The 6 Basic Steps To Buying A House, Condo Or Townhouse In Florida Whether you are buying your first home, a vacation or retirement condo, a beach get-away or an investment rental property, there are 6 basic steps that you will need to successfully complete. Some of the specifics may vary slightly from area to area within Florida, but the general steps and a majority of the specifics will hold true throughout the state. This information comes from my experience as a buyer’s agent in the Tampa Bay area. The six steps I will be covering in this article are: 1. Selecting the general area. 2. Beginning the financial preparations. 3. Searching for and finding the property that is right for you. 4. Negotiating the contract. 5. Getting from the contract to the closing. 6. Closing the deal. 1. Selecting the general area. In some cases this may already be done for you. If you are relocating for your job to a specific area of Florida or if you are moving to be within a certain distance of family members, you already know the general area you want to move to. If this isn't the case for you, you will need to decide where you want to be and this may involve doing research on different parts of the state. You will need to look into the factors that are important to you such as climate; schools; cost of living; distance to airports, beaches, major cities, etc.; and job market just to name a few. But you will need to know what is most important to you and I’d recommend writing down a clear and precise description of the ideal location for you before starting your research. Go through the following list to help narrow this down: - Climate – the further south the hotter
- Near the water or inland; how close to the beaches
- Large metropolitan area, more rural, or smaller town near a large city
- Distance to nearest major airport
- Job availability in your field or activities available to retirees
- Pricing – higher end areas like Miami, Naples, West Palm, Sarasota; middle end areas like Tampa/St. Pete/Clearwater, Orlando, Jacksonville
By deciding what you’re looking for in relation to each of those points and then comparing that to what each area of the state has to offer, you should be able to eliminate some areas of the state and narrow your choices down to a few areas. I’d recommend continuing to narrow down the areas until you have 1 or 2 left that fit all or most of your needs. A lot of the information you need in order to make your decision can now be obtained over the Internet. You can also get information through friends or family that live here, by contacting the appropriate city or county departments or through local realtors. It also would be a good idea to visit the area or areas you think might be best for you to personally check them out for yourself. Any way you choose to do it, make sure that you don't skimp on your research. When you have the general area in mind, it is time to start on the next step which is to begin the financial preparations for your purchase. 2. Beginning the financial preparations. If you plan to purchase with cash, there is not as much for you to do on this step. But you will need to work out where you’ll be getting the funds for your purchase, including the closing costs, and make sure that they will be accessible when you need them. However, if you are in the 90+% of buyers that will be getting a loan to make a purchase, you should start early to arrange your financing. I’ve found that the most common mistake people make when they are looking to buy property is lack of preparation regarding financing. To start your preparations you will need to know: - How much of a monthly payment can you afford?
- Will you get approved for a loan?
- How much can you get approved for?
- How much will you need for a deposit when you put in an offer?
- How much down payment will you make, if any?
- Where will the money for the down payment come from?
- How much will the closing costs be?
Even if your purchase may be many months in the future, it is still wise to know the answers to all these questions. The more certainty you have on all aspects of your financing, the better chance you will have of knowing what you can buy and then being the one who gets that perfect property when you find it. You will also be in a much stronger negotiating position when you are ready to make an offer. Let me illustrate the importance of this. Recently I had a client who almost lost out on the home they decided (after much looking) was perfect for them. Since they hadn’t fully sorted out the financing arrangements for their purchase, we lost 2 days time from the point they decided to buy this house to the point where we submitted an offer. While we were in the middle of negotiating a contract, another buyer came along and made a better offer (all cash with a fast closing) and my clients almost lost the home they really wanted to buy. If we hadn’t lost those 2 days we would have been able to complete the negotiations and get a contract that would have worked for them before the other buyer had even come along. (Fortunately, that other buyer didn’t go through with the deal and my clients did eventually get the house. But they would have preferred not going through that stress and were lucky it ended up the way it did.) Another reason for starting your financing preparations early is that you may find out that waiting to apply for your loan raises your interest rate higher than it needs to be. The all powerful credit score has a lot to do with the interest rate you will be able to get for your loan. And I can guarantee you that it would be very frustrating to hear that if you had applied a few months earlier you might have been able to take simple actions to raise your credit score by the time you were ready to buy, thus lowering the interest rate on your loan and your monthly payments. Make sure you contact a good mortgage broker early enough and save yourself from some unnecessary stress and possibly higher payments. Hopefully the information above will help you to understand why it is important to begin preparing financially for your purchase early on in the process. When you have begun the financial preparations you will then be ready to move on to the next step which is: searching and finding the property that is right for you. 3. Searching for and finding the property that is right for you. This step may be done at the same time you are doing step #2 (beginning the financial preparations). There are two parts to step 3 and they are: 1) narrowing down the area or areas and 2) finding the house, condo or townhouse that fits your needs and wants. Sometimes you can do a lot of your