A home inspection is not required but is advisable. It is the buyer’s option and expense which is normally paid at the time of the inspection rather than at closing like most other costs.
You’re advised to hire a home inspector after you have a signed purchase contract and before closing. The sale and purchase contract used by us, provided by the Florida Association of Realtors, specifies that the seller warrants that everything will be in working condition. The home inspector will examine the structure, electrical, plumbing, air conditioning – the functional components of the property. Cosmetic conditions are not warranted meaning cracked tiles, carpet stains, etc are not covered by the seller’s warranty.
If the home inspector finds anything not be functioning as it was designed to function, the seller pays to have it repaired. The seller’s liability for repairs is limited to 1.5% of the purchase price, by default, which can be negotiated. If you don’t have a home inspection, there’s nothing to require the seller to make repairs
The property may be offered ‘as-is’ without the seller’s warranty described above. In this case, we recommend you still have a home inspection. We protect you from buying a property needing excessive repairs by including a clause in the contract giving you the option to cancel the contract if you don’t like the results of the home inspection.
The property tax will vary somewhat from one community to the next. As a rule of thumb, we multiply the property value by 1.7% to get in the ball park.
The property tax bill for the current year is mailed November 1st. The tax can be paid any time before becoming delinquent April 1st. Property owners receive a 4% discount for paying in November, 3% in December, 2% in January, 1% if paid in February. If you have an escrow account with your lender for taxes, the lender will receive the tax bill and you get a copy for your records.
Homestead exemption applies to owners who make the property their primary residence and reduces the taxable value by $25,000. This exemption results in an annual savings of about $500. On January 29, 2008, voters approved an additional $25,000 exemption excluding the portion that goes to schools. A property that qualified for Homestead Exemption on January 1st will be taxed as such when the bill comes out in November even if the property is sold during the current year.
More importantly, Florida’s Save Our Homes cap limits annual tax increases to no more than 3% for homesteaded property. An owner who has homesteaded the property for more than a few years stands to have a much lower property tax bill than his neighbor who bought recently. That cap on annual increases is removed upon sale and the new property owner is taxed at the current value.
Tax and property information can be found by searching the County Tax Appraiser’s Office. The site contains lots of information about property taxes in general, homestead exemption, the Save Our Homes cap, and more. For property outside Pinellas County, find the website of your county’s taxing authority.
Typically, buyers make a 20% down payment. You can make a lower down payment and the lender will require mortgage insurance, which serves only to protect the lender if the borrower stops making payments. In some cases, the mortgage company will waive the mortgage insurance premium and ‘self insure’, bumping the interest rate up a tick. Buyers who are not U.S. residents typically need a 30% down payment.
In spite of the mortgage crisis, there still are mortgage programs with a down payment as low as 3% or 5% if you qualify. Talk to a mortgage lender for more details.
There are no rules about how much the ‘earnest money’ or ‘good faith deposit’ must be. It can be any amount agreeable between buyer and seller. The deposit is placed in an escrow account and kept safe there until needed for closing. The purpose of the deposit is to show the buyer’s good faith intention to close on the purchase. There are contingency clauses in the purchase contract which give a buyer the right to cancel and not lose the deposit if the contingency is not met. If a buyer gets flaky and decides not to close without an escape clause, the seller gets the deposit. A larger deposit tends to give the seller more assurance that the buyer is serious about buying the property.
Before spending time running around looking at property, you’ll want to know that you’re able to buy a house or condo in the price range that you’re interested in. The best way to ensure that you’re on the right track is to make sure you get a Pre Approval Letter, giving you a certain mortgage amount you can buy up to.
Termite inspections are a good idea, especially for houses. If you’re getting a mortgage, the lender will normally require a termite inspection for a house. They normally do not require a termite inspection if you’re buying a condo. If termites are found, the seller is typically required to exterminate unless you’re buying ‘as-is’.
Mold: We know not what others may do but we include an addendum for our buyers giving them the option to have a mold inspection and cancel the contract if mold is found that will cost more than $xxx to remove.
