction seemed to have gone smoothly only for issues to come up when the buyer later tries to sell the property, which makes the issues much more difficult to remedy.
With three offices located in Melbourne/Viera, Vero Beach and Coral Gables, the law firm of Rossway Swan serves clients throughout Florida. Contact us today to speak with one of our experienced residential real estate attorneys.