CONTRACTS

A real estate contract, by definition, is a legally binding document between parties, that states the terms and conditions of the purchase and sale of real property. A real estate contract is also known as a real estate purchase and sale agreement, and standardized documents that have been approved by the Florida Association of Realtors and the Florida Bar (FR / BAR), and Naples Area Board of Realtors (NABOR) are generally used.

A Florida Real Estate Contract must be in writing and contain the following, in order to be legally binding;

  • The parties to the contract - Buyers and Sellers identification
  • Identification of the Real Property by means of a legal description and street address
  • Identification of Personal Property, which could include appliances and pool equipment
  • Purchasing Price of the Property
  • Effective Date - Time for accepting offers and counter offers
  • Closing Date when the money will be paid and the title of the property will be transferred to the buyer.
  • The Signatures of the parties involved in the real estate transaction.


Sellers – Listing Contract

The listing contract is with the listing brokerage, not the individual realtor. The listing contract is with the seller(s) of a property so all sellers must be on the contract to be valid.  In certain circumstances, a Power of Attorney or an executor of the estate may sign the listing contract.

The listing contract requires a commencement date and a termination date to be valid. The listing contract spells out the rights and obligations of the seller and the real estate brokerage.

Regarding the commissions in a listing contract: there is a total commission percentage or a flat fee. Contractually, the broker determines the cooperating broker amount (which is the real estate company that procures the buyer).  This cooperating broker amount is to be disclosed to the seller so the seller can decide if they feel this is reasonable and will not hinder other realtors cooperating and bringing potential buyers to preview their property. Traditionally, the commission has been 6% with 3% paid to the cooperating brokerage. However, this is completely negotiable. 5th Avenue Realty / Ryan Ehmen, are offering a 1.5% list (+$250) and will let the seller decide what they want the co-operating percentage to be.

Many listing contracts have a variable rate commission option also. A variable rate commission is when the listing realtor procures the buyer and the total commission the seller pays is reduced. If there is a variable rate commission, it is required to be disclosed in MLS. This is to make aware to other potential buyers that if all offers are equal, the seller would have an advantage working with the listing realtors buyer as the sellers contractual commission percentage is reduced. This allows the buyer to make an offer with this taken into consideration.

Buyers and Sellers – Purchase Contract

Florida Realtors offers three residential sales contracts:

  • Standard FR / BAR
  • AS/IS FR / BAR
  • The Contract for Residential Sale and Purchase (CRSP)

NABOR offers two residential sales contracts:

  • Standard NABOR Contract
  • AS IS NABOR Contract

As-Is Contract in Florida

An “As-Is” contract, means the seller is not obligated to make any repairs to damages, or defects to the property. The responsibility then lies on the buyer to carry out due diligence when deciding on the purchase, and to schedule any necessary inspections, to fully ascertain the condition of the property before the purchase of real property is concluded.

Real Estate Inspection Contingency

There is no Florida statute that requires a seller to provide a property disclosure report. A seller has an obligation to disclose anything that would materially affect the value of the transaction.  A buyer of real property should order a home inspection to determine the condition of the property they are looking to purchase, and any defects or repairs to be negotiated with the seller or to determine what may defects or repairs that need to be carried out prior to closing the real estate transaction. If a buyer fails to notify a seller of the inspection results and any repairs that need to be made, they will waive their rights to the seller to be obligated to repair any damages. When the home inspection has been completed any repairs or defects should be disclosed to the seller, whereby the seller is then obligated to follow the terms and conditions of the contract and complete the necessary work.

Real Estate Inspection Period Florida

Unless otherwise stated in the contract, a buyer has 15 days inspection period from the effective date the to order all home inspections. There are multiple inspections to consider: General, Wood Destroying Organisms (WDO), Radon, Mold, Pool. Depending on the contract, the buyer has an additional 5 days after the inspection period to complete the Inspection Election Notice and deliver to seller.  In an AS-IS contract, a buyer is purchasing the property in the current AS IS condition, but it is also important that the buyer orders a home inspection when to clearly understand the condition of the property they are looking to purchase, and the repairs that the buyer will need to carry out. The buyer has the right to terminate during the inspection period “at buyer’s sole discretion”.

Real Estate Financing

“Cash Closing” is where a buyer purchases a property in full, without the need for any loan or mortgage.

Mortgage  Applying for a loan or mortgage through 3rd party lenders, such as banks, is the most common financing option to buyers in Florida.

Certain buyers will also have other financing options, depending on the type of property they are purchasing such as;

VA Loans (Veterans Association) – for members of the military and veterans, and spouses of members, who have died while on active duty

FHA (Federal Housing Administration) Loans, for buyers with low-to-moderate income, or low credit scores that would make eligibility for a 3rd party loan difficult or unachievable.

Closing Costs in Florida Explained

When the real estate contract is concluded by both parties, fees must be paid by both buyer and seller. The title to the property is then passed to the buyer.

Buyer Closing Costs Florida

Closing costs due from the buyer can include –

  • Stamp and Intangible Tax on Mortgage
  • Survey, Inspection and Appraisal Fees
  • Mortgage and Lender Origination Fees
  • Recording Fees
  • Buyer's Broker/Attorneys' Fees

Seller Closing Costs Florida

Sellers will also be due to pay certain fees at the closing of a real estate transaction which includes;

  • Recording and Title Search Charges and Fees
  • State stamp taxes on deed
  • Seller's Broker/Attorneys' Fees and Commissions

Marketable Title in Florida

Marketable Title means that is the seller's responsibility to provide evidence that the property that they are selling is clear of any liens or title defects. Liens and defects that could affect the properties marketable title include

  • Inaccurate recording of ownership
  • Undiscovered encumbrances
  • Unsatisfied judgments
  • Boundary, Easements or Survey Disputes