Everyone knows that to buy or sell a home in South Florida, you have to sign a contract. But what most people don’t realize is that each contract is unique. You shouldn’t rush to sign your contract before you’re clear what you are agreeing to.
When you’re buying or selling your home, you’ll likely be given a form contract from a Realtor, typically with specific filled in between preprinted clauses. But there is no such thing as a “standard contract,” because which clauses are included and what information is inserted can mean the difference between a smooth closing and one filled with endless litigation.
Each state has a different way of dealing with real estate purchases. In South Florida, it is common for a buyer to actually present their signed contract as their offer. The seller accepts the offer by countersigning the agreement. The problem with this is that now both sides are bound to the contract, which is a legal document. You cannot get out of a signed contract without risking serious financial harm.
Clients sometimes come to me with a contract already signed and executed by both sides. When I explain to them some of the terms they have agreed to, they are shocked. This is why I feel strongly that no one should sign a real estate contract without first having an experienced real estate lawyer look at it and talk them through the terms.
Whether you’re using a Realtor or buying or selling a property on your own, your real estate contract must have these basic items:
- Both parties’ names
- Property address
- Purchase price
- How much of a deposit will be given (the higher the amount, the more the buyer can lose if the deal goes south)
- Fixtures and other items that are included with the home sale
- Date the sale must be completed
- And the signatures of everyone involved.
Some contracts will also have an addendum, such as one I like that covers who will pay for any damages from mold, should it be discovered before the deal is closed.
Other Important Contract Terms You Must Pay Attention To
Beyond these terms, a real estate contract has other clauses that someone who is not familiar with them might get tripped up by.
Here are some of the most important issues I regularly encounter:
# 1. The mortgage contingency
Many of the contracts in use today, 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 get financing for the deal, this “cash deal” box is checked. This means if the buyers are not able to obtain a mortgage, they are promising to still buy the home for cash, or they will lose their full deposit.
The other option that may be selected is for the buyer to seek financing. Typically, the contract calls for the buyer to begin the mortgage-seeking process within a time period, such as 5 days. That timetable can be negotiated, but once in writing it must be adhered to exactly or, again, the deposit can be lost.
# 2. The inspection period
Most contracts give the buyer a period to have the home professionally inspected. This is a crucial thing to do, because you don’t want to wait until after you close to learn that the home has, say, major electrical problems or a leaky roof.
The length of time the buyer has to inspect the property and to back out of the deal if the report reveals unwanted surprises, is written into the contract. Too often, I find the inspection date they agreed to is too short, such as 5 or even 10 business days after the signing. Locating an inspector and arranging for the busy inspector to get to the home, and then waiting for him to write a report and send it to you, takes more days than you think.
I advise buyers to try to as for an inspection clause of 15 business days. That way, there is ample time to get it done, and if the inspection reveals major problems you are able to back out of the deal and have your full deposit refunded.
# 3. As is sale
Many homes today are sold “as is.” This means the seller is not obligated to make home repairs that the inspection might uncover. Most sellers don’t want to negotiate this away, but it is another reason why having an adequate length for an inspection period is so important.
Alternatively, a home can be sold with a repair clause. Under these terms, the seller must make repairs up to a certain cost, such as 2 percent of the sale price (or whatever is agreed to in the contract). When a home is sold with a repair clause in the contract, I generally tell buyers to ask for the money for the repairs rather than have the seller do them, since buyers have more incentive to use materials that are long-lasting.
# 4. Closing cost distributions
Who pays for which closing fees? This is determined by the contract.
Typically in South Florida, the title insurance, which can run hundreds or thousands of dollars, is paid by the seller in Palm Beach County and by the buyer in Broward County (unfortunate souls selling in Palm Beach and then buying in Broward get hit twice). But like everything else in a contract, this fee is subject to negotiation, especially if the home’s price is very high so the title insurance is expensive.
Other closing costs are also laid out in a contract, and can be subject to negotiation.
# 5. Outstanding or pending special assessments
Say you live in a condo that issued a 4-year assessment that you’ve been paying out monthly for 2 years. Now you’re selling your home: Who is responsible to pay the remaining balance?
There is no hard and fast rule to this, because once again it depends on what was agreed on in the contract. The same holds for who pays a special assessment that might be issued after the contract is signed but before the parties have closed the sale.
Have the Law Office of Gary M. Landau by your side. The Law Office of Gary Landau is located in Coral Springs, Florida, and is rated 10 out of 10 by the legal website AVVO. For more information or a free phone consultation, call 954-979-6566 or email us. Attorney Gary Landau personally returns all calls to him.
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