Common Questions About Florida Law
It is natural to have many questions and worries when faced with a legal issue or litigation. The experienced lawyers at DeLoach, Hofstra & Cavonis, P.A., ask many common legal questions and provide useful answers to help get you in making the best decisions for you and your family.
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Why Is It Important to Fill out the Questionnaire Prior to Your Meeting?
Why Is It Important to Fill out the Questionnaire Prior to Your Meeting? (Transcript)
D. "Rep" DeLoach III, Estate Planning and Board Certified Elder Law AttorneyThank you for choosing our law firm to help with your estate planning. As part of your initial consultation, we're going to send you a questionnaire for completion for you to bring in with you to your initial appointment. This questionnaire is very important to us and it's very important that you take your time to fill out completely and accurately.The questionnaire will set out your age, address, occupation, but also gives the names of potential beneficiaries. So it'll spell out things (or names) that we may need, or other important aspects to your estate plan. We'll also need a list of your assets in the questionnaire and those assets will provide us a basic understanding of your estate plan. And this is a very, very important piece of the plan.We need to know your assets because we need to know how to best plan your estate based upon where your assets are, what are the potential values of the assets, how these assets should be distributed. And it's important that you do this and take your time. It's going to help make sure we have a great first meeting, and we don't have to go back and get basic information. We can jump right in and start helping you out.Again, we look forward to meeting you and thank you so much.
Texting and Driving in Florida
Electronic devices are the biggest cause of distractions for drivers nationwide. In 2016, Florida alone saw roughly 50,000 accidents and 233 fatalities as a result of distracted driving.
In the time it takes to glance at a text message, a driver can travel nearly 300 feet—enough to strike a pedestrian, hit the back of a stopped line of cars, or even veer off the road entirely.
Florida Drivers May Be Ticketed for Texting and Cell Phone Use
In 2019, Gov. Ron DeSantis signed a bill into law strengthening protections against electronic distractions and making texting and driving a primary offense. As of July 1, law enforcement officers may pull over drivers who are texting without any other reason for the traffic stop.
Florida detracted driving laws place specific restrictions on:
- Cell phones. While it's legal for drivers to make and answer calls, all drivers in school zones and construction areas must use hands-free systems in order to talk on the phone. Troopers from the Florida Highway Patrol troopers may begin issuing warnings for cell phone use beginning October 1, 2019 and issue citations for the practice after December 31.
- Texting. It's illegal for drivers in Florida to text while driving. This includes manually typing or entering multiple letters, numbers, symbols or other characters into a virtual keyboard, hitting a button on a wireless device to send messages, or reading any data off a device while a vehicle is in motion. Drivers face a $30 fine for a first offense, plus court costs; with second and subsequent offenses within five years, there's a $60 fine and an addition of three points to their licenses. Drivers caught texting in a school zone may have two additional points added to their licenses, while motorists whose texting resulted in a crash will have six points added to their licenses.
- Truckers and bus drivers. Operators of trucks and buses are held to a higher standard than other drivers. Both truck and bus drivers are only allowed to use wireless communication devices if they're hands-free, and can be pulled over and charged if they use a handheld electronic device while driving in Florida law without committing another violation. For the first violation, commercial drivers can receive a fine up to $500 and their companies can be charged separate costs up to $2,750. If a driver commits three texting violations or more, he or she can be liable for a $2,750 fine and license suspension for 120 days, while the employer can be fined up to $11,000.
If you've been injured in a distracted driving accident, you should have the incident investigated as soon as possible. A thorough examination can reveal if a driver was using his or her cell phone at the time of the accident, which can significantly affect the amount of damages a victim is awarded.
Our attorneys can help you build a strong injury case and advise you of all of your legal options. Simply fill out the form on this page today to make an appointment in our offices, or call the number on this page to speak to an attorney.
What is a fiduciary? Who should act as my fiduciary?
When you are planning for your death and incapacity, one of the first questions is who would be your fiduciary? Your fiduciary is one of the key decision-makers in any estate plan, and the potential roles include your successor trustee, personal representative (i.e. your executor), your attorney-in-fact (your power of attorney), and your designation of health care surrogate.
What is a fiduciary?
