I'd like to try to bridge the gap between the UK and Florida. I recently had a buyer from the United Kingdom ask me to detail how a real estate transaction happens here in Davenport, FL. So I thought I'd put together a guide to help him along and hopefully help you along as well.
The best thing about the real estate business in Florida, as compared to the UK, is that here in Florida we have the MLS (Multiple Listing Service). All realtors enter their listings into this database. This allows all realtors to have access to all listings of other realtors, whether their own or another realtor's. This means there is usually a realtor on either side of the transaction, one representing the seller, and one representing the buyer. In some cases a listing agent can represent both parties, but usually it's two different realtors. The seller pays the listing agent a commission and that agent will offer a portion of the commission to another agent who is representing the buyer. You get the best of both worlds, you get an exclusive buyer's agent, and you don't have to pay him a dime. As my Dad once told me, "free is the best price there is".
This is great for a buyer because you have the ability to hire a realtor to represent your best interests rather than having to work with a listing agent who is actually being paid by the seller of the property, or you having to bounce around between different realtors. A buyer's agent can show you any listings and help you find a suitable property. All you need to do is find a realtor you like, and hopefully trust, and then get to work.
The first step is actually getting the pre-qualification done. What this entails is either getting pre-approved for a mortgage or having proof of funds in place if the purchase will be cash. This will be required to present with any offer. It usually takes about a week to get this completed, so it needs to be something that's taken care of first thing. Once the pre-approval is done, you'll need to forward the document to your realtor so that he can put it together with any offers you may make. Once the pre-qualification is done, you can really start looking for a property in earnest.
The market is still flooded with foreclosures and short sales that are extremely competitively priced. You can just about count on there being multiple offers on anything priced less than $100k. So any offers you make have to be enticing for the sellers to accept them. You aren't negotiating against the bank, lender, or seller. You are in a blind bidding war with other investors who know the market and know how to make a good looking offer when they want a property.
If you don't know the market, it can be like swimming with sharks. It's not always about the price. When an offer is made on a property, you need to be aware of the contract terms such as purchase price, escrow deposit amount, inspection period, and the closing date. All of these things can make a big difference in either having an offer accepted or wasting your time.
The purchase price is the most obvious term. The market here is quite difficult to navigate right now because there are three different types of sales that you can get involved in. There are private sales, foreclosures, and short sales. A private sale is something that most people are familiar with, so I won't go into much detail about them. Foreclosures and short sales are entirely different, so they will require a bit more homework on your part. I've written blogs about each that will help you understand how each process works. The links to those articles are below:
Short sales:
You Can't Lowball A Davenport, FL Short Sale, It's A Waste Of Time
Are Central Florida Short Sales A Total No Go?
Foreclosures:
Buyers Beware, The Asking Price Of The Property Means Squat
Buying A Central Florida Foreclosure Requires Some Strategy
The escrow deposit amount is another bargaining tool that will help you in securing a home. You have to look at this from the seller's perspective. They want the home sold as soon as possible. But they also want to know that a buyer is serious and plans on closing on the home once it is under contract. One of the ways you can show them that you are serious is by offering a large deposit. Many banks will require a 10% deposit on cash purchases. This is adequate, however, if the seller you happen to be dealing with doesn't require it, you should still offer it. A 10% deposit tells the seller that you are real and ready to buy. The deposit would be wired once the offer is accepted (normally within a few days of acceptance). The deposit is usually held by a title company that will be closing the transaction and obviously is applied to the price at closing. More on title companies later...
The inspection period is also very important to the deal. Again, you have to put yourself in the seller's shoes. They have to take the property off the market during the inspection period. So if a buyer decides to cancel the contract during the inspection period, the seller has now had the property off the market for the entire period. You can make the inspection period 10 days (that's the standard), but if you make it 7, or maybe even 5 days, the seller is taking less of a risk when they accept your offer. If you decide to walk away and have your deposit returned, they only had the property off the market for 5 or 7 days. This makes the offer more enticing to them.
The escrow deposit is made within a few days of the offer being accepted. The inspection period starts when the contract is fully executed. So essentially, you will make the escrow deposit, schedule the inspection (inspectors are normally recommended by your realtor), and once the inspection report comes back, you would review it and decide whether you want to proceed with the purchase.
Expect to see some small defects in the house. You are probably buying a house for a third of what it would cost to build it. The foreclosures have usually been vacant for upwards of a year, sometimes even two. Any house that sits that long empty is going to have some issues that need looking after. Expect the carpets to be dirty and the walls to need paint. These are things you should plan on doing anyway if you plan to rent the house out. I will also go out and do a 50 picture photo shoot of the property during this period, if you like, and email a link to a web-album.
If you decide not to proceed with the purchase, we would need to inform the seller in writing before the close of the inspection period. If that notice is given prior to the end of the inspection period, you would be entitled to have your deposit returned. If ,however, we don't give them written notice that we are not proceeding prior to the inspection period closing, the seller could have a claim on your deposit.
Lastly, the closing date matters very much to a seller. If you are dealing with a foreclosure, the faster the closing date the better. The banks want the property off their books as soon as possible. Banks can usually close on a property within a couple of weeks (sometimes faster) so that is what should be offered on a foreclosure. When buying a short sale the closing date will have to be extended somewhat. Short sales require the seller's lender's approval and, as such, they can take a few months to close. In the case of a short sale, a buyer has to be willing to wait for that approval and probably needs to count on the fact that the closing date will be extended at some point. The two articles about short sales I linked to previously go more in depth into this.
Once the two parties are under contract, a title company (who is being compensated by the seller) will close the transaction. The buyer does not pay any attorney's fees as the title company will handle all aspects of the closing. Saves the buyer some money, you can't beat that. The closing would be a mail away for an international buyer. Most documents can be handed by email and fax, and those that can't will normally be Fed-Ex'd overnight. The closing could also be a mail away for the seller if it is a foreclosure and would be handled much the same way as the buyer's side. Here in Florida, the seller also normally pays for the title insurance policy and the taxes on the deed. In some cases (such as a home owned by the government) the seller is exempt from the taxes and they would be paid by the buyer. The closing fees for a cash purchase are pretty minimal. If the property is being mortgaged then the closing fees associated would be more, but that is a subject for another post. It is a very good idea to purchase a home owner's insurance policy. They are relatively cheap and you're better off safe than sorry.
Once all parties have signed all documents and the transaction has funded, the keys will be released and you can start enjoying the Florida weather in your new Davenport, FL vacation home.
Photos courtesy of: PhotoRack
Egarc2
Hakan Dahlstrom
Your friendly Davenport, FL Realtor®
Posted via email from nathantutas's posterous
