Buying a House in Florida

Buying a house is one of the most important legal transactions you'll ever undertake. It's important to know your legal rights and understand the process.

Working With a Real Estate Agent

At the point of first contact about a real estate deal, Florida law requires that real estate agents provide seller and buyers with information about whose interests they are representing in a real estate transaction; this is called agency disclosure. The Brokerage Relationship Disclosure Act requires all licensed real estate agents to disclose agency relationship prior to showing property or prior to discussion of negotiations, price, terms, or conditions of a potential sale. A specific type of written disclosure must be given to the customer on a form as directed by state lawmakers, and at a designated time in the formation of the relationship agreed upon between the real estate agent, also known as the real estate licensee, and the principal, which would be the buyer or seller. Before you talk to a seller's agent, ask for the written Notice of Representation.

In Florida, real estate agents have a "fiduciary duty" to the party who they are representing, which means that the agents are held by law to owe specific duties to that person, in this case, the buyer. In addition to duties or obligations that are set forth in an agreement for representation, a listing agreement or other contract, a fiduciary's duties include:

• Dealing honestly and fairly
• Loyalty
• Confidentiality
• Obedience
• Disclosure
• Accounting
• Skill, care and diligence
• Presenting all offers and counteroffers in a timely manner

You may want to hire a buyer's agent, which is someone that will act on your behalf. The sales commission is then split between the seller's and buyer's agent.

Under state law, a seller must disclose the following potential house defects:

• Apparent defects
• Material defects that are defects, including property damage, malfunctions of major systems and environmental hazards affecting the condition of a home, not readily visible to the buyer

To protect families from exposure to lead from paint, dust, and soil, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992. Under this law, anyone selling a house that was built before 1978 must notify potential buyers of a possible lead problem.

Purchase Agreements

When you find a house you'd like to buy, you'll put together and sign a purchase agreement, which is called a "purchase and sale agreement" in Florida. This is the sales contract for the house. The sales agreement should include the following information:

• Parties
• Property description
• Conveyance of property
• Purchase price
• Permanently attached fixtures
• Deposit amount
• Settlement date and costs
• Transfer and recording charges
• Restrictions, easements or limitations
• Financing
• Buyer's duties and responsibilities
• Seller's duties and responsibilities
• Condition of property
• Default provision
• Inclusions and exclusions
• Property insurance and risk of loss
• Attorney's fees
• Termite inspection
• Radon gas disclosure
• Environmental inspection
• Wetland's notice
• Lead paint disclosure

The real estate transactions involved in purchasing a home give rise to a number of legal question that a lawyer with real estate background and experience is best equipped to answer.

Inspection

It's always a good idea to hire an independent professional home inspection service before you buy a house. A home inspection is a visual examination of some combination of the structural, mechanical, electrical and plumbing systems that is designed to identify material defects in those systems and components. You can make your offer contingent on inspection.

The state of Florida has passed legislation regarding the licensing of home inspectors, mold assessment and remediation services, which will become effective in July 2010. While this legislation will bring increased protection for consumers using inspection services, you should make sure that your inspection includes reviewing the condition of the home's heating system, plumbing system, electrical system and central air conditioning system, as well as the roof, attic, visible insulation, walls, ceilings, floors, windows, doors, foundation, basement, landscaping and visible structure.

Most inspectors will charge extra for services such as radon testing, termite inspections and well or septic inspections.

Legal Title Issues

Your Florida real estate attorney or title company will investigate the legal title of the property you want to buy, and may find issues with the legal title you'll need to understand.

In Florida for example, an implied easement arising from preexisting use is not recognized unless there has been a prior grant of an easement in a valid document that is too ambiguous to create an express easement. An implied easement exists where a person grants lands to which there is no accessible right-of-way except over her or his land, or retains land that is inaccessible except over the land which the person conveys. In such instances a right-of-way is presumed to have been granted or reserved. Such an implied grant or easement in lands or estates exists where there is no other reasonable and practicable way of accessing the property, and an easement is reasonably necessary for the beneficial use or enjoyment of the part granted or reserved.

The property you're interested in may also be subject to a "lien," which is a charge on the property to satisfy a debt or other obligation owed by the current owner of the property that has been recorded in the public records.

In Florida, liens on a piece of property may include:

• Construction liens
• Tax liens
• Mechanics lien
• Unpaid federal and state tax liens
• Unpaid child support

Closing Costs

In Florida, you can expect to pay for the following charges - called "closing costs"-at the time you purchase your home:

• Down payment
• PMI insurance
• Lender points
• Loan origination fee
• Appraisal fee
• Credit report
• Tax service fee
• Assumption fee
• Pest inspection fee
• Other inspection fees
• Title search
• Title insurance
• Survey of property
• Hazard insurance reserve
• Prepaid interest
• Mortgage insurance
• Tax impounds
• Escrow fee
• Lender attorney fees

The above fees are typical costs when purchasing a home in Florida counties. Most of the fees are considered buyer's nonrecurring closing costs. Some of the fees are fixed while others are negotiable.

RESPA

The US Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) administers several regulatory programs to ensure equity and efficiency in the sale of housing. One of these programs, under the Real Estate Settlement Procedures Act (RESPA), applies to almost all mortgage loans and mortgage companies, not just FHA-insured mortgages.

RESPA protects consumers by requiring a series of disclosures that prevent unethical practices by mortgage companies and that provide consumers with the information to choose the real estate settlement services most suited to their needs. RESPA helps consumers avoid surprises, like when an unexpected fee appears in your closing documents. The disclosures take place at various times throughout the settlement process. Certain disclosures are required at the time of loan application, before closing occurs, at closing and after closing.

Mortgages

At the time of purchase, you'll sign a promissory note that legally obligates you to pay back the money you borrowed to buy your house, in other words, it's the loan. In Florida, the document you sign as a security interest in your house is called a mortgage, and this contract names your house as the collateral for your loan. If you fail to make your loan payments, the lender can then foreclose on your house and have it sold to pay off the loan.

It's a good idea to shop around and get the best possible deal, because mortgage terms and costs can vary.

Private Mortgage Insurance

If you put down less than 20% on a home mortgage, lenders often require you to have "private mortgage insurance" (PMI). PMI is a type of insurance which protects the lender in the event the borrower defaults on the loan, which is a concern if you don't have much equity in your home. PMI covers the gap if a foreclosure sale of your home might not bring enough to pay off the mortgage plus cover the foreclosure proceedings. PMI is a cost added to the monthly payment of many conventional loans. The loan servicer collects these monthly premiums and pays them to a private mortgage insurance company. The Homeowners Protection Act of 1998 (HPA) establishes rules for automatic termination and borrower cancellation of PMI on home mortgages.

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80% of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years.