A fiduciary is a trusted person or institution that can act for you upon your death or incapacity. A fiduciary is held to the highest standard of trust in the legal world. For estate planning purposes, your fiduciary roles can be separated out in three different ways.
First, you need a fiduciary to handle your affairs upon your death, who would be a successor trustee and personal representative.
Second, you need an attorney-in-fact to handle your financial and legal affairs if you become incapacitated. You name this person in your durable power of attorney.
Finally, you will need a health care decision-maker if you are unable to handle your medical decisions. In Florida, you nominate this person in a designation of health care surrogate. Often, the same person can serve in all of these roles.
Who should act as my fiduciary?
First, you must trust the person you name in any role. There is no better way to create problems in your estate plan than to name an untrustworthy person. After that, the person you name should be able to act if needed. Someone who lives out of state, for instance, may not be a great choice if you have a trusted local person. Finally, you must trust this person’s ability to run your affairs. The person you name should have the financial and emotional ability to handle difficult situations in being your advocate.
What if I do not have any children or family?
While most people look to family fiduciaries, this is not possible for everyone for a variety of reasons. If you do not have a trusted family member who is able and willing to assist you, some estate planning attorneys serve as fiduciaries. If your estate planning attorney will not do this for you, he or she may know professional guardians and banks who could help you in the event of your death or incapacity. As an elder law attorney, our law firm serves in this role for some clients.
What Makes an Asset Go Through Probate Upon Death?
Most people know that when they die, they want their assets to avoid the probate process. Most people do not even know what probate is, but they know they want to avoid it. But what is probate and, even more important, when do assets go through probate in Florida?
First, probate is the court process to properly settle your estate upon your death. The probate process was created to make sure the decedent's taxes are paid, legally enforceable bills are paid, and assets go to the right people (i.e., their heirs). Their are four types of probate in Florida, each applying in very specific situations. The four types are:
- Formal Administration: A typical "probate" process where the court appoints the personal representative (i.e., "executor") to settle the estate.
- Summary Administration: A shorter and more simple form of probate when assets are less than $75,000 and all of the decedent's bills are paid (among other matters).
- Disposition without Administration: Not really a probate, per se, but a simple way for a family member or other person to get paid for last funeral costs.
- Ancillary Administration: When the decedent was not a resident of Florida but owned real property here.
We have more on the types of Florida probates here.
Let's get back to the question posted - what makes an asset go through probate in the first place? Probate assets are assets that were either:
- In the decedent's own, individual name upon their death; or
- Did not have a beneficiary designation upon death.
Assets in the decedent's own, individual name would be just about anything - bank accounts, stocks, bonds, brokerage accounts, real property (i.e., land), and more. When someone dies with these assets, no matter what the value, the family/heirs will need to look to one of the processes above in order to take control of the asset.
If someone had a life insurance policy, IRA, 401k, etc., that did not have a beneficiary designation, that asset would also be subject to the probate process.
Example of Probate Assets:
Mom dies with a bank account and her homestead property, both in her individual, individual name. The family/heirs will need to see a probate attorney to gain control of the bank account and to sell the home.
Where are Probate Assets Distributed?
Probate assets are distributed according to the decedent's last will and testament, if they have one, and if not, then according to the laws of intestacy, which roughly means going to your family in the order set forth in the Florida statutes.
What Should I do to Avoid Probate?
There are a number of ways to avoid probate with your own estate plan. If you want to learn more about how to avoid probate, please download a copy of my book, The Top 20 Rules to Protect Your Florida Estate.
If you want to learn more about probate:
- Do I need to hire an attorney to probate a Florida estate?
- Does probate have a small estate affidavit?
- Download our free book, Navigating the Florida Probate Process!
What Are Some Pet Laws in Pinellas County?
Whether you are taking a trip to the veterinarian or are just out for a ride, pet owners often transport their animals in and out of cars. In an effort to protect both pet owners and their four-legged friends, Pinellas County created laws to ensure the safety of animals. Here are a few:
What does the law say about the transportation of my pet?
Most people don’t know this, but your pet must be safely enclosed in the vehicle or protected by a container, cage, cross tether, or another device, which would prevent the animal from falling, being thrown, or jumping out of the motor vehicle in Pinellas County.
Is it illegal to leave my pet in the car?
