In our conversations with new clients and friends we meet when we’re working in Europe and the UK, we often find there is some apprehension about the process when buying property in America, as for many people it’s a complete unknown. Happily, we’re able to reassure everyone we talk to, because the process is actually incredibly transparent, simple and easy – when compared with a lot of European countries.
Additionally, buyers from the UK give a sigh of relief when they realize that the dreaded ‘gazumping’ cannot happen in a Florida property transaction. Once an offer is accepted here money is put down, and unless something comes up in due diligence which causes the contract to be broken, you can be confident the sale will be proceeding. For a lot of Brits this is the opposite from buying in the UK, when you can only be confident of the purchase when you have the keys in your hands on move-in day!
To help clarify just exactly what’s involved in the sale process we’ve put together this guide to buying Florida property, to really demonstrate how simple it is. For a more in depth explanation of every single part of the process, from finding a property to renting it out, please check out our book Your Guide to Florida Property Investment for Global Buyers.
Guide to Buying Property in Florida
Step 1 – Engage a Florida Realtor
We’ve written at length, and constantly advise our readers, that hiring a Realtor to represent them is the most important decision they will make (other than the house) when buying Florida property. Read more about how the right Realtor will smooth the process, and how it costs you nothing as a buyer here. But trust us, this is the important first step. The right expert will ensure you have every bit of information at your fingertips as you begin your search, and steer you through every possible aspect of the property purchase process.
Step 2 – Find a Property
Begin your search. Prices are rising steadily, and the deal you could get today, won’t necessarily be as well priced tomorrow. Your Realtor has access to the MLS (Multiple Listings Service) and will be actively using their expertise to find listings that suit your criteria and lifestyle goals, but you can also get proactive searching online.
The more you look at, the more informed you are about price points and what’s really in your budget. When searching online be prepared to listen to your Realtor’s feedback and advice on neighborhood and streets though, as he or she is the expert on the ground and has the experience to know if something is too good to be true, overpriced or not the right location for your needs. Your Realtor’s local knowledge will be priceless in assisting you on this part of your journey.
Once you’ve found some listings which may work for you, we highly recommend making the trip to check them out in person. On the ground in Florida, you have the option of attending open houses, or your Realtor can book showing appointments with the listing Realtor on your behalf. If you really can’t make it to Florida, then it’s even more imperative that your Realtor is of the highest standard and has impeccable local knowledge and market info!
Step 3 – Mortgage Pre-approval (If you are paying cash, move-on to Step 4)
The other key step in buying a home is of course having financing in place if you need it. Before you start your property hunt in earnest it’s a really good idea to get pre-approved for a mortgage, just in case you see something you really like. Without pre-approval you’ll most certainly not be the seller’s first choice should there be several offers, and you won’t really know for sure that you can even afford the property, or get a mortgage.
Please note: pre-qualified is not the same thing as pre-approved. Pre-qualified means you’ve given a lender your income details and financial commitments and they’ve estimated what you can afford. Pre-approved means they’ve actually checked your credit report, and your debt to income ratio, and properly analyzed your financial situation. Once they’ve done this you’re given a pre-approval letter. This can certainly help in sealing the deal when in negotiations with a seller, and indicates there’s a really good chance you will get a mortgage and the sale will go through.
Step 4 – Making an Offer
Once you’ve found the right property and read through the Seller’s Disclosure (where the homeowner discloses any known issues with the property) it’s time to make an offer. In Florida, this is done with a formal contract that lays out the specific requirements and terms on the part of the buyer and seller.
Some Realtors may approach the seller’s Realtor first with an oral offer, to see how the other party responds before they take the time to put anything in writing. From our perspective, we strongly encourage all offers to be presented in writing from the beginning. Offers that come in writing are generally more seriously considered by virtue of the fact that the terms are in writing.
Obviously, the seller doesn’t have to accept the offer, even if you offer the full price of the listing. And sellers are under no obligation to explain why they reject a particular offer. Usually, we find most buyers hear back within a day or so, and in most cases, the seller will let you know if the offer was too low, which is where the negotiation begins! You can bide your time at this point and gamble on seeing what happens, or increase your offer hoping to secure the property immediately.
Step 5 – Offer Acceptance
The minute you learn your offer has been accepted ranks up there as one of life’s most exciting moments. It
is important to keep grounded, however, in the fact that there are still many steps in the due diligence stage which may uncover issues or problems on either side. As with much in life, when it comes to real estate deals, the devil is in the details.
After your offer is accepted, if you haven’t already put down earnest money you will be expected to do so on signing the contract. Always be aware that earnest money could be at risk if the seller does what he or she is required to by contract and you do not.
Depending on how the terms were set out in the contract, usually within the first few days after execution of the contract you’ll put down the remaining deposit for the property. Then it’s time to begin checking off the contingencies set out in your contract, which is where the skill of your Realtor, and the quality of the team he or she’s assembled becomes paramount.
Step 6 – Contracts
The purchase contract should be drawn up by your Realtor with all the details and signed by you. In many cases, buyers are asked to put up “earnest money” which is a small amount of the deposit, to demonstrate that you are serious about the purchase. Do bear in mind, if your offer is accepted and you then later pull out of the deal without the necessary provisions in the contract, you’ll forfeit that money.
There are two main contracts in Florida property purchase. The standard contract provides that should problems be found with certain parts of the home during inspection, the seller is obligated to fix them, and there is an allowance for these repairs accounting for up to 1.5% of the house price.
We prefer to work with the alternative “As-is” contract. With this type of contract if the inspection report reveals issues with the house the seller is not obligated to make those repairs. This means the buyer has more flexibility to pull out, should they decide the house is not for them, and this is the only contract that allows the buyer to receive a full refund of the deposit should they be unhappy with anything in the due diligence phase.
The contract includes:
- The price you’re offering
- The percentage or value of the earnest money (like a pre-deposit) you will put down, and the value of the full deposit due at the end of due diligence (Usually 10 percent)
- Response time to the offer by the seller
- Proposed closing date. In Florida the majority of closings occur within 30 to 45 days of going to
contract. This can vary greatly, however, depending on specific circumstances
- Number of days allotted for due diligence. The default amount in the standard contracts is 15 days
- Repair limits. This is applicable if you’re not using an “as-is” contract
- Financing contingency and time frame. It should be stated in the contract that the sale will only go through if your mortgage gets approved, and specify the maximum interest, and terms of the mortgage that are acceptable to you
- Inventory of items included in the purchase.
Step 7 – Closing
You will attend a closing meeting (or your Realtor will go in your stead) with a closing agent or a real estate attorney. You’ll go through and sign all the paperwork, your Realtor or lawyer will check everything is as it should be as you go along. Then funds will be transferred from escrow and you will get your keys. Congratulations, you’re a Florida homeowner!