Residential Real Estate Frequently Asked Questions
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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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.
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.
My tenant at a residential property is late on their rent, what can I do?
Residential tenancies are governed by Chapter 83, Part II, Florida Statutes. In the event your tenant fails to timely make a rental payment, a 3-day notice should be provided to your tenant demanding payment of rent or possession of the premises. Should your tenant fail to comply with the 3-day notice, you may terminate the rental agreement. Should your tenant fail to vacate the premises upon such a termination, an eviction proceeding may be filed in county court where the rental property is located. It is important to note that the form and delivery of the 3-day notice must comply with the specific requirements set forth in Chapter 83. It is recommended that you consult with an attorney to address any questions you may have regarding proper notice to tenants or filing an eviction action.
If I must file a lawsuit to evict my tenant, may I recover my attorney’s fees expended?
Generally, to recover attorney’s fees in litigation there must either be a contractual or statutory right to same. Chapter 83, Florida Statutes provides for recovery of prevailing party attorney’s fees in certain circumstances. It is also recommended that in any written lease provisions for entitlement to attorney’s fees be included. Such provisions, when read in conjunction with Chapter 83, Florida Statutes, may be useful in recovering attorney’s fees incurred in any litigation necessary to enforce the terms of the lease.
Please call me at (727) 397-5571 or fill out a contact form if you have any questions about landlord and tenant law.