When the temperature outside reaches 85 degrees Fahrenheit, the temperature inside a car can climb to 120 degrees in just 30 minutes, so leaving pets unattended in cars on warm days, even for a short time, can cause irreversible organ damage or even death, according to the Humane Society of the United States.
In Pinellas County, an animal cannot be confined or remain unattended in a vehicle in conditions that would endanger the well-being of the animal due to lack of ventilation or water, heat, or any other condition that pain and suffering, disability, or death to the animal is expected to occur.
If I can’t leave my pet in the car, can I restrain it outside?
No, in Pinellas County, it is unlawful for a person to tether, fasten, chain, tie, or restrain a dog or cat to any stationary object, unless it is within the visual range of the owner.
Is there a leash law in Pinellas County?
Yes, the law states, “No dog or cat shall run at large within the county. Any person who possesses, harbors, keeps, or has control or custody of any dog or cat which is running at large shall be in violation, regardless of the knowledge, intent or culpability of the owner.”
For more information on pet laws, visit the Pinellas County Animal Services website.
Do I really need a realtor for a residential real estate transaction?
Maybe. Buying a home is a stressful and overwhelming process, often from the first online search for real estate listings. Realtors can alleviate a lot of the stress and confusion homebuyers face, but they'll also take a fee for their services. That said, realtors may be wise investments for people who don't want to do the legwork, research, and negotiations necessary to get the best possible deals.
Using a Realtor to Buy Florida Real Estate
A realtor is a person who performs real estate-related duties for someone buying or selling a home. A realtor working for the seller is often called a seller’s agent, while the realtor representing the buyer is known as a buyer’s agent.
Generally, both buyers’ and sellers’ agents work on commission—usually a percentage of the home’s final purchase price. The fee is generally settled at closing, so you won’t pay for the agent's services until he or she is finished working for you. In some cases, a realtor may want clients to sign an exclusivity contract, which is a promise that you won’t work with another broker for a specified period of time.
In addition to fees, there are a few other considerations when hiring real estate agents. For example, they are unable to offer legal advice during a real estate transaction. Also, since their commissions are based on the sale price of the home, so they likely have a vested interest in the sales price of the property you are buying.
Buyer’s Agent Benefits for a Florida Home Purchase
Realtors are not the only people who can act as buyers’ and sellers’ agents. A real estate attorney can also perform certain duties of a real estate agent, with the added bonus of advising you on legal matters that arise during the transaction.
Whether you're using a realtor or real estate attorney to buy property, your buyer's agent can be invaluable throughout the process by:
- Finding potential properties. Buyers can easily miss opportunities in a seller’s market, where homes may be sold within days of public listing. Agents often receive information about listings and potential listings ahead of the general public, and can contact you immediately if a home matching your specifications is becoming available.
- Experience. Buyers' agents have experience in the market trends, neighborhood statistics, zoning codes, school districts, and local businesses in residential areas. This specialized knowledge is much more beneficial at the start of a home search, as learning about potential downsides later in the purchase process can cause delays or cancel the transaction altogether.
- Offering mortgage advice. Realtors often recommend one or two lenders for buyers who need to finance home purchases, and agents are forbidden from profiting off of these referrals to lenders.
- Negotiating with sellers. Agents can perform market analyses that tell you if a seller’s asking price is too high or too low, and will consider any potential repairs or costly problems on the property to calculate a competitive offer. They're often familiar with the costs of upgrades, title problems, and seller motivations that can be leveraged during negotiations.
- Closing. Real estate closings involve a deluge of paperwork, and agents are familiar with drawing up the documents and contracts necessary to complete closing. If buyers have questions during closing, they can clarify a document’s meaning with the agent before signing, attaining peace of mind.
Our real estate attorneys can work alongside or instead of a realtor to give buyers the best chance of finding an affordable home while protecting their interests. Simply fill out the quick contact form on this page to set up a consultation and get answers your questions.
When should I accept a buyer’s offer on my house?
Whether you receive one offer on your home or several, it can be difficult to tell if the terms and suggested purchase prices are right for you.
In addition, sellers have a limited period of time to consider offers before they expire, making it even more stressful to choose the right buyer.
Fortunately, there are a few factors that can help sellers determine when a buyer’s offer meets their needs.