Homeowners insurance premiums have risen in Florida the last several years. The state government has gotten involved in an effort to control premium increases. Despite what you may have read, insurance is obtainable. Our advice would be to talk with an insurance agent. The cost of insurance depends on too many variables for us to give a ballpark rate.
Condo owners associations carry insurance on the structure and the cost is included in the owner’s maintenance fee paid to the association. If the condo is located in a designated wind or flood hazard area, policies for wind and flood are also obtained by the association. The associations’ policies do not cover the interior of each unit.
Though not required by most lenders, condo owners often get a policy, known as ‘contents insurance’ to cover the unit from the interior paint inward. Such policies are of nominal cost, typically a few hundred dollars per year. Condo owners can also insure the unit against wind and flood damage.
Closing costs are the various costs associated with the transfer of property to a buyer or seller.
A buyer paying cash has very little in closing costs. Typically only the cost of recording the deed in County Records, closing fee to the title company, often a processing fee to the real estate company. At your option, there may be a survey and termite inspection to pay. In all, it should be less than $1000.
A buyer getting a mortgage incurs closing costs which will vary by lender. Only the lender can tell you their costs. In addition to lender costs, there will be a professional appraisal, documentary tax on the deed at $3.50 per $1000 of the loan amount, intangible tax on the mortgage at $2 per $1000, termite inspection (unless it’s a condo), land survey (unless it’s a condo), title insurance for the lender, wiring fees.
Sellers will pay at closing brokerage fee or commission, title insurance for the buyer, documentary stamps on the deed at $7.00 per $1000 of sale price, closing fee to the title company, and small miscellaneous fees. We ballpark seller’s costs at 1.5% + brokerage fee. Upon receiving an offer for a seller’s property, agents will present an estimate of seller’s closing costs and net proceeds.
Property taxes for the current year are pro-rated at closing. Taxes are paid in arrears meaning this year’s taxes will be billed by the county November 1st. The closing agent will charge the seller for their portion of this year’s taxes and give it to the buyer in the form of a credit on the closing statement. The buyer then pays the entire tax bill when due.
The mortgage company will consider your employment, income, credit rating, assets, and debts to determine the amount of money you’re qualified to borrow to buy real estate. Most often, all of your information will need to be supported by documentation via tax returns, pay stubs, bank statements, etc. The property you’re buying has to qualify, too, by appraising for the purchase price. This is done by a certified real estate appraiser chosen by the mortgage company.
CMA = Comparative Market Analysis
A CMA is typically created by a Realtor using data from MLS to show a seller or buyer similar properties for sale, recently sold, or under contract to be sold as a means of establishing the market value of a property. The format may be brief or detailed or a combination of summary and details. It is commonly used to give sellers what they need to price their property properly. It’s also useful for buyers who want to ensure that they’re not overpaying for a property. This is similar to the means used by certified appraisers though less detailed. It’s the little brother to the appraisal.
An appraisal is a certified document prepared by a certified real estate appraiser and is used by mortgage lenders to ensure they’re loaning money on a property that is worth the price being paid. It’s also used when refinancing an existing mortgage for the same reason.
When you have a contract to buy a property and you’re getting a mortgage to buy, the lender will order an appraisal. If the appraised value comes in lower than the contract price, the buyer may cancel the contract or re-negotiate the price with the seller.
Pre-Qualified – Simply contacting a mortgage broker or lender’s loan officer and provide them with information about your income & debts and authorize a credit check. In a matter of minutes, you can be ‘pre-qualified’ for a mortgage amount subject to verification of the information given.
Pre-Approval – You submit an application for a mortgage and supporting documentation to verify your income, assets, and liabilities for the mortgage underwriter to examine and authorize a loan amount for you.
MLS is the database of all properties for sale by Realtors. This information was formerly available only to Realtors and is now being made available to the public enabling you to search for the type of property you want. The MLS database contains complete details and photos about each property for sale listed by a member Realtor. The accuracy, quality, and sufficiency of the photos and property information depends on the quality of the work done by the seller’s agent entering the data into MLS.
The real estate commission, or brokerage fee, is typically paid by the seller of the property except in unusual circumstances. Of the commission paid by the seller, one portion pays the buyer’s agent and the other portion pays the seller’s agent.