Pitfalls of Buying Directly From the Home Owner – Home Buyer Mistakes

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.

The following is the usual sequence in real estate transactions in Florida. The Purchase offer. It is done through the buyers’ real estate agent. The acceptance of the Offer by the seller, or a counter-offer and further negotiations to reach an agreement. The inspection (optional) The financing process, if needed. Contact with banks and mortgage lenders. The Property Title search: this is the first step in order to issue a Title Insurance policy that will guarantee a clean title. The Title Insurance, usually issued by a Title company or an attorney, specialized in real estate. The Closing and recording of the sale. This is done by the Closing Agent or the Title Company. In general it is the same company or attorney in charge of the Title search and Title Insurance. We use Florida Realtor Association standard forms (F.A.R.) or FAR/BAR forms which are standard issues of the Florida Realtors Association and the Florida Bar. (Attorneys Official Organization)

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.

In addition to the low prices and low mortgage rates, the government is encouraging home purchases with the first time home buyers tax credit of up to $8,000, and the existing home buyers’ tax credit of up to $6,500. Buyers must have accepted purchase offers no later than April 30, 2010, and must close on that purchase by June 30, 2010, in order to qualify for the tax credits. Some states are offering additional cash incentives.

Let me explain the “Points”. As an example, a client wants a $100,000 loan at a fixed rate for 30 years. The bank will propose a fixed rate of 5% per year. However, if the borrower would like to lower the interest rate, the bank could propose him an interest of 4.75% for example, and in compensation, the bank will charge upfront $1,000 (1% of the loan amount, or one Point), as a fee. Sometimes the bank could propose for example a $2,000 (which is 2% of the loan amount, or 2 Points) and lower the interest rate to 4.50%. It is up to the borrower to calculate if it is to his advantage to accept any of these deals or just go with the 5%. It will depend on how long is the term of this loan; if he expects to repay it in full before the 30 years, or any other consideration that can justify paying these “Points” upfront. For the seller, there will be a tax of 0.70 % charged in all cases plus miscellaneous expenses by the attorney or Title Company. Mortgage companies and banks, when dealing with foreign buyers require a higher down-payment what was in the past about 20 % up to 30 %. Presently and due to the new events, it could be between 30 % and 50 %. The required documents for a foreign buyer to obtain a mortgage loan are usually: Bank references Bank statements. Letters of credit references by third parties

Tags: Real Estate

Category: Real Estate