Three Things to Consider Before Accepting an Offer
While sellers may be tempted to accept the highest offer on their homes, there's much more to consider than the sale price.
An offer that's far higher than the rest may cause a seller to refuse other potential buyers—only to have the offer fall through. Ultimately, sellers have to evaluate which offer presents the best deal. This may not always be the one with the highest price.
Before deciding whether to accept or pass on an offer, sellers should carefully examine:
- Financing. With a cash offer, there's no need for a buyer to involve a lender, eliminating many of the approvals and deadlines imposed when there's a mortgage provider. Cash offers typically mean shorter wait times for closing and far less paperwork in the transaction.
- Timing. Timing affects every aspect of a real estate transaction, from listing to closing. A seller with a specific timeframe for moving—such as relocating to a new city for a job—may be more likely to accept a first offer; while someone who is selling the house for other reasons may wait for a higher bid. Even the amount of time the house is on the market can affect its value, with the highest offers likely in the first few months the house is listed.
- Details. If a buyer’s offer is slightly low but meets time constraints, sellers may make a counteroffer to the asking price, or negotiate for the buyer to pay for closing costs, inspections, or repairs.
In most cases, the best offer is the one that provides the most benefits to the seller’s unique situation. Our real estate attorneys have over 30 years of experience representing buyers and sellers in Florida, and can examine the details of your offers to help you choose the one that best suits your needs.
Simply fill out the quick contact form on this page to set up a consultation and get answers your questions.
What are the legal remedies if a resident doesn't pay housing association fees?
All members of a community association are responsible for paying dues and assessments in a timely manner. While Florida law allows a homeowners’ association to take action against a resident who falls behind on payments, there are specific procedures that must be followed—and failure to follow the law can place the association at risk of a lawsuit.
Florida Regulations Allowing HOAs to Collect Fees from Homeowners
Homeowners’ associations (HOAs) often outline the procedures that can be taken against a homeowner in its governing documents, such as suspension of rights or the filing of a lien. However, the governing documents are only enforceable if they're in compliance with state HOA statutes.
Under Florida law, the HOA must:
- Give notice to a delinquent owner. The HOA board must issue a demand letter stating the amount of the outstanding debt and the steps taken if the debt isn't paid. Potential penalties include late fees; suspension of voting rights in HOA meetings; and suspension of use of common areas, such as tennis courts or pools.
- Notify the homeowner before filing a lien. If the homeowner fails to resolve the debt after a demand letter is issued, the HOA may consider filing a lien against the home. Before a lien can be filed, Florida law requires the HOA to provide a homeowner with a written demand for the outstanding amount and permit him or her 45 days to pay the amount in full. Florida law also dictates the charges allowed in an assessments lien, including past due assessments, administrative late fees (up to $25 or five percent of the amount of each installment that is past due), interest on unpaid assessments, and attorney’s fees.
- Notify the homeowner of intent to foreclose. If the matter isn't resolved, the HOA may file a lawsuit to foreclose on the home to collect the assessments. The HOA cannot initiate a foreclosure unless it notified the homeowner with intent to foreclose and allowed 45 days after the notice to settle the debt.
How an Attorney Can Help You Navigate an HOA Dispute
An attorney can be extremely useful when an HOA is having trouble collecting past due assessments. Our community association lawyers ensure the HOA is following Florida legal requirements. We can also:
- Inform owner of violations. Our firm assists with corrective action for homeowners in arrears, ensuring that notifications were issued in compliance with state laws and governing documents. We can also perform collection services for our association clients regarding past-due accounts.
- Tenant collections. If a homeowner rented out the property to a tenant, we enforce delinquent tenant procedures outlined in the governing documents.
- Negotiate between the parties. A homeowner may refuse to pay assessments for a number of reasons, from insufficient funds to the unfair levying of fines. Our attorneys perform mediation and arbitration services, including negotiating an amount for a qualifying offer to satisfy the debt.
- Represent the HOA. If the homeowner doesn't comply with the terms of the qualifying offer or an agreement cannot be reached, the HOA’s foreclosure action may proceed to court. We represent the association in foreclosure litigation and work to remove the owner’s right of possession to the property.
