Buying a condo in Miami is an exciting event, but it can catch many first time buyers or out-of-towners by surprise because of how different the process is.
For example, many New Yorkers used to submitting multiple, completely non-binding offers are shocked by how contractually binding offers submitted in South Florida can be.
However, with a little bit of studying the process which we’ve described in detail below, we’re confident that you’ll find buying a condo in Miami to be refreshingly straightforward and even advantageous from a negotiating perspective.
Table of Contents:
Do your initial Miami home search by yourself
Get pre-qualified for a mortgage so you’ll know your budget
Find a buyer’s agent who’ll give you a commission rebate
View as many listings as you can across neighborhoods
Get pre-approved for a mortgage to show you’re serious
Have your agent submit a compelling offer
Negotiate an accepted offer with the seller
Schedule a professional home inspection
Review building documents and due diligence
Wire the rest of your contract deposit
Get a loan commitment letter from your bank
Title commitment and examination
Get a home insurance policy
Review closing costs and seller property disclosure
Conduct final walk-through before closing
Document preparation and the closing
Do your initial Miami home search by yourself
You should always start your home search by yourself, especially if you’re moving to a new city like the many people that have left New York in droves for Miami. Depending on how quickly you need to move, and how much time you have to search for a place, it may even make more sense to rent for a year first so you’ll have more time to find and buy a place. This may especially make sense if you’re not entirely sold yet on the pros and cons of living in Miami.
If you’re like most people, you’ve probably visited Miami before and stayed somewhere in Miami Beach. However, Miami is a large city with almost 3 million people (as of 2019 for Miami-Dade County) and many diverse neighborhoods worth exploring.
Unlike New York City where everyone wants to live in just a few neighborhoods like the West Village or Meatpacking District, Miami offers a diverse range of neighborhoods from bustling Brickell, quiet North Beach to leafy Coconut Grove.
The easiest way to get to know the city and discover what neighborhoods you can imagine living in is to explore it on your own first.
You could do this by making reservations at the many great restaurants that Miami’s booming culinary scene has to offer, and simply walking around the various neighborhoods after your meal. Or you could stop by open houses on your own in various neighborhoods, and then drive around afterwards to get a feel of the place.
Why do we recommend searching on your own first?
Because it’s nice not to waste your buyer agent’s time if you’re not even sure yet which Miami neighborhood you want to live in, or even whether you want a condo or a single-family house. Even though buyer agents are incentivized to help you find a place and close, they do work on commission, and they won’t get paid a penny if they end up spending all of their time with a client who wasn’t serious.
Just like in NYC, buyers’ agents in Miami typically do not have exclusivity agreements in place with their buyer clients. As a result, there’s no real assurance that they will get compensated anything, and the buyer could decide to stop working with the agent without consequence at any time.
Pro Tip: Even the most patient of buyer’s agents will lose faith in their client over time if the buyer client keeps viewing listings without making an offer, or worse, makes offers that they always back out of. Do you really want to spend your finite supply of goodwill with your agent so early on? Or would it not make more sense to loop in your buyer’s agent once you’re serious about buying a place, know what you’re looking for and have a sense of where you want to live in Miami?
Get pre-qualified for a mortgage so you'll know your budget
The next step is to speak with a mortgage banker or two to get a mortgage pre-qualification letter, which you can get after a 15 minute phone call during which you’ll share some high level financial information about yourself. At this stage, there’s no document verification and the banker is simply giving you an idea of how much you could borrow assuming what you say checks out.
Why should you get pre-qualified for a mortgage?
You should get pre-qualified for a mortgage before going too far in your initial search so you’ll have a better idea of how much you can afford, and how much banks will lend to you. Unless you’re an all cash buyer, this information will be critical in determining your price range and budget when searching for condos to buy in Miami.
As a secondary benefit, having an official mortgage pre-qualification letter from a reputable lender gives more assurance to real estate agents and sellers that you are a credible, potential buyer.
Will mortgage pre-qualification hurt my credit score?
Generally speaking, no. Most lenders will just ask for an estimate of your credit score (i.e. often times just a range vs your exact credit score), though some might make a soft credit inquiry which won’t affect your credit score because soft inquiries aren’t attached to a specific application for credit.