searching online by looking at listings of available properties. But chances are you’ll still need to spend some time checking out areas and/or properties in person to be sure. It is usually at this point where you will check on school districts, local activities, distance to your workplace or relatives as well as anything else you need to consider when narrowing down the area in which to look. Some buyers start to narrow down the location(s) by looking at listings from a broader area, like half of a certain county, to find the specific cities, areas or even subdivisions in which they’ll be able to buy the type of property they want in the price range they’ve set. A new advancement in technology in our local MLS that is very helpful to buyers working on this step now gives you the ability to get a personalized, automated search set up for you. All you do is provide basic criteria of what you are searching for such as location, price range, minimum number of bedrooms and bathrooms, minimum square footage, what type of property (house, condo, townhouse or villa), etc. This information is then entered into our local MLS and an automated search can then be set up to send you every listing that meets your criteria including any new listings the day after they are entered into the MLS. This gives you the ability to get a better feel for which areas suit your needs, what you can get in a certain price range, what neighborhoods or subdivisions best fit what you are looking for, etc. This is a tremendous tool and is especially valuable for picking out which houses you would want to go look at. That makes this step of searching for and finding the right property much easier than if you had to drive all around trying to find which properties were for sale. To be most effective in your search you’ll need to know what will suit you, both in relation to the location and the property. You should have a list of features for each that are “musts” as well as features that you’d like to have but can be flexible on. Start your process of searching by trying to find something that has everything you want and is in your price range. But if that can’t be found or isn’t realistic based on what you can get in your price range in the area you’ve selected, then you may need to extend the area in which you’re searching, move the price range up slightly (unless you can’t), drop some features that aren’t really a necessity, etc. This will open up a lot of other possibilities that didn’t show up when you were more restrictive on what you were searching for. This is another step where it can be very helpful to work with a realtor, especially one who specializes as a buyer’s agent. Once you find a property that you’re interested in buying, make sure you find out everything you need to know about it in order to proceed in making an offer. How old is the roof and air conditioning system? Is flood insurance required? What is an estimate of what the taxes will be? Are there any association fees, how much are they and how often do they have to be paid? What would the total monthly payment be, including everything? Have there been any problems with the property? When you feel that you’ve found the right place and know enough about it to feel comfortable with proceeding, the next step is to make an offer to purchase it. At that point you begin the negotiation process. 4. Negotiating the contract. Is it better to submit an offer in writing or verbally? Can you even make an offer verbally? Yes, you can make a verbal offer but it is much better to do so in writing. The main reasons for this are: - a written offer leaves nothing open to misunderstanding and will cover all terms and conditions of the offer
- if the seller accepts your offer in writing and signs it then you have a valid contract and the seller cannot accept another offer and back out of yours.
If the offer is verbal and the seller accepts it, there is still the possibility of them getting another offer they like better until you have everything in writing and signed by them. Real estate contracts in Florida must be in writing to be enforceable. That means that even if a seller accepts all the terms of a verbal offer from you, until it is in writing and signed you have no real recourse if they back out of it or change their mind. So the bottom line is that you should submit any offers in writing to protect your interests. In Florida there are 2 standard forms commonly used that have been developed by the Florida Association of Realtors and, either of them, when signed and initialed by all parties becomes the contract. Again, this is best to do with a realtor working on your behalf so that you have everything in the form explained to you before you sign and submit your offer. It is in your best interest to make sure you fully understand what you’re signing and that you understand all the terms and conditions of the offer you’re making. The only way you can really protect yourself from potential problems on a purchase is by knowing what your rights and responsibilities are. These are described in these standard forms and the associated forms that go with them. Fortunately, in Florida you don't have the extra expense of having to have an attorney prepare the contract once an offer is accepted like in other states such as New York. One other thing you’ll need to be prepared for when making an offer is to have the money available to make a good-faith deposit. This is the money you put into an escrow account that shows your commitment. It also helps the seller feel more secure by knowing that you have something to lose if you decide to back out of the deal without a valid reason. The traditionally acceptable amount for a deposit in this area is 1% of the purchase price. So make sure you will be able to write a check for that amount when you are going to make an offer on some property. Once all the necessary paperwork is completed for your offer, it is submitted to the seller’s realtor (or the seller themselves if they are not represented by a realtor). They will have a certain amount of time to either accept or reject your offer or present a counter offer. You will set the deadline for their response and they can respond either verbally or in writing. It is often more efficient to deal with any negotiating back and forth verbally as the process will move more quickly and will result in a contract that is more legible (when you fax back and forth too many times, the paperwork ends up being unreadable by the time you’re done). The negotiating process is a whole subject unto itself so I won’t get into that here but I will be putting together another article covering it in more detail. But let's just say that one of the most successful negotiating approaches for a buyer is to be understanding of the seller's situation and request and to do your best to work with them on points that important to them. Of course you'd do this while still getting the best possible deal for yourself. And the stronger your offer is, the more the seller will be willing to negotiate on the price. A stronger offer is one where there are few or no contingencies, you have a strong financial position and the closing is relatively quick. Once you have all terms agreed upon by all parties and everything is signed and initialed, you now have a contract to purchase the property you want. From this point on there is a lot to get accomplished to get the deal to a successful conclusion, or closing. 5. Getting from the contract to the closing. This step involves as much work as everything up to this point and is another reason why it can be very helpful to have a realtor working for you as a buyer’s agent. After you have a contract on a property and before you close on it, you have your last opportunities to make sure that you know as much about the property as can be found out. Also during this period, everything that is necessary for a proper transfer of the ownership of the property will have to be completed. The first thing that generally gets done once a contract is obtained is to send a copy of the contract to whoever is handling your financing (if you aren’t paying cash). They will need a copy of the contract as soon as possible to get things rolling. They will probably need other documentation from you along the way – and it is best to get them what they need as quickly as possible. The next thing that needs to get done is to schedule any inspections on the property. You will have a specific time frame in which to do the inspections, as laid out in the contract, and minimally you should have a home inspection and termite inspection. These are vital to you as they will let you know about any existing or potential problems (at least the ones that can be found through these inspections). You will need this information so that you can decide whether or not it is in your best interest to proceed with the purchase. A properly done contract becomes important again at this point as it can protect you in the event that the inspections find serious problems. When you have completed the inspections and have determined to proceed with the purchase the next steps can be started. If you are getting a loan to make the purchase, your lender will want to order an appraisal to make sure that the price you are offering to pay is supported by what the estimated value of the property is in the current market. If you are buying a house, you will also have to contact your insurance agent to have them get you a quote on homeowner’s insurance and, if needed, flood insurance. If you are buying a condo or townhouse, you will have to verify that the condo association pays for the building insurance. If they do, then you can choose to also get optional insurance for the interior and your belongings - similar to renter's insurance. In most cases the building insurance is covered by the condo association, but in the rare cases where it isn't you would then have to arrange for your own full insurance coverage. There are about 25 other things that need to be done to have a successful closing and that will need to be tracked to ensure they are completed and are done correctly. Condo association application, utility account transfers, property survey, etc. The specific actions that have to be done will vary depending on the type of property you are purchasing, how you are paying for the purchase and several other factors. However, I won't bore you with all of that here. I just want you to understand that there is a lot to keep track of and make sure gets done in order to get from the point where you have a contract to the point where the property is yours. One of the last steps that you will do is a final walk-through inspection of the property to make sure it is in the condition it is supposed to be in, including any repairs the seller has agreed to do. This is normally done the day before closing or even sometimes the morning of the day of closing. It is a very good idea for you to plan to be there for this, if at all possible. When everything has been completed, the title company or attorney’s office that is handling the closing will have all the necessary paperwork and will have a final figure for the amount you will need to bring to the closing. You’ll need to bring that in a cashier’s check and you’ll need to bring your driver’s license with you. This takes us up to the point you've been waiting for - the closing. 6. Closing the deal. By the time of the closing, the major work has been done and basically all that is left for you and the sellers to do is to sign the paperwork, present your cashier’s check, and get the keys to your new place. This can be done here locally at the title company or attorney’s office that is handling the closing. However, if you won’t be in the area at that time, the paperwork can be sent to you where you are and you can get all the signatures and notarizations done and then send it back with your cashier's check. This is called a mail-away closing and can be done as long as you let everyone know very early on so that the timing can be planned out properly. Most people who do closings are very good about explaining the paperwork you are signing. But it is important that you know it is up to you to ask about anything you don’t understand. And it is also very important that you make sure that everything is correct, especially regarding the terms of any loan. Minimally you want to check on: - Interest rate
- Monthly payments
- Length of the loan
- Is there a prepayment penalty?
- On an adjustable rate loan:
- What is the interest rate?
- How long does that last ?
- What will the interest rate go up to at the end of that period?
- How much can the interest rate go up?
When the closing is done you will now own the property. Unless you have some agreement that allows the seller to occupy it after the closing, you will now be able to start moving in, remodeling, finding a tenant or whatever you have planned for it. This is the time to celebrate! Hopefully this article has provided you with a better understanding of the whole residential purchasing process in Florida. I’ve found that the more you understand, the more comfortable you will feel about the process and the better able you will be to watch out for your interests. Back to Special Buyer's Reports Page |