- Prevent future disputes. In many cases, an HOA can avoid costly collection and litigation costs by strengthening its governing documents. Our attorneys examine existing governing documents and bylaws; rewrite vague language or outdated information; ensure that declarations and collection procedures are compliant with Florida law; and advise association directors on available enforcement options.
Our attorneys have over 30 years of experience representing homeowners and their associations through all aspects of their business operations. Whether you need help creating the governing documents of your HOA, or the association is in the middle of a dispute with a member, our experienced real estate attorneys can answer your questions and advise you of your legal options. Simply fill out the quick contact form on this page to set up a consultation.
What is a short sale?
A short sale offers a way for a seller and a mortgage lender to avoid foreclosing on a home. Essentially, the lender agrees to accept less than the full outstanding mortgage price of the house, usually because the seller can't pay or owes more on the home than it's worth. The lender would rather recoup some of its money through a short sale to another buyer than undergoing the expense of repossessing the home in foreclosure.
Before the seller can list a house at less than the amount required to pay off the mortgage, the seller must obtain the lender’s permission. If the property is approved for short sale, the buyer will negotiate a price with the seller before taking that price to the lender.
However, the lender isn't required to accept any offer it believes is too low, even if the seller has accepted it.
What Buyers Should Consider Before Purchasing a Short Sale Home
The first thing to know about short sales is that buyers aren't getting a “discount” on the property. Lenders won't approve a short sale purchase if the lowered price is below market value for the home. Mortgage lenders will consider the comparative market analysis (CMA) carefully to know exactly what the property is worth, and won't hesitate to take the property to foreclosure if it believes it can get a higher price.
Before you tell your real estate agent to include short sale homes in your search, you should:
- Perform a public records search. If you want your purchase price offer to be accepted, the offer needs to be reasonable to the lender. A search of the public records reveals who holds title to the property (there may be more than one holder); how much is owed to the lender; and whether a foreclosure notice has been filed—all of which can help determine the amount of your offer.
- Do your due diligence. Just because buyers aren’t paying the price the seller paid doesn't mean the home is a bargain. There may be a variety of problems with the property, especially if it's sat vacant for some time. Unfortunately, short sales typically sell “as is,” so the lender may not be required to issue a disclosure statement outlining any known problems with the home. Buyers should extra careful during the home inspection process, especially when it comes to looking for roof defects, mold, or termite damage. If the property had renovations, make sure the necessary approvals and permits for the work are on file so the city doesn't take action against you when you're the new owner. If a problem is identified, get an accurate repair estimate—and be honest about your budget so you know when to walk away.
- See if there are multiple lenders. In some cases, the seller may have more than one loan securing the property. Instead of splitting your offer, mortgage lenders often require full payment of their own debt before the next mortgage can be considered. If your offer pays off the primary lender but leaves only a small amount for the second, the second lender may not agree to the transaction.
- Anticipate higher closing costs. While many buyers and sellers compromise on the costs they assume at closing, lenders usually refuse to pay any additional closing fees. This includes pest inspections, transfer taxes, repairs identified during home inspection, and other costs that buyers may have to pay out-of-pocket.
- Plan for closing delays. Everything in a short sale process must be approved by the lender, which can be a long and frustrating process. It takes several weeks or even months just to get a lender’s response on a purchase offer. If you're buying a home at the same time you're selling your current residence, it may be difficult to coordinate the dates, leaving you to assume the costs of temporary residence until you close escrow.
Use Our Expertise to Your Advantage
Remember, in a short sale, agents and lenders are the only ones who stand to make money from the transaction. A real estate attorney with experience in short sales can anticipate problems before the offer stage, working to secure a home that's within budget and aligns with your best interests.
If you have questions about your home purchase, fill out the short contact form on this page to set up a consultation.
What legal documents will I have to sign when buying a house?
There will be many different documents that require your signature before you can complete the purchase of your new home. The specific paperwork varies depending on the exact location of the home, but it's not uncommon to sign 20 or more separate contracts and attestations before the transaction is final.
After long months of waiting to get into your new home, it may be tempting to close the deal and get your keys as quickly as possible.
However, it's important not to rush through the signing process. Each of these documents plays a vital role in your transaction, and you should take the time to read, review, and complete each one before signing.