Be careful however if your lender intends to make a hard inquiry which can affect your credit. There is no need to run a hard inquiry at this point, especially when you are simply looking for an estimate of how much you can borrow and don’t intend to necessarily proceed on a mortgage with that specific lender.
In fact, having a rogue lender run a hard credit check at this stage can be quite detrimental to your credit score as it’ll be treated as a separate inquiry.
This is bad because your credit generally won’t get penalized if you get hit with multiple inquiries of the same request type within a 14 to 45 day period (e.g. you’re buying a home and have several banks run your credit while shopping for the best mortgage); however, if a rogue lender hits you with a hard inquiry very early on for a pre-qualification, and then you have to run your credit several months later when you’re actually ready to buy, then it’ll look like you’ve made multiple requests for credit vs just one.
Pro Tip: If you just want an idea of how much you can borrow without having to speak with a banker, then check out our handy Mortgage Affordability Calculator. Alternatively, if you’re dead serious about buying a place, it doesn’t hurt to get started with the mortgage pre-approval process which takes time, so you might as well get started early. Plus, a mortgage pre-approval is viewed even more credibly than a mortgage pre-qualification by sellers and agents.
Find a buyer's agent who'll give you a commission rebate
Once you’ve figured out how much you can afford, what type of property you’d like to buy and where generally you’d like to buy, it’s time to find a buyer’s agent who will rebate you a portion of his or her commission to you post-closing.
Why should you get a commission rebate?
Because the typical real estate commission in Miami is 6% of the sale price, which is split equally between the buyer’s agent and the seller’s agent if the buyer has an agent. If the buyer is unrepresented, the seller’s agent typically receives all 6% of the commission.
On a million dollar Miami condo, your buyer agent stands to earn $30,000 in commission when you’ve done much of the initial searching yourself. Simply put, the amount of commission earned on a per hour basis simply doesn’t make sense for larger transactions, so why not sign up for a Hauseit® Buyer Closing Credit and get some of it for yourself?
What’s wrong with asking an agent friend for a rebate?
You could of course ask a real estate agent friend to give you some of the commission back, but most big brokerages will not allow discounting of any type. Then you’ll be stuck with the unsavory situation of your friend cutting you a check directly post closing, instead of the brokerage writing you a check which is what should happen.
When the brokerage writes you a commission rebate check, it’s not counted as income but rather as a reduction in your cost basis.
In other words, commission rebates are not taxable and you will not be issued a 1099. However, if your agent friend writes you a check directly against the brokerage’s wishes, then it’s much more grey in how that money will be treated for tax purposes.
Will it count as a gift? That may pose an issue for larger rebate checks over the annual gift tax exemption amount, meaning your agent friend may have to pay a gift tax on anything over the exemption amount.
Pro Tip: Don’t make your friendship awkward by asking your friend to part ways with potentially much needed income. Being a real estate agent may be his or her only job, and asking to take food off their table is kind of gauche. It’s much better to sign up with Hauseit® for a commission rebate with one of our experienced agents who have already agreed to do so.
View as many listings as you can across neighborhoods
At this stage, it’s important to view as many listings as possible across different neighborhoods. Remember, your goal at this point of the process of buying a condo in Miami is not to figure out generally where you want to live or if you want a house vs a condo, but to view as many comparable listings as possible so you have a sense of the market and relative value.
The importance of this cannot be overstated when trying to compare options and decide whether specific condos are priced right. Sure, you can rely on your agent to provide you with pricing and comparables analysis, but since you are the ultimate decision maker, it’s important to be able to judge value on your own.
Seeing many properties will even help you judge and compare square footage numbers as advertised between different listings.
For example, even though agents should be using square footage numbers from public tax rolls (Miami-Dade Property Appraiser), you will often see conflicting numbers on the MLS and public search websites such as Zillow. As a result, it’s always safer to gauge for yourself whether the square footage number advertised seems approximately right or not, and the only way to do that is to have seen many comparably sized properties.
Lastly, seeing as many listings as possible across your price point helps you learn what features you value, and how to value them. For example, how much is a direct ocean view worth to you? Or a gym? Or dozens of fitness classes per day like you’ll see at the Carillon Miami Wellness Resort?
As you would expect, comparables analysis is more of an art than a science. There is no exact formula for valuing certain amenities and features, and you’ll simply have to view a good amount of properties to gauge relative value for yourself.
