When a seller offers their home for sale and a buyer decides they want it, a contract must be signed. Everyone knows this. But what they don’t always realize is that every deal, and therefore every contract, is unique to that one sale.
Whether you are a buyer or a seller, it is crucial that you fully understand every word of the contract before you sign, because once a contract is signed by both parties it is a binding agreement before the law.
Since a home is one of the biggest investments most people make, the signing of this contract should not be taken lightly. That’s why it is crucial that an experienced real estate lawyer review any contract before it is signed to alert you to the most important clauses.
Every state deals with real estate purchases in their own way. In Broward County and Palm Beach County, Florida, it is common for a buyer to present a signed contract to the seller as their offer for the property. The seller can accept this offer by countersigning.
This is never a good idea.
Because both sides have now signed the contract, it is a binding agreement, and everyone has to live with all its terms. (In some states, an offer is made and accepted informally and then a contract is negotiated between lawyers for both sides of the deal. This is a much better system.)
Most buyers don’t realize that they are agreeing to all the terms of the contract when they make their offer this way. If a buyer or seller later decides they want to make changes to the contract, they cannot do so without the other side’s complete agreement. If a person decides after learning about all the terms that they cannot complete the deal and want to walk away, they can lose a substantial amount of money.
Many Realtors in South Florida tell their clients that the contract they are having them sign with their offer is “standard.” They are simply filling in some blanks on a pre-printed form. But any experienced real estate attorney will tell you that there is no such thing as a “standard contract.” Every single clause in any contract is subject to negotiation.
At the Law Office Of Gary M. Landau, P.A., clients regularly come to us with a contract already signed by both sides from an offer and its acceptance. When our experienced real estate attorney explains the terms they have agreed to in these real estate contracts, many are unhappy, because the terms may not be favorable for them.
Instead, we recommend that you avoid signing this “standard” real estate contract until you send it to a real estate lawyer who can fully explain its terms. Alternatively, you can sign the contract but insert a line at the bottom that the contract is subject to your attorney’s review in three days, a line that both parties must initial. Then you should get that contract to an experienced real estate attorney right away so it can be reviewed in time to make that three-day deadline.
The Basics of a Florida Real Estate Contract
Whether you are working with a Realtor or buying or selling a property without one as a “for sale by owner,” every real estate contract includes seven basic items:
- All parties’ names
- The property address
- The purchase price
- The amount of the deposit the buyer will give that will be held in escrow (buyers can lose this amount if they later back out of the deal)
- Fixtures and other items that might be included with the sale
- Date the sale must be completed
- The signatures (with date of signing) of everyone involved
Some contracts include an addendum. For example, one covering who pays for mold damages, should it be discovered before the closing.
Other Important Florida Real Estate Contract Terms
Beyond these seven basic items, however, a real estate contract features many important clauses that buyers or sellers may not know to look for.
Here are 5 critical areas that highlight why an experienced real estate attorney should review your Florida contract before you sign it.
# 1. The mortgage contingency
Many of today’s contracts, including the popular one issued by the Florida Realtors, offer the option to check a box as to whether the deal is contingent on the buyer getting a mortgage.
Often, even if the buyer plans to finance the property, the “cash deal” box is checked. This obligates the buyer to purchase the home for cash if they cannot obtain a mortgage, or they can lose their entire deposit.
Alternatively, the contract can indicate that the buyer plans to seek financing. The contract will call for the buyer to begin their mortgage process within a specified time period, such as five days. That timetable can be negotiated, because if the timetable is too tight and the buyer does not get their paperwork in by that time they risk losing their deposit.
# 2. The inspection period
This is a crucial clause of any contract.
Most allow the buyer a designated time period to hire a professional inspector to thoroughly review the property and indicate any flaws, such as faulty wiring or a bad roof. This inspection is necessary because a buyer should be clear about all the pros and cons about the property they are planning to purchase.
The contract specifies the length of time allotted to the buyer to have this inspection completed. If the inspection report reveals unwanted surprises during this inspection period, the buyer can back out of the deal and get their deposit back.
In many cases, Realtors insert a short inspection period, such as 5 days after signing. Because it can take time to find an inspector, arrange for the busy inspector to get to the home, and wait for the person to write and send their report, it is never a good idea for a buyer to agree to such a short window.
I always recommend to my buyers that they request an inspection clause of 15 business days. This allows for ample time to get it completed. If the inspection reveals significant problems, the buyer will have enough time to able to rescind the deal and receive a refund of their deposit.
# 3. As is sale
In today’s sellers’ real estate market, many homes are sold “as is.” This means the seller has no obligation to repair any defects the inspection might uncover. Most sellers don’t want to negotiate this away, but it can be worth asking. It’s also another reason why buyers must demand an adequate timeframe for completing the professional inspection.
The alternative to being sold as is is a contract with a repair clause. This clause obligates the seller to make repairs the inspector finds up to a certain cost, such as two percent of the sale price. The amount of the repair clause is subject to negotiation by both parties. Buyers with contracts that use a repair clause should consider inserting into the contract that rather than having the seller do the repairs, the seller should deduct their cost from their profits. This way the buyer can undertake their own repairs after closing, which is generally preferable because buyers who will be living in the house have more incentive to use long-lasting, high-quality materials.
# 4. Closing cost distributions
Who pays for which closing fees? There are conventions, but even this is subject to negotiation.
Palm Beach County and Broward County generally operate under two different standards. In Palm Beach County, the seller typically pays for the title insurance and therefore selects the closing agent. In Broward County, the title insurance and selection of the closing agent generally land on the buyer’s side.
Title insurance can cost hundreds or thousands of dollars, depending on the sales price of the home. (People unlucky enough to be selling a home in Palm Beach County and buying one in Broward generally pay twice). Like everything in a contract, however, who selects the closing agent and who pays for title insurance can be subject to negotiation, especially for high-end home purchases.
# 5. Outstanding or pending special assessments
Suppose a seller lives in a condo that issued a four-year special assessment, perhaps to repair elevators or redo the pool, and the seller has been paying it out monthly for two years. Now the person plans to sell their home.
Who pays the remaining balance? Once again, the answer depends on the terms of the contract.
And what if a new special assessment is levied after the contract is signed but before the deal has closed–who pays then? It depends on the terms of the contract, of course.
Contact the Law Office of Gary M. Landau, P.A.: Probate and Real Estate Lawyer, for Help with Your Florida Real Estate Contract
Attorney Gary M. Landau and his team have been serving South Florida for over 20 years. We cover all matters related to real estate law, including drafting contracts, providing legal advice, and serving as a closing agent/title company for all real estate deals.
Instead of searching online for “real estate attorney near me,” talk to experienced South Florida real estate lawyer Gary M. Landau in Coral Springs, FL. Consultations are free. Simply call (954) 979-6566. You can also fill out our contact form here.
Located in Coral Springs, Florida, the Law Office of Gary M. Landau has earned a 10 out of 10 rating by the legal website AVVO.
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