Home Loan Documents Required to Close Your Mortgage
If you're using a mortgage lender to purchase the property, you'll have two closings: one for the loan and one for the purchase of the house. The loan documents will be prepared by your lender’s agent, and vary by the type of lender and loan you've chosen.
In general, the loan documents required to complete closing are:
- Promissory note. This document outlines the terms of your home loan, including interest rates and monthly payments. When you sign this document, you're making a legally-binding promise to pay back the borrowed amount, plus interest. It also gives the lender the ability to collect the debt, or sell the debt to another lender.
- Loan estimate and closing disclosure. The federal government requires all lenders to provide a “truth in lending” statement to borrowers who are approved for a mortgage. This document shows the amount borrowed, the interest rate, the annual percentage rate, and the total cost over the life of the loan. This allows borrowers to easily see the amount they're responsible for repaying.
- Mortgage. The mortgage is your acknowledgement that the lender will have a lien on your home until your home loan is paid off. When you sign a mortgage, you're agreeing to use the home as collateral for the loan, allowing the lender to foreclose and sell the property if you don't make payments.
- Loan application. You're required to inform the lender if your financial situation has changed—for example, if you have changed jobs or spent some of your savings—before your loan is issued. The lender’s agent will ask you to review your original application, update any inaccuracies, and sign a new copy.
- Monthly payment statement. This document provides a breakdown of your monthly mortgage payment, allowing you to see how much of each payment goes to the principal balance, interest, taxes, and insurance.
Legal Documents Needed to Transfer Ownership of a House
The documents needed to close on a property are usually signed by the seller first, then delivered to the buyer for his or her signature.
Purchase documents for a residential real estate transaction may include:
- Closing disclosure. This document outlines all closing costs for the buyer and the seller. The law requires buyers to have this form at least three days before closing so they can ask questions and resolve any issues before the date of signing.
- The deed. This document itemizes the legal description of the property. Once signed, it's filed with the county recorder of deeds, officially transferring the property from the seller to the buyer. Once the deed is recorded, anyone performing a title search can see that you obtained title legally from the prior rightful owner.
- The bill of sale. The bill of sale lists all property being transferred from the seller to the buyer along with the property, such as furnishings, appliances, light fixtures, satellite dishes, water features, or security systems.
- Seller’s affidavit. The seller is responsible for providing a notarized statement attesting that he or she has rightful ownership of the property being sold, as well as identifying any potential claims on the title, such as outstanding leases, liens, boundary line disputes, or pending sales contracts.
- Abstract of title. The abstract is a summary of the public records related to who may claim ownership over the property. Your attorney should examine the abstract of title carefully to see if there any additional parties that could claim ownership over the home. Even if a seller performed an adequate title search, the buyer is still answerable for any claims that are made on the property, so it's a good idea to purchase title insurance when buying a new home.
- Tax declarations. Like most states, Florida levies a tax whenever property passes from one person to another. In Florida, it's called the documentary stamp tax, and is paid when the deed is filed with the county clerk. There will also be a proration agreement describing how much the buyer and seller will pay to split the outstanding property taxes.
Your Partner in Progress
The road to your new home can be long and frustrating. Let our experienced real estate attorneys answer your questions and ensure you don’t run into problems in the future. Simply fill out the quick contact form on this page to set up a consultation.
Can a married couple create a joint revocable trust?
Yes. A married couple can typically create a joint trust agreement, naming themselves as co-trustees. Under this arrangement, the married couple will own the trust assets during their lifetimes. Upon the death of the first spouse, the surviving spouse will retain control of all of the trust assets during his or her life and also have the ability to change the trust’s final distribution. A joint marital trust is not advisable for every situation, such as for those in second marriages and those with separate assets, but it can be useful for many estate plans.
As a follow up question - if my spouse and myself own all of our assets jointly, why should we create a living trust?
While jointly held assets avoid probate upon the first spouse’s death, a trust would still be advisable upon the death of the second spouse. Potential problems then arise if the surviving spouse is incapacitated and could not establish a trust. Additionally, a joint trust eliminates the possibility of a probate upon a simultaneous death. This means that a joint trust can help avoid probate if both spouses die at or near the same time.
We generally create joint living trusts for many situations. Exceptions to this could be second marriage type situations, for instance, where one spouse did not want to leave all of his or her assets to the surviving spouse.