Get pre-approved for a mortgage to show you're serious
If you need a mortgage in order to buy a condo in Miami, then it’s time to get a pre-approval letter from a reputable bank. We recommend getting at least two pre-approvals in case something unexpected comes up with one of the lenders and they aren’t able to fund at closing.
When should you start the mortgage pre-approval process?
It’s time to start sending in your financial documents to your mortgage banker and kicking off the mortgage pre-approval process once you’re fairly confident that you’ll be making an offer within the next few months, and that you are most likely going to buy something.
As we discussed in the previous section on getting pre-qualified for a mortgage, there’s no point in going any further with the loan process unless you are fairly confident that you will be buying vs renting.
Remember that your lender will need to run a hard inquiry on your credit as part of the loan pre-approval process.
Why is having a mortgage pre-approval letter important?
A mortgage pre-approval letter demonstrates to real estate agents and sellers that you are serious enough about buying that you’ve been partially underwritten and conditionally approved for a mortgage by a third party financial institution.
Having a mortgage pre-approval letter also demonstrates credibility and an ability to close because you’ve submitted financial information which has been vetted by your lender.
This makes real estate agents’ jobs easier because the mortgage banker has done the hard work of verifying whether you have the wherewithal to actually make a purchase of a certain size.
Have your agent submit a compelling offer
Serious offers are submitted in Miami via an “As Is” Residential Contract for Sale and Purchase that has been signed by the buyer. If the seller counter-signs the agreement, then the contract becomes binding. This process is in stark contrast to the norm in NYC real estate where buyer’s agents email completely non-binding offers to listing agents.
Can I back out from my offer?
Yes, you can rescind your offer at any time before it has been counter-signed by the seller. Furthermore, the contract states that “if not signed by Buyer and Seller, and an executed copy delivered to all parties on or before [date], this offer shall be deemed withdrawn and the Deposit, if any, shall be returned to Buyer. Unless otherwise stated, time of acceptance of any counter-offers shall be within 2 days after the day the counter-offer is delivered.” Your agent will typically suggest providing a one or two day grace period before your offer is automatically withdrawn.
Can I back out of an accepted offer?
Fortunately yes. Buyers typically have 10-15 days (negotiable) from the date the contract is fully executed to back out for any reason. This period is called the inspection period or due diligence period where the buyer pays for a home inspection and reviews key building documents (i.e. condo declaration, bylaws, association rules, most recent year’s building financials and a FAQ document):
Property Inspections and Right to Cancel: Buyer shall have [10] (if left blank, then 15) days after Effective Date (“Inspection Period”) within which to have such inspections of the Property performed as Buyer shall desire during the Inspection Period. If Buyer determines, in Buyer’s sole discretion, that the Property is not acceptable to Buyer, Buyer may terminate this Contract by delivering written notice of such election to Seller prior to expiration of Inspection Period. If Buyer timely terminates this Contract, the Deposit shall be returned to Buyer, thereupon, Buyer and Seller shall be released of all further obligations under this Contract.”
When is the ideal time to back out of an accepted offer?
If you’ve had a change of heart, then the best time to back out of an accepted offer is within three calendar days of the contract being fully executed. Why? Because buyers typically will have 3 days within contract execution to send in their initial contract deposit of $5,000:
Initial deposit to be held in escrow in the amount of (checks subject to collection): $[5,000]. The initial deposit made payable and delivered to “Escrow Agent” named below (check one): __ (i) accompanies offer or __ (ii) is to be made within [3] (if left blank, then 3) days after Effective Date. If neither box is checked, then option (ii) shall be deemed selected.
The initial deposit amount and when it becomes due are negotiable, but $5,000 within 3 days of contract execution is fairly typical in South Florida.
With that said, we’re starting to see more transactions where there is only one lump sum contract deposit that is wired vs two separate contract deposits (i.e. an initial one, followed by an additional one in say 10 days). Remember, all of this is negotiable, including the timing and amount of the contract deposit.
Additionally, the condominium rider (Comprehensive Rider to the Residential Contract for Sale and Purchase) that is typically included with the contract gives additional protections for a buyer wanting to back out:
This agreement is voidable by Buyer by delivering written notice of the Buyer’s intention to cancel within 3 days, excluding Saturdays, Sundays, and legal holidays, after the date of the execution of this agreement by the Buyer and receipt by Buyer of a current copy of the Declaration of Condominium, Articles of Incorporation, Bylaws and Rules of the Association, and a copy of the most recent year-end financial information and frequently asked questions and answers document if so requested in writing. Any purported waiver of these voidability rights shall be of no effect.
Pro Tip: There is an alternative to the above selection if the buyer acknowledges that he or she has been provided with a copy of the above documents more than three business days prior to contract execution. However, that situation is quite rare as it’s uncommon for listing agents to furnish all of the above due diligence documents before someone has even made an offer.
Negotiate an accepted offer with the seller
Unless your offer is at the seller’s full asking price, all cash and with no contingencies, you’ll most likely have a period of back and forth counter-offers before your offer is accepted, if it is at all.
Fortunately for buyers and sellers in Florida, the scope of negotiations is fairly standardized by the options allowed in the standard contract approved by the Florida Realtors and The Florida BAR.
Do I need a real estate lawyer to buy property in Florida?
No. Unlike New York where having a lawyer is required because the contracts are very negotiable and customized, it’s not necessary nor typical for either the buyer or the seller to retain their own legal representation in Florida.
Realtors will typically prepare the standard contract and send that in as an offer since no customization is typically warranted. Only in very rare instances where either party requests custom changes to the standard contract would a lawyer need to get involved.
However, it’s not advisable to demand custom changes to a standard contract that everyone else uses as is. Not only will the seller then have to hire their own attorney to review your custom edits, but it signals that you are a potentially troublesome, difficult to deal with or even litigious counter-party.
The standard options to choose from within the standard contract and associated standard contract rider are sufficient for the vast majority of situations.
What are the most commonly negotiated items?
As you can imagine, the purchase price is the most commonly negotiated point during counter-offer negotiations. Except in the most heated of markets, buyers will typically come in below the listing price since their offer will be legally binding if accepted.
In contrast to the NYC real estate market which is much more of a Wild West, buyers typically will typically want to have a period of counter-offers to give them more time to digest whether they want to proceed with a given property.
Other commonly negotiated points include the following:
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Contract deposit: Though negotiable, it’s customary for the remainder of the contract deposit, typically 10% of the contract price, to be wired to escrow within 10 days of contract execution.
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Special assessments: It’s typical for the seller to pay any installments due prior to closing, and for the buyer to pay any installments due after closing. Buyer agents often try to negotiate and have the seller pay the special assessment in full prior or at closing.
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Closing date: The closing date is often negotiated depending on the buyer and seller’s unique preferences. Note that Florida’s standard contract does not have “on or about” language regarding the closing date, meaning it’s inadvisable to miss the closing date without mutual agreement.
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Financing contingency: Florida’s standard contract has a financing contingency section with options for loan type, maximum interest rate, term as well as loan amount.
Here is an excerpt from Florida’s standard contract on the financing contingency:
This contract is contingent upon Buyer obtaining approval of a __ conventional __ FHA __ VA or __ other ____ (describe) loan within __ (if left blank, then 30) days after Effective Date (“Loan Approval Period”) for (Check One): __ fixed, __ adjustable, __ fixed or adjustable rate in the Loan Amount (See Paragraph 2(c)), at an initial interest rate not to exceed __% (if left blank, then prevailing rate based upon Buyer’s creditworthiness), and for a term of __ (if left blank, then 30) years (“Financing”).
The standard contract then states that the “Buyer shall make mortgage loan application for the Financing within __ (if left blank, then 5) days after Effective Date and use good faith and diligent effort to obtain approval of a loan meeting the Financing terms (“Loan Approval”) and thereafter to close this Contract.”
As you can imagine, having a financing contingency gives a lot of room for a buyer to potentially exit the contract, and thereby waste a seller’s time on market. This is especially so since the standard contract gives the buyer an appraisal contingency by default:
“appraisal of the Property obtained by Buyer’s lender is insufficient to meet terms of the Loan Approval, in which event(s) the Buyer shall be refunded the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract.”
Schedule a professional home inspection
Just like in New York, it’s not absolutely necessary to get a home inspection if you’re buying a condo or co-op, which after all is only a visual inspection of the interior of the apartment. Remember that your home inspector will not be expected to check any common elements of your apartment building, meaning the building’s roof, furnaces, boilers and such which are a shared responsibility between all unit owners.
On the other hand, if you were buying a house vs buying a condo in Miami, then it absolutely makes sense to get a home inspection since you’ll be solely responsible for the structure, and it’ll be critically important for the home inspector to check the roof, foundation, etc.
With that said, it’s the norm for agents to recommend condo buyers to get a home inspection, if nothing but for peace of mind.
After all, for the cost of a few hundred dollars, you can have someone thoroughly inspect the apartment and check that the appliances, light sockets and plumbing are working as expected. Furthermore, home inspectors will conduct a thermal scan of the apartment to check for hidden water leaks and that the dishwasher, oven and microwave are heating properly.
If anything is broken, such as an air conditioning system that needs to be re-wired, the inspector can provide an estimate for how much the repair should cost as part of the home inspection report they’ll provide within a day or two.
Pro Tip: Even though the apartment is being sold “as is,” you can re-negotiate with the seller during the inspection period if the inspection reveals anything that needs to be fixed. Depending on how trivial the amount is and whether you want to risk destabilizing your deal, you can threaten to walk away if the seller doesn’t fix certain items before closing, or more typically, issue you a credit to cover the cost of fixing such items.
Review building documents and due diligence
Per the standard Florida contract, buyers should receive a copy of the condo declaration, bylaws, HoA rules, the most recent year’s building financials and a FAQ document. These due diligence materials will be familiar to buyers of New York condos, with the exception of board meeting minutes which many condo boards in Florida are resistant to share with prospective buyers.
The other difference is that the buyer is responsible for analyzing these due diligence documents in Florida, whereas in New York the buyer’s attorney would typically study all of these materials on the buyer’s behalf. Please note that while a good buyer’s agent will be able to explain to you what these various documents are, they are not responsible for reading them or analyzing them on your behalf.
This can lead to better outcomes for most buyers who are actually forced to read important building docs for themselves vs in New York.
Condo Declaration: The Declaration of Condominium is the original filing that establishes the condominium. This document spells out the rights and obligations of the parties involved, and establishes the limits and extent of the use of the property. These documents can often be decades old, and if not recently amended, may not be as relevant to a buyer today.
Articles of Incorporation: The formation document for the Homeowner Association that runs the condominium. A brief document that generally won’t reveal much for a buyer.
Bylaws: The Bylaws govern how the association is run, establishes the association’s rights and responsibilities, sets voting rights and procedures, board term limits and more.
Rules of the Association: Each owner must abide by all the rules, restrictions, terms and conditions found in the Rules of the Association. This document is especially important to review because of it’s very real effect on day-to-day life. For example, the building may not allow pets over a certain weight limit, or it may not allow curtains visible from the exterior to be anything but white. If you’re an investor, you’ll want to know whether the building only allows leases for a minimum of 6 months, or if the rental policy is more flexible.
Year-End Financials: You are entitled to received the most recent year-end financials for your building. This is different from New York where it’s common to receive the last two year’s financial statements. There is no requirement for the financials to have been audited by an accounting firm.
FAQ Document: Similar to an attorney questionnaire sent by attorneys condo managing agents in New York, except in Florida you are given a set of answers to the most commonly asked questions, as determined by the condo association. This document can often be quite dated, and there is no custom for buyers to send in their own custom questionnaire.
Pro Tip: Most brokers will request you to sign a document acknowledging that you’ve received the above due diligence items as well as Florida’s official Condominium Governance Form, which summarizes the governance of condominium associations.
Wire the rest of your contract deposit
If you haven’t already done so, you’ll need to wire in your initial, typically $5,000, deposit to the escrow agent within 3 days of the contract being fully signed. Then once you’ve finished your due diligence, you’ll need to wire in the remainder of the customary (but negotiable) 10% contract deposit by the end of the Inspection Period, typically 10-15 days after contract execution.
For example, let’s say you are buying a $1,000,000 condo in Miami. You’ll need to wire $5,000 into escrow within 3 days of the seller counter-signing the contract. Then you’ll need to wire in the balance of the 10% contract deposit, which is $100,000 in total, within 10 or 15 days of contract execution, depending on the specific negotiated terms of your contract.
Since you’ve already wired in $5,000, that means you’ll need to wire an additional $95,000.
At this point, the Inspection Period has just passed and you are fully locked into the terms of the contract and can no longer back out at will. However, you will still have some outs to the contract if you have a financing contingency checked as part of the standard contract.
At this point, you have real money on the line in escrow, and a default under the contract could mean forfeiting your 10% contract deposit to the seller.
Get a loan commitment letter from your bank
If you need a loan to close, meaning you can’t just fund the purchase all cash if you can’t get a mortgage, then it’s imperative to start the process of getting a mortgage commitment letter as soon as possible.
In Florida, where the option to back out lies with the buyer, we recommend starting the loan approval process as soon as you have an accepted offer on a place you’re fairly confident that you’ll go through with.
Of course, if you intend to re-negotiate hard and potentially back out during the Inspection Period, then it would make sense to wait until after the Inspection Period before pushing hard for loan approval.
Since you already have a mortgage pre-approval letter from one or two banks, the process should be faster as you aren’t starting from scratch.
As we discussed previously, you’ll typically have 30 to 45 days post contract execution to back out if you are not able to receive loan approval. The standard contract also states that you’ll have to make a bona fide mortgage loan application within a certain number of days (typically 5) after contraction execution:
Buyer shall make mortgage loan application for the Financing within __ (if left blank, then 5) days after Effective Date and use good faith and diligent effort to obtain approval of a loan meeting the Financing terms (“Loan Approval”) and thereafter to close this Contract. Loan Approval which requires a condition related to the sale by Buyer of other property shall not be deemed Loan Approval for purposes of this subparagraph. Buyer’s failure to use diligent effort to obtain Loan Approval during the Loan Approval Period shall be considered a default under the terms of this Contract. For purposes of this provision, “diligent effort” includes, but is not limited to, timely furnishing all documents and information and paying of all fees and charges requested by Buyer’s mortgage broker and lender in connection with Buyer’s mortgage loan application.
If you aren’t able to obtain Loan Approval “after the exercise of diligent effort, then at any time prior to expiration of the Loan Approval Period, Buyer may provide written notice to Seller stating that Buyer has been unable to obtain Loan Approval and has elected to either” waive the contingency or terminate the contract.
Pro Tip: Even after Loan Approval has been obtained or the financing contingency has been waived, buyers still have a way out of the contract if the “appraisal of the Property obtained by Buyer’s lender is insufficient to meet terms of the Loan Approval, in which event the Buyer shall be refunded the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract.” However, you should push your lender to schedule the property appraisal as early as possible in the process.
Title commitment and examination
A title examination is done by the title insurance company, who often also serves as the escrow agent, and a title insurance commitment is issued to the buyer typically at least 5 to 15 days prior to closing. Per the standard Florida contract:
At least __ (if left blank, then 15, or if Paragraph 8(a) is checked, then 5) days prior to Closing Date (“Title Evidence Deadline”), a title insurance commitment issued by a Florida licensed title insurer, with legible copies of instruments listed as exceptions attached thereto (“Title Commitment”) and, after Closing, an owner’s policy of title insurance … shall be obtained and delivered to Buyer.
In addition to being required by lenders, a title examination is extremely important to verify that the chain of title for the property in unbroken and unambiguous. A deed with a mistake in the previous chain of title, such as a missing deed in the property’s history, or a lien or judgment can cause serious financial consequences if missed and you do not have title insurance.
Other examples of title defects include tax liens, construction liens, judgments, inheritance claims and mortgage liens.
Once you’ve received the title commitment, you’ll have:
5 days after receipt of Title Commitment to examine it and notify Seller in writing specifying defect(s), if any, that render title unmarketable. If Seller provides Title Commitment and it is delivered to Buyer less than 5 days prior to Closing Date, Buyer may extend Closing for up to 5 days after date of receipt to examine same in accordance with this STANDARD A. Seller shall have 30 days (“Cure Period”) after receipt of Buyer’s notice to take reasonable diligent efforts to remove defects. If Buyer fails to so notify Seller, Buyer shall be deemed to have accepted title as it then is. If Seller cures defects within Cure Period, Seller will deliver written notice to Buyer (with proof of cure acceptable to Buyer and Buyer’s attorney) and the parties will close this Contract on Closing Date (or if Closing Date has passed, within 10 days after Buyer’s receipt of Seller’s notice). If Seller is unable to cure defects within Cure Period, then Buyer may, within 5 days after expiration of Cure Period, deliver written notice to Seller: (a) extending Cure Period for a specified period not to exceed 120 days within which Seller shall continue to use reasonable diligent effort to remove or cure the defects (“Extended Cure Period”); or (b) electing to accept title with existing defects and close this Contract on Closing Date (or if Closing Date has passed, within the earlier of 10 days after end of Extended Cure Period or Buyer’s receipt of Seller’s notice), or (c) electing to terminate this Contract and receive a refund of the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract. If after reasonable diligent effort, Seller is unable to timely cure defects, and Buyer does not waive the defects, this Contract shall terminate, and Buyer shall receive a refund of the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract.
What are the steps of title search and examination process?
The title order is submitted: The lender or the buyer’s agent submits a request for title to a closing attorney after a contract is fully executed and the initial deposit is wired. This request can often be done via a form on the attorney’s website, or by sending a brief transaction summary to the attorney. A copy of the contract is also sent to the closing attorney.
The file is processed: The closing attorney orders important tax information relating to the status of property taxes owed, loan payoff statements, property surveys, HoA estoppel letters, home inspection reports and insurance certificates. The closing attorney will also order a lien and judgment search report and a title search report.
The title search is done: A deep dive is done through public records for liens, judgments, mortgages, deeds, divorce settlements, easements and anything else that might cloud the title to the property. After all relevant documents are located, the title insurance underwriter prepares a title search report and sends it to the closing attorney.
The title examination process begins: The closing attorney issues a title commitment to the buyer and lender, if applicable, based on the information contained in the title search report. The closing attorney then thorough reviews the report to determine whether there are any clouds to the title that need to be cleared prior to closing.
Get a home insurance policy
Even though condo owners are no longer required by Florida state law to purchase a home insurance policy, your HoA or lender may still require you to purchase condo insurance. Fortunately, the cost of this will be relatively minor as your condo association is already required to carry insurance which typically covers the exterior, land, common areas, shared amenities, elevators and systems as well as flood insurance.
The condo insurance that you purchase is described as “walls-in coverage,” meaning it covers your personal property, personal liability and some interior structural elements of your home like the interior of your walls and floors.
At some point after contract execution, you can expect to receive a seller property disclosure form as well as a Good Faith Estimate (GFE) of your closing costs. The seller is responsible for filling out the former, and the title insurance company is responsible for sending you the latter.
What is the Seller’s Property Disclosure form?
Florida law requires every seller to fill out this form and disclose to the buyer “all known facts that materially affect the value of the property being sold and that are not readily observable or known by the buyer.”
Real estate agents in South Florida commonly tell buyers that sellers do not need to do research to find the answer to the questions, and that they only need to answer to the best of their ability and according to what they know. They have a right to check the “Don’t Know” box for as many questions as they want.
Nonetheless, it’s still comforting for most buyers to see what sellers come back with for questions like “has the unit been treated for termites; other wood-destroying organisms, including fungi; or pests?”
What is the Good Faith Estimate?
The Good Faith Estimate is an estimate of all charges and credits due at closing, meaning what you’ll have to pay at closing minus any credits given to you.
If you’re purchasing with financing, your lender is obligated to provide you with a Closing Disclosure at least 3 days before closing.
This is important to stay on top of, as your closing will be delayed if your lender doesn’t provide you with the Closing Disclosure in time.
If you’re purchasing all cash, this closing cost estimate is provided by the closing attorney who is often also an authorized agent of the title insurance company. Here is an example for an all cash purchase of a condo in Miami, Florida:
Charges
$1,380,000 Contract sales price
$700 June Assessments (Apr 15 to Apr 30)
$895 Settlement or closing fee (Miami Title Services, Inc.)
$6,025 Title Insurance (Florida Title Insurance Company)
$50 4.1-25;5.1-25 (Miami Title Services, Inc.)
$31.50 Recording fees (Clerk of Courts)
$125 Account setup for apartment 907 (AMG Management)
$50 Wire transfer fees (Miami Title Services, Inc.)
$1,387,876.50 Total Charges
Credits
$138,000 Deposit or earnest money
$4,800 County taxes (January 1 to April 15)
$142,800 Total Credits
$1,245,076.50 Cash due from buyer
As you can see, closing costs in Miami are substantially lower than closing costs in NYC. For the all cash condo purchase in the example above, closing costs for the buyer are approximately 0.6% of the contract price.
Please note that the June Assessments (Apr 15 to Apr 30) in the example above refers half of the April’s condo common charges owed by the buyer since the transaction closes on April 15th. In Miami, real estate professionals will often interchangeably use the term assessments with the term common charges. In this example, the title company is not referring to any special assessments that New Yorkers are accustomed to.
Pro Tip: Why is the buyer in the above example receiving a credit for property taxes? Because property taxes are paid in arrears in Miami-Dade County. So if the above, hypothetical transaction is due to close on April 15th, 2021, then property taxes for 2020 have already been paid and property taxes for 2021 are not due until March 2022. However, the county does offer a small 1% discount to owners who pay their property taxes early. The county releases the new tax bills on November 1st every year.
Conduct final walk-through before closing
Buyers are contractually entitled to a final walkthrough inspection of the property the day prior to closing per the standard purchase contract in Florida:
On the day prior to Closing Date, or on a Closing Date prior to time of Closing, as specified by Buyer, Buyer or Buyer’s representative may perform a walk-through (and follow-up walk-through, if necessary) inspection of the Property solely to confirm that all items of Personal Property are on the Property and to verify that Seller has maintained the Property as required by the AS IS Maintenance Requirement and has met all other contractual obligations.
Per the standard Florida contract, the seller’s obligations to maintain the property in the same condition seen, and ideally documented by photos or videos, as of the contract execution date is as follows:
Except for ordinary wear and tear and Casualty Loss, Seller shall maintain the Property, including, but not limited to, lawn, shrubbery, and pool, in the Condition existing as of Effective Date (“As IS Maintenance Requirement”).
Document preparation and the closing
Even though buyers and sellers do not need their own attorney for most transactions in Florida, a closing attorney who often owns the title company and/or is an agent of the title insurance company is necessary for title search and examination process, document preparation and to act as a closing coordinator.
For example, once all parties are satisfied and ready to proceed with the closing, the Florida closing attorney will gather all the necessary documents such as the deed, the bill of sale, various affidavits, the FIRPTA certificate as well as the closing statement. If the buyer is financing, the buyer’s lender will submit its own set of closing instructions to the closing attorney so its various fees, charges and escrows can be reflected on the closing statement.
A good closing attorney will send drafts of all the closing documents around well in advance so any revisions can be approved with plenty of time before closing.
On closing day, the closing attorney will act as a closing coordinator and oversee all aspects of the transaction and answer any questions the parties may have. The closing attorney will make sure the various parties sign the correct documents, such as making sure the buyer signs the loan documents and both parties sign the HUD-1 settlement statement. The closing attorney will then make sure all the relevant parties that need to be paid are paid and that the right documents are sent to the county to be recorded in public records.
Pro Tip: This is when your buyer’s agent will receive half of the total commission, typically 6%. If you’ve signed up for a Hauseit® Buyer Closing Credit, then you would be eligible to receive up to 2% of the typical 3% buyer agent commission by check post-closing.
One thing that’s unique about buying a condo in South Florida is that it seems most of the buildings have some sort of litigation ongoing, which really throws off the big, national banks headquartered in New York who can’t really fit anything with litigation into their box.
For example, it seems newer construction buildings where the board has taken over from the sponsor almost always seem to have some sort of litigation, with a Chapter 558 claim being pretty common.
A 558 claim is a claim for construction defects by the HoA. The Association conducts investigations to determine what will be part of the 558 claim against the Developer, GC and related construction parties. In my experience, it is just about standard operating procedure for an Association to go through the 558 process against the Developer/GC for new construction projects.
I concur. The big banks definitely get less market share in the mortgage market in Miami and South Florida because of litigation, especially for newer buildings with Chapter 558 claims.
It’s so common in fact that condominium estoppel letters will often point out that there’s a Chapter 558 claim in process which may increase common charges in the future if it’s unsuccessful in getting money from the developer. Here’s an example blurb from a condo estoppel letter:
There are pending Chapter 558 claims against the Developer and other construction and design parties in the multiple millions of dollars. To the extent that Association does not collect sufficient funds from the responsible parties via a pre-suit settlement or lawsuit, the Association may either increase monthly assessments or pass a special assessment or assessments. The Association may also pass a special assessment for legal and engineering fees to pursue the defects claims.