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Tuesday, March 22, 2016

Buying a House in Florida - A Language of Its Own.

If you have never bought a home the process is not hard even though the language can seem daunting.  I have outlined some of the common terms buyers encounter when buying a home in Brevard County, Florida.  

While most of these terms have common application the process and practices vary from location.  I know from working with buyers moving to Florida I hear the words "not how we do it back home" fairly often.  Check with your real estate agent.

Home buying process.  Read here about contract to closing in twenty steps!

Buyer's Agent.  This is your real estate agent. Here in Brevard County, Florida the seller pays for your agent.  Your buyer's agent will guide you through the process from mortgage pre-approval, property needs assessment, property location, contract negotiations and closing process.

Open House.  This is a situation where the listing agent has a house open for anyone to come see it at the designated time.  It is certainly OK to stop by an open house but tell the agent you have your own agent.

Listing Agent.    This is the name on the sign out front of a house.  This is the person who is paid by the seller and WORKS FOR THE SELLER.

Appraisal.  This is a determination of value by an independent, licensed appraiser which the bank uses to make a decision on your loan.  Read more at "What happens if the appraisal comes in low?"

Closing costs.  Buying a house is not he same a picking up a burger at McDs.  Everything has a cost from appraisals, inspections, title insurance, settlement services, escrow monies, and more.  These are all wrapped up in what is commonly referred to as the "closing costs."   Some closing costs are paid by sellers, some by buyers.   And who pays what can be negotiated.

Credit score.   Most everyone knows this term.  But its significance on loan approval and interest rates is substantial.  Before reaching the "buy stage" get a copy of your credit report and monitor activity.

Closing AgentIn Florida this is the independent party who holds the escrow monies as well as manages the document process and exchange of funds. The cost of services is part of the closing costs.  While this may be an attorney its most commonly handled by title companies in Florida.

Hazard Insurance This is a fancy name for homeowner's insurance.  Common practice in this area is for buyer's to pay for a twelve month policy at purchase and  then deposit 1/12th of the annual cost with each monthly payment so the lender can pay when due in the future.  Property taxes are also escrowed through the year in a similar method.  

PITI Short for principal, interest, taxes and insurance.  Monthly mortgage payment usually composed of PITI.  Depending on the lender/loan, some buyers are not required to escrow their insurance and taxes.

MLS.  Short for the Multiple Listing Service.  This is the place where professional Realtors (members of the national, state and local Realtor associations) provide the most accurate list of homes for sale  in your area.  No it is not the mega real estate sites!

Real Estate Broker.  In Florida a real estate broker is one who is licensed to negotiate the purchase and sale of real estate for payment.  Real estate agents (sales associates) as well as Broker-Associates must work under the license of a supervising real estate broker in Florida.

Contingency.  These are the "conditions" that must be cleared for a sale to proceed. As a buyer these contingencies serve to protect you.  Some of the most common contingencies include financing, appraisal, and inspection contingencies.

Comps.  These are the other properties used for comparison between the subject property and similar sales. Your real estate agent uses these to come up with a market analysis while an appraiser will also use comps for their determination of value. Note your real estate agent's comparable market analysis is not the same as an appraisal.  The market analysis is an opinion of value.

Earnest Money.   This is the amount of funds placed in escrow upon the acceptance of an offer to purchase.  How much to put down depends on the property/price and local practices.  I suggest placing enough to let the seller know you are serious but not an excessive amount.  This escrow money will be part of the buyer payment at closing.

Mortgage.  The debt that allows the lender to place a lien against the property until your loan is paid back in full.  Unless you are a cash buyer a mortgage is part of the process.

Origination Fee  Your lender's charge to prepare documents make credit checks, etc.

Pre-Qualification. This is not same as mortgage pre-approval. Pre-qualification is a general assessment of credit worthiness.  Read more about the difference between mortgage pre-approval and pre-qualification.

Real Property and Personal Property.  Real property includes improvements to the land such as a house and anything permanently attached to a house.  Personal property includes things like refrigerators, furnishings/contents.  Personal property can become real property when permanently affixed to a house such as ceiling fans, air conditioning units, dishwashers, etc.  Sometimes buyers want to purchase some contents from the seller.  These should be handled separately from the house purchase.  Lenders are not lending money on the used TV or sofa!

Title Insurance.  An insurance policy that protects a buyer's interest in real property. The protection exists for prior acts that may cause ownership to be questioned.  There are two title policies - owner's and lenders.   Here in Brevard County, Florida it is customary for the seller to pay for the owner's policy.  The cost of the owner's policy is established by the state.  Currently the charge is $575 for the first $100,000 in value plus $5 per additional $1,000 in value. For example, a $125,000 policy would be $700 [ $100,000 ($575) plus $25,000 ($125)].   The lender policy costs less as it is considered a simultaneous issue.  In Brevard County, while the seller usually pays the owner policy the buyer pays the lender side.

Homeowner Association.  An organized body that can impose restrictions on the use/changes to a property.  These may involve paint colors, plants/location, parking, and more including restrictions on the ability to lease a home.  Read the rules before you buy.   Know what you are paying and receiving.  Most association memberships are mandatory.

"As Is" Offer.   Most sellers want to avoid repairs but sometimes "As Is" may not mean "as it is."  Minor repairs or monetary concessions are sometimes made to close the deal.  Remember the inspection contingency mentioned above...buyers can walk - even when it is an "as is" offer.

Builder's Model. These model homes are staffed by the builder's representative. The builder's representative works for the builder - not the buyer.  Have your buyer's agent accompany you to the model home.  By the way most of the model homes have "upgrades" that are added to the base house.  This is where your own rel estate agent can help with the negotiations.

While the above is not an all inclusive discussion of the language of real estate I want to end with one word of advice for sellers and buyers in Florida....
Time is of the essence.  Offers to purchase have inflexible and binding time constraints.   Be prepared to act within the time limits of the contract.

If you have a question about buying or selling a home in Viera or Melbourne, Florida please call or text me at 321-693-3850.

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