If you want to learn more about creating your estate plan:
- Please download a copy of my free book, the Top 20 Ways to Protect Your Florida Estate
What is private mortgage insurance (PMI)?
Many first-time homebuyers are shocked by the amount of additional costs involved in purchasing a house. Inspections, insurance, closing costs, fees, and taxes can quickly add thousands to the price of the home.
If you're not paying at least 20 percent down, you'll likely have the additional expense of private mortgage insurance (PMI). Our attorneys explore this unique form of insurance and offer tips for homebuyers to reduce or eliminate PMI quickly.
What Buyers Need to Know About Private Mortgage Insurance
Lenders require homebuyers to purchase PMI when their down payments are less than 20 percent of the value of the home. The evaluation of PMI is usually between .03 percent and 1.5 percent, based on the appraised value of the home, your credit score, and the amount of the down payment.
The good news is that PMI is only required until you have gained a certain amount of equity in your home. The bad news is that PMI is an extra expense that does nothing to protect you from foreclosure.
Unlike other forms of insurance you buy, PMI doesn't protect you—it protects your bank and lender if you become unable to pay the mortgage. If you had a low down payment on a conventional loan and default on the loan after just a few years, the bank will likely lose money when it repossesses and re-sells your house.
However, buyers who put down 20 percent or more own a significant portion of the property before they've even moved in, making them less of a credit risk.
Before purchasing PMI, homebuyers should ask lenders about:
- Payment options. The most common way to pay for PMI is by adding the premium to your monthly mortgage payment, but some lenders offer a one-time lump-sum premium paid at closing. Your lender may also offer a combination of both.
- Automatic removal. Lenders are usually required to remove PMI automatically from the mortgage payment once the buyer has paid the loan balance down to 78 percent of the initial value. However, you may want to double-check the lender’s policy and establish the earliest possible time you qualify to have PMI removed. In most cases, buyers can request that PMI is removed when they have paid 80 percent of the home’s value.
- Other options. Borrowers making a low down payment may have other options besides a conventional home loan. Many lenders offer specialized loans, such as an FHA or one tailored for purchasing property in an underdeveloped area. If you qualify for these alternatives, it's worth crunching the numbers to see how these types of loans compare to a conventional loan with PMI. A loan without PMI at a higher interest rate may not save you much money over a conventional option.
It Pays to Get Rid of PMI As Soon As Possible
The only benefit homeowners get from PMI is the ability to secure a loan to buy the house. Since you'll be paying for something every month that doesn’t help you at all, you should keep a close eye on your mortgage balance and have PMI removed as soon as you can.
For example, let's say the appraised value/purchase price of your home is $300,000. You put five percent down, or $15,000, and the bank issues you a loan for $285,000. You make mortgage and interest payments every month, plus the additional amount for PMI. When your mortgage balance reaches $234,000, you've reached the 78 percent value threshold, and the lender will drop the PMI automatically.
On the other hand, you could call or write your bank when your mortgage balance reaches $240,000, or 80 percent of the home’s value, and request removal of the PMI. It may not seem like two percent makes much of a difference, but in this case it means you could save hundreds in PMI premiums.
Buying a home is one of the biggest financial transactions you will make, and a Florida real estate attorney can protect you both legally and financially throughout the process. If you have questions about buying or selling real estate, please fill out our quick our contact form so you can move forward with peace of mind.
Should I hire a real estate salesperson or listing agent to sell my home?
It can be difficult to say whether homeowners need a listing agent to sell their properties.
While Florida law doesn't require property owners to engage the services of a real estate agent to complete the sale of a home, listing agents offer a significant advantage depending on the location and condition of the property.
Benefits of a Real Estate Seller’s Agent in Florida
Although you may legally sell your home, there's a lot of work involved, and no guarantee you'll be able to get the best price.
Real estate agents may charge hefty commissions, but since they're paid with a percentage of the sale price, it's in their best interest to help you get as much as possible for the property.
Before you put an ad in the paper or list your property on a home-buying website, consider what you may gain from a real estate agent's:
- Knowledge. You know what you originally paid, and you know your improvement costs, but only a real estate professional will know the market value of your home. An unrealistically high asking price may leave your home unsold for months, while underpricing your home can deprive you decades’ worth of assets. A real estate agent can calculate your home’s value and current market trends, and price according to competing listings in your neighborhood. When it comes time to sell, the agent will be responsible for drafting all transfer documents in accordance with Florida laws.
- Marketing plan. While some properties may sell with little marketing, others need a more strategic approach to attract buyers. This includes reaching out to potential buyers through media they are likely to use. Younger families often find starter homes using apps and internet searches, while some buyers rely on newspaper listings. An agent should be willing to take high-quality photos or video walkthroughs for the listing, as well as write a detailed summary of the property that sparks buyers' interest.
- Time and effort. Listing agents are responsible for making your home look attractive to buyers, including staging the property to show its potential and showing the house to prospects. The agent also chooses which prospects to allow to tour the property—such as those who already have loan offers in place—ensuring you only have serious buyers visiting your home.
- Negotiation skills. A good real estate agent is familiar with tiny details that make a big difference when negotiating price. As your agent, he or she knows when it's cheaper to make repairs to a defect or adjust the asking price, and will work to ensure the maximum amount of profit for you.
It May Make More Sense to Hire a Real Estate Attorney for Your Transaction
There are numerous differences between real estate lawyers and agents, and many people choose to involve both in the process. However, there are many instances where legal protection is a major benefit to sellers.
For example, selling a home with known defects in “as is” condition can open a seller up to potential legal action in the future. Some people get into the later stages of a sale before discovering there's an encumbrance on the home. This additional financial burden may stall or sink the transaction.
Even if you love your real estate broker, he or she isn't an attorney. In fact, real estate agents aren't even permitted to answer legal questions posed by their clients—which is extremely problematic given how often legal questions arise during a sale. In addition, while real estate agents can draft sales documents that are legally binding, they aren't necessarily structured to give the seller legal protection. Only a real estate attorney can protect you both legally and financially throughout the process.
Selling a home is one of the biggest financial transactions you will make. We make the process easier for you by offering guidance in our free book, Top 7 Tips for Selling Your Florida Home. Order your copy today!
If you have further questions or concerns, please complete our contact form so you can move forward with peace of mind.
What does a designation of Health Care Surrogate do for a Minor?
A Designation of Health Care Surrogate for a Minor (HCS) provides authorization to a nominated person, other than a natural parent or legal guardian, to give consent to medical treatment on behalf of a minor child. The nominated HCS may complete any consent forms and access medical records. Without the HCS, it can be stressful for a stepparent, grandparent, godparent, or supervising adult. Some examples of when this document is helpful are:
Jill and her stepson, Jack, are involved in a car accident on the way to school. Jack is rushed to the hospital, but Jill cannot get any information regarding Jack’s condition or his treatment. This is because Jill, as a stepmother, has no legal authority until all persons who have priority under Florida law are reached.
Parent or Child is Traveling
A HCS can also be helpful when parents go out of town, leaving their child in the care of a third party, or a child travels without his/her parents, such as for summer camp or extracurricular activities. When completing a HCS, a legal professional can help ensure everything is done in a correct and legally effective manner. For more information, please call me.
How often should I update my Durable Power of Attorney?
You should update your durable power of attorney at least every 10 years, if not sooner. Why?
- The laws change over time;
- Banks and other financial institutions may decline an older document;
- The people you name may change, particularly with a couple that names each other;
- Legal trends change where you may want to have expanded powers to protect your assets;
- and more!
What about a married couple getting older?
One matter to concern ourselves is with a husband and wife. A husband and wife typically name each other as their attorney-in-fact and/or health care surrogate with a child/children as alternate. As the spouses get older, they may diminish in their capacity. If this is the case, they should likely not be each other's agents as they likely cannot act to help each other. Here, the husband and wife would likely want to bypass each other as agent and go directly to a child as their helper. As an example:
Mom and Dad are both 92 and are both failing mentally and physically. Their older estate planning documents only name each other as power of attorney. If Mom fell and went to the nursing home, who could act for Mom? Only Dad! But Dad has capacity issues himself and may not be able to take charge in this difficult situation. So it is likely Mom and Dad would have wanted to update their powers of attorney and advance directives at this time.
If you want to learn more about estate planning